Regulator hits SingTel with compensation suit
Jake Lloyd-Smith in Singapore
Singapore's industry regulator has hit Singapore Telecommunications (SingTel) with a S$388 million (about HK$1.66 billion) writ to recover money it claims was 'mistakenly included' in compensation for the loss of the company's monopoly.
The Infocomm Development Authority (IDA) said it had brought in lawyers to reclaim the tax element in S$1.5 billion paid to SingTel in exchange for the early termination of monopoly rights.
SingTel said yesterday it would fight the claim.
The dispute raises the intriguing prospect of two of the state's many arms battling it out in open court.
Although run on commercial lines, SingTel is 78 per cent held by Temasek Holdings, the government's principal investment vehicle.
The disputed payment was made in March 1997 in exchange for SingTel bringing forward the date of opening up the telecoms sector to competition from 2007 to next year. A further S$859 million was later paid to SingTel by the government to accelerate liberalisation by two more years to last year.
'As SingTel was informed in October 2000 by the Inland Revenue Authority of Singapore, the compensation sum is not taxable,' the regulator said. 'The development authority requested the return of the provision of the S$388 million. The writ has been filed as SingTel has not made payment.'
SingTel appears not to be amused by the tactics. In a statement to the stock exchange yesterday it said: 'SingTel disagrees with the IDA on its entitlement to the recovery of the sum . . . and will be defending the claim.'
The wrangle adds to the problems faced by SingTel president and chief executive Lee Hsien Yang, who is midway through a A$17 billion (about HK$68 billion) offer for Australia's Cable & Wireless Optus.
The company's resolve may have been fortified by the knowledge that the figure is not inconsiderable and, besides, it needs all the cash it can get to finance the bid for C&W Optus.
The IDA claim represents almost 12 per cent of SingTel's pre-tax earnings last year, which came in at S$3.29 billion.
The offer for C&W Optus, announced in March, has become stalled as Australian Government departments pore over the deal, especially on national security implications. The matter is now before the Foreign Investment Review Board.
The takeover proposal - among the largest foreign transactions launched by a Singaporean firm - has already been extended twice and runs to September 3.
The uncertainty sparked by Canberra's extended review, combined with investor unease about the price SingTel was prepared to offer has taken its toll on the share price.