Webb Henderson advises SingTel on S$1.89 billion transaction in relation to Singapore’s NGNBN

Tuesday, 2 August 2011

Webb Henderson has advised SingTel on the $1.89 billion sale of its passive telecoms infrastructure assets into a separate business trust. This transaction marks the completion of a critical milestone in the reform of Singapore's telecoms sector and is designed to support the ongoing operation of Singapore's Next Generation National Broadband Network (NGNBN). 

In late July, SingTel entered into conditional agreements to sell certain passive infrastructure assets, including ducts, manholes and exchange buildings that are critical to the operation of the NGNBN, to CityNet Infrastructure Management Pte Ltd (CityNet) in its capacity as trustee-manager of NetLink Trust. As part of the transaction, the parties also entered into commercial arrangements for the use of those passive infrastructure assets by SingTel to support SingTel existing copper and fibre services and OpenNet fibre services.

The Webb Henderson team, comprising Angus Henderson, Ara Margossian, Andrew Walsh, Ish Omar and Korolyn Rouhani-Arani, advised on the commercial arrangements for SingTel's ongoing use of the transferred infrastructure, whilst Allen & Gledhill of Singapore advised on the corporate elements of the transaction.

Webb Henderson partner, Ara Margossian, commented:

"The transaction represents a key milestone and one of the 'key pieces of the puzzle' associated with the Singapore Government's reform agenda for the Singapore telecoms sector.

It creates a framework for the implementation of open access in respect of Singapore's NGNBN through setting up the arrangements for SingTel to reduce over time its ownership stake in the key passive infrastructure assets that support the NGNBN. The sale and leaseback arrangements that underpin this transaction will shift the industry to a full open access model for the delivery of super-fast broadband services in Singapore. This new model and the commercial transactions that underpin it entail a high degree of interworking between each of the separate layers that comprise the NGNBN to ensure effective service delivery.

The Singapore model is being watched closely in other markets that are currently planning or implementing similar reforms to the industry structure for telecommunications".

Further details

In September 2008, OpenNet Pte Ltd (OpenNet), a joint venture between SingTel (30%), Axia NetMedia Corporation (30%), Singapore Press Holdings (25%) and Singapore Power (15%), was selected by the IDA to operate the passive layer of the NGNBN. SingTel is a key sub-contractor to OpenNet, with responsibility for the fibre rollout on behalf of the OpenNet consortium using part of SingTel's duct and exchange network. 

As part of that transaction, SingTel undertook to the telecoms regulator to transfer certain infrastructure assets that it used in the rollout of the NGNBN to a separate wholly-owned entity as part of the IDA's effective open access requirements. The NetLink Trust was established to comply with this undertaking. SingTel will initially be a 100% unit holder in the NetLink Trust. It will sell down its stake to less than 25% by August 2014 to fulfil the IDA's open access requirements, subject to relevant approvals being obtained.

Upon completion of the transaction, CityNet in its capacity as Trustee-Manager will carry on the business of ownership, installation, operation and maintenance of the relevant ducts, manholes, exchange buildings and space in exchange buildings for the purposes of facilitating telecommunications activities. NetLink Trust's customers will include telecommunications operators such as SingTel and OpenNet. To support the delivery of SingTel's own wholesale and retail services and to also support its role as the key-subcontractor to OpenNet, SingTel has also entered into the following agreements (amongst others) as part of this transaction:

• a duct and manhole services agreement relating to SingTel's existing copper and fibre cables situated within the NetLink Trust ducts
• a duct and manhole services agreement relating to OpenNet's fibre cables situated within the NetLink Trust ducts.