Australian government binds SingTel to agreement

The Australian Department of Defense has agreed with SingTel the terms under which it will approve a $A17 billion takeover by SingTel of local carrier Cable & Wireless Optus, the department says.

          The Australian Department of Defense has agreed with Singapore Telecommunications (SingTel) the terms under which it will approve a $A17 billion ($US8.7 billion) takeover by SingTel of local carrier Cable & Wireless Optus (CWO), the department says.

          The terms, set out in a Deed of Agreement signed by SingTel and Optus, are designed to protect Australian defence communications and to protect defence investment in telecommunications infrastructure, the department says.

          The main concern from the Australian side has been the operation of Optus' advanced $A500 million C1 satellite, to be launched early next year. This is being carried out as a joint venture between Optus and the Australian Department of Defense and will carry a significant defence communications payload as well as normal commercial traffic, the department has said.

          As SingTel is 87% owned by the Singapore government, certain restrictions have been agreed on, the department says.

          In extreme circumstances, the Department of Defense will take over the satellite's operations, according to Gunnar Tuisk, director-general of communications systems for the department's defense materiel organisation.

          "In the event of armed conflict, or when it is determined to be in the national interest, Defense will control the operations of the next-generation satellite," he said in a telephone interview. "The signatories have agreed that this will happen."

          Other parts of the satellite operations will be compartmented and subject to normal security restrictions, Tuisk said.

          "In places where there is classified equipment, or classified information, these will be maintained behind closed doors, with only Australian citizens having access," he said.

          A hurdle yet to be overcome is the approval of the US Office of Defense Trade Controls. The C1 satellite will contain sensitive US-developed technology, which is subject to an export licence. The US authorities will want to approve the technology export in the light of the change of ownership of the satellite in the event of a SingTel takeover, Tuisk said.

          "This (approval) is a fairly lengthy process and will have to go to the US Congress," he said. "Optus made an application a little while ago."

          Tuisk said there was no definite time frame for a decision from the US side, but said that previous cases had taken around three months to be processed.

          SingTel will have to meet certain guarantees of performance and back those with "substantial company capitalisation", the Defense Department says.

          "Defense will also step in on the C1 satellite if there is any substantial breach of the agreement," Tuisk said.

          The "satisfactory arrangements" will be taken into account when the Defense Department makes its submission to Australia's Foreign Investment Review Board (FIRB), the department says.

          FIRB has the final say on whether the takeover will proceed, but the easing of Australian security concerns makes it more likely that FIRB will approve the deal, if the US agrees to the technology export.

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