M1 Limited has entered into an investment agreement with Integrated Telecommunications Oman SAOC (TeO) to acquire 1.66m new TeO shares for OMR3m (S$10.3m); this will result in its subsidiary M1 TeliNet owning 15% of the common stock of TeO, subject to several completion conditions. TeO is a niche provider of international telecommunications services and mobile services reseller in Oman.

M1 TeliNet and TeO intend to capitalize on their respective strengths and work together for TeO to become a full service telecommunication provider in Oman. M1 said it will fund the acquisition internally and does not expect it to have a material impact on NTA or EPS in FY15.

While it is still early days, we believe the news is positive as the move could signal a significant change in the telco’s Singapore-only strategy. We will continue to monitor the situation and will build more potential implications into our model as and when we get more details. For now, we maintain HOLD on the stock with an unchanged fair value of S$3.66.

Source: OCBC Research - 7 May 2015