SingTel leads Asia B2B consolidation

SingTel will end up with 44.5 percent of the merged B2B entity

By Kristie Lu Stout
CNN.com Writer

SINGAPORE (CNN) -- A Singapore Telecom-backed business-to-business hub is to merge with Asia2B, an e-commerce consortium of Hong Kong blue chips.

SESAMi, majority-owned by SingTel, will join forces with Asia2B's powerful backers Swire Group, Jardine Matheson Group, and Sun Hung Kai Properties. SingTel will end up with 44.5 percent of the merged entity, Sesami Inc.

The merger of rival e-commerce flagships from Singapore and Hong Kong is made easier by a shared Commerce One trading platform, and marks an emerging trend of consolidation in Asia's business-to-business sector.

No room for two

Asia2B spokesperson David Ketchum anticipates that after the merger, combined turnover will hit $320 million a month from trades generated by 1300 participating companies.

The key vertical industry marketplaces of the new merged entity will be chemicals, construction, electronics, healthcare/pharmaceuticals, retail/food, telecoms, and transportation.

Industry watchers see the deal as a face-saving coup for SingTel after its thwarted bid for Cable&Wireless HKT last year. SingTel was outmaneuvered by Hong Kong's PCCW to secure a dominant position in the Hong Kong telecom market.

"PCCW took a run at SingTel at some point," says Ketchum. "This merged entity is all about a new era of Singapore-based and Hong Kong-based companies engaged in a collaborative enterprise."

Analysts say the merger was a natural consequence to two geographically close online marketplaces sharing the same technology platform and competing for limited turf.

"Our original concern is that there is not enough room for two Asian e-commerce hubs," says ABN Amro Asia Internet analyst Jahanzeb Nasser.

"With too many hubs close together, they have very little value. The incremental value for a company to register with Asia2B and SESAMi is limited. But if they are one, I would get the best suppliers in Asia."

Global domination

The Asia2B and SESAMi merger also falls in line with Commerce One's global strategy to create a series of interconnected e-marketplaces powered by a single platform.

"If you look at the deal, they are following what the Commerce One model is: to create hubs all over the world to become mega markets that would be in turn interconnected with other Commerce One markets around the world," says Nasser.

Sesami Inc., as both a pan-Asian online marketplace and technology provider, will be poised to take on two sets of B2B competitors.

The merged entity will challenge pure Internet markets like Hong Kong's iSteelAsia and GlobalSources as well as technology providers such as Ariba, Singapore's Bex.com and Hong Kong's Computer and Technology.

According to Goldman Sachs Global Equity Research, Asia's B2B players will be fighting for a share of $50 billion in Asian e-commerce transactions in 2001.

The merger will be formally announced Wednesday at the close of trade on the Singapore stock market.

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