Research On The Motivation And Consequences Of Telecom Enterprises Issuing REITs

With the rapid development of communication technology services such as Internet of things,cloud services and big data applications,the importance of new digital infrastructure such as 5G base station,optical fiber network and data center is becoming more and more prominent.However,when building or acquiring new digital infrastructure assets,communication enterprises need to invest a lot of money,which often comes from retained earnings,equity financing or debt financing.China’s communication enterprises rely on these financing channels for a long time,which leads to problems such as insufficient internal liquidity and high financial leverage.In 2021,China’s public REITs pilot projects were officially listed,and the underlying assets of the first batch of pilot projects did not involve new digital infrastructure.The new digital infrastructure assets of communication enterprises can generate long-term and stable cash flow after they are mature,which is very in line with the requirements of REITs for underlying assets.The issuance of REITs is expected to solve the financing problems of such communication enterprises.This paper selects REITs issued by Keppel T&T,a Singaporean communication enterprise,as the research object to explore whether REITs can become an effective financing way for communication enterprises.During the development of Keppel T&T and China’s communication enterprises,there are problems such as insufficient internal liquidity and high financial leverage,and the REITs products issued by Keppel T&T are similar to the current REITs products in China and have a certain typicality.In the case introduction part,the paper first introduces the current development status and trend of China’s communication industry;Then it introduces the basic situation of Keppel T&T and Keppel DC REIT.In the case analysis part,the paper first analyzes the motivation of Keppel T&T’s issuance of REITs from three aspects: capital structure,investment demand and tax preference;Secondly,it analyzes the market reaction after the issuance of REITs by Keppel T&T through the event research method,and focuses on the changes of financial level before and after the issuance of REITs from three aspects: solvency,profitability and operating capacity;Thirdly,the financial risks before and after the issuance of REITs are analyzed by F-score model,and the financial performance of Keppel T&T is comprehensively evaluated by principal component analysis;Finally,the paper compares domestic communication enterprises with Keppel T&T from the perspectives of capital structure and financial performance,analyzes the applicability of REITs issued by domestic communication enterprises,and puts forward some suggestions.Through case analysis,the paper found that the issuance of REITs helped Keppel T&T solve the problems of insufficient internal liquidity and high financial leverage,and improved the investment and financing ability of the enterprise.By comparing Keppel T&T with Chinese communication enterprises,the paper finds that the successful experience of Keppel T&T in issuing REITs can help Chinese communication enterprises solve the problems of high financial leverage and limited financing channels.Combined with the successful experience of Keppel T&T in issuing REITs,the paper puts forward the following suggestions for domestic communication enterprises: first,enterprises should strive to improve the quality of underlying assets and meet the requirements of REITs for assets;Second,enterprises should actively explore different forms of REITs products according to their own conditions;Third,enterprises can reduce financial risks by issuing REITs products;Fourth,enterprises can use REITs to improve their investment and financing capacity.For policy makers,we should speed up the research on the REITs market at home and abroad,formulate and improve the relevant legal and regulatory systems of China’s REITs market,clarify the tax preferential policies in all links,and gradually expand the pilot work of various forms of REITs,so as to help the healthy and rapid development of China’s REITs market.