Singapore Telecommunications said on Monday it agreed to sell its stake in cyber security business Trustwave for $205 million. Southeast Asia’s largest telecom firm began a strategic review of its 98% interest in Trustwave in 2021 after buying it for $770 million in 2015. The divestment comes after SingTel incurred an impairment charge of around S$336 million on the Chicago-based company in the second half of this year. The charge was mainly due to impairment of assets and goodwill at digital marketing firm Amobee and cybersecurity business Trustwave, which SingTel has been trying for years to diversify in new sectors amid slowing growth in traditional carrier services.

The deal is vital to the telecom giant’s strategy to boost its cloud, data center and security businesses. The acquisition of Trustwave, whose clients include Microsoft and Facebook, is expected to help SingTel expand its global presence in the rapidly growing cybersecurity market.

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However, the acquisition will likely increase SingTel’s debt burden and financial leverage. The deal will be funded through cash and debt, raising SingTel’s net debt-to-EBITDA ratio to just below 2x. The higher debt level will limit the telecom giant’s ability to make further acquisitions and is not conducive to a stable and sustainable growth path.

Meanwhile, SingTel’s other core businesses face intense competitive pressure in its domestic and overseas markets. In its domestic market, the telco’s mobile service revenue has been flat for eight years as rivals such as TPG Telecom offer generous data plans that attract consumers and drive down ARPUs. In addition, Mukesh Ambani’s Reliance Jio has been disrupting the industry with cheap mobile and fiber plans.

The strategic review of Amobee and Trustwave is the first significant overhaul under chief executive Yuen Kuan Moon, who took the helm in January. He has been tasked with overhauling the company to boost its revenue base in the face of slowing growth in the traditional carrier business.

Fitch expects SingTel to have a ‘Low’ legal incentive and ‘Medium’ strategic incentive to support its Australian subsidiary Optus, given the absence of guarantees or cross-default clauses in the Australian unit’s bond documents. The rating agency notes that the ‘Medium’ operational incentive will partially offset the ‘Low’ legal and strategic incentives because SingTel has extensive control over Optus and appoints its board members. There are few management and brand overlaps between the two entities. Additionally, the regional data center business based in Australia provides cost synergies to SingTel.