Morrison & Co is reportedly backing away from its proposed investment in Optus. The infrastructure investor instead looks to be shifting its attention to a $2.5 billion Ausgrid deal.

The New Zealand-based Morrison & Co had been in advanced discussions to acquire a more than 30 per cent stake in Optus from Singapore Telecommunications (Singtel), in a A$2 billion-plus transaction.

That Optus deal now appears to have lost momentum as Morrison moves its focus to the sale of Ausgrid’s Plus ES business, according to The Australian’s DataRoom.

The development would represent a significant change in strategy for Morrison. The proposed transaction was seen as a potential way of bringing a major Australian telco asset under greater local ownership after 25 years under Singtel.

Singtel confirmed in July that it was in discussions over a possible Optus sale but stressed there was no certainty a transaction would go ahead.

The Singaporean telco had previously said it was open to a “like-minded” Australian partner taking a meaningful minority position in Optus. This followed a series of issues at the telco, including the Triple Zero failure, which increased political and regulatory pressure on the company. Optus is also facing Federal Court action from the ACMA over alleged breaches relating to emergency-call obligations.

The deal had also been complicated by questions surrounding Optus’ profitability, capital requirements and the ability to increase prices in the competitive telecommunications market.

Optus remains Australia’s second-largest telecommunications operator, with more than 11 million customers. It generated approximately A$2.4 billion in EBITDA in the year to March, an increase of 6%.

Morrison’s attention is now focused on Plus ES, a business within Ausgrid that provides smart metering, data services and infrastructure solutions across the National Electricity Market.

Final bids for the business were submitted more than a week ago, with Morrison leading a consortium backed by Australia’s Future Fund. US investment firm DigitalBridge is understood to be the only other bidder remaining.

Plus ES is reportedly valued at around A$2.5 billion.

Ausgrid is jointly owned by the NSW Government, which holds 49.6%, IFM Investors with 25.2%, APG with 16.8% and AustralianSuper with 8.4%.

The outcome is still pending, but the shift from Optus to Plus ES for Morrison would move its focus from a scrutinised consumer telco business to an infrastructure asset that is benefitting from an ongoing rollout of smart metering.