Maxis bid for Mobile One may result in SingTel stake in former
2001-07-18
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MAXIS Communications Bhd's US$1.4 billion (US$1 = RM3.80) bid for Mobile
One Asia Pte could be part of a jigsaw puzzle that would eventually see
Singapore Telecommunications Ltd (SingTel) acquiring a stake in Malaysia's
only private-owned telecommunication concern.
A stumbling block, however, is Singapore's anti-trust laws which could
scupper the transaction.
A lawyer said if SingTel were to hold a minority stake in Maxis, and
Maxis in turn were to control Mobile One, the legal implications are
vague, and a ruling by the Singapore authorities can go any which way.
"(But) if it can be proven that a SingTel-controlled Mobile One will
result in a monopolistic situation, then (such a deal) will be prohibited
under the Singapore anti-trust law," a lawyer who spoke on condition of
anonymity said.
SingTel is said to be eyeing a block stake of 33 per cent in Maxis for
between RM1 billion and RM1.5 billion.
Talks on the emergence of a new shareholder in Maxis is due to the
belief that someone is needed to inject capital into the company after
Usaha Tegas Sdn Bhd increased its stake and Maxis finished paying for the
Mobile One stake.
As at end of 1999, Maxis had shareholders' funds of RM1.2 billion and
total borrowings of RM2 billion. It made a net profit of RM131 million on
a turnover of RM1.5 billion.
Queries on how healthy Maxis was and whether it was operating on
overdraft facilities were met with "no comments" response from the
company.
Early this year, Usaha Tegas bought British Telecommunications Plc's
(BT) 33.3 per cent stake and MediaOne Group Inc's 12.6 per cent stake for
about RM3 billion. The purchases brought the private limited concern's
shareholding in Maxis to about RM3 billion.
Maxis, on the other hand, is making a bid of between US$1.2 billion and
US$1.4 billion for control of Mobile One. Analysts value Mobile One at
between US$2.8 billion and US$3 billion.
Mobile One is being put on the market because shareholders that include
Keppel Transportation & Telecommunications Ltd and Singapore Press
Holdings Ltd which own 35 per cent each, want out.
The remaining 30 per cent is collectively held by Cable & Wireless Plc
and Hong Kong's Pacific Century Cyberworks Ltd.
A successful bid for Mobile One would go a long way to ensure Maxis
remains in the driver's seat of the Malaysian mobile phone business.
Analysts say a tie-up between Maxis and Mobile One will mean that the
former will gain access to faster connectivity to Singapore, ensuring a
firm foothold of the lucrative telephone traffic between the island state
and Malaysia which is now dominated by SingTel.
"In theory, this puts Maxis in a very advantageous position, but there
are other considerations apart from money which may affect Maxis."
"The major drawback for Maxis is that it does not have a strong equity
presence outside of Malaysia, and if it intends to bolster one, then the
telco or at least its shareholders will have to dig deep into their
pockets," a top executive from a rival telco said.
With even Maxis' Media One bid said to be heavily scented with borrowed
money, a rapid expansion plan to match SingTel's impressive armour of
equity ownership may over-leverage Maxis' balance sheet.
SingTel has strategic stakes in Thailand's Advanced Info Service Plc and
Philippines' GlobeTelecom Inc, as well as India's Bharti Group.
Additionally, the Singapore concern also has business interest in Hong
Kong and Taiwan.
It has also made a massive A$13.9 billion (A$1 = RM2.01) bid for
Australia's second largest phone company Cable & Wireless Optus Ltd.
Industry sources, however, believe Maxis will offer a strategic stake to
SingTel for two reasons.
One is Maxis does not have the financial clout to take on SingTel which
has its eyes set on becoming Asia-Pacific's leading telecommunication
company.
The other reason is, Maxis' entry into Singapore will put added pressure
on Malaysia to open its doors to SingTel which only last year saw its
proposed tie-up with Time dotCom scuttled in the final hour.
Furthermore, SingTel is believed to be very comfortable dealing with
Maxis due to the equity structure of the company. Sources say that ties
between both telcos in recent months have been more than cordial.
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