Telekom Malaysia To Buy Into Singapore's M1
By Hasan Jafri
KUALA LUMPUR (Dow Jones)--Telekom Malaysia Bhd. (4863.KU) and its state-owned parent have agreed to buy a major stake in Singapore's MobileOne Ltd. (M31.SG), in a deal that could provide the Malaysian operator with steady dividends despite the Singaporean market's limited growth potential.
Malaysia's biggest telecom company and Khazanah Nasional, the national investment company, have agreed to buy a 12.06% stake in Singapore's No. 3 mobile phone company by customers, and are seeking to raise the stake to as much as 30%, Telekom Malaysia said Wednesday.
The two companies will buy the stake, via a new joint venture, from Great Eastern Telecommunications for S$2.20 per share, a 4.8% premium to M1's closing share price.
Talks with M1 shareholders continue, the company said. However, Singapore Press Holdings Ltd. (T39.SG) said in a statement that it's not selling the 14.1% stake in MobileOne held by its unit SPH Multimedia "at this time."
Great Eastern Telecommunications is a venture between Cable & Wireless PLC (CW.LN) and Hong Kong's PCCW Ltd. (0008.HK). Keppel Telecommunications & Transport Ltd. (K11.SG) is another key shareholder in M1 with a 14% stake.
The deal gives Telekom Malaysia access to a mature and competitive market and underscores its regional expansion plans, said Telekom Malaysia Chief Executive Abdul Wahid Omar.
The deal is "not so much for growth, but synergy and product innovation and cross border transactions - that's why we're buying into this company," he told reporters.
Telekom, Khazanah Expand Overseas
The transaction is the fourth major cross-border deal in two years and indicates that warmer political ties between Singapore and Malaysia are translating into major business transactions.
Until recently politicians in the two countries were suspicious of cross-border deals, but they have been more welcoming as globalization forces the neighbors to rethink strategic interests.
"I don't think that there are any impediments to cross-border investments between the two countries," Abdul Wahid said.
It is Khazanah's first direct investment in Singapore and the third overseas deal in weeks, underscoring its regional expansion strategy. It last month bought a 52% stake in Indonesia's PT Bank Lippo (LPBN.JK) and followed it up with a 13.2% stake in India's Apollo Hospitals Enterprise Ltd.
"There are some interesting companies in Singapore with high cash-flow and strong market position, so companies like Khazanah and others are going to be interested," said Lim Jit Soon, the head of Singapore research at Citigroup.
Temasek Holdings, Khazanah's Singapore counterpart, already is a shareholder in Telekom Malaysia and Malaysian Plantations Bhd. (2488.KU), which owns Alliance Bank.
JV Will Have 17.7% Stake In M1
Telekom Malaysia and Khazanah also disclosed for the first time that their joint venture already owns 4.97% of M1 and on Wednesday bought another 0.67%, bringing their total stake to 17.7%, worth S$377.2 million. They didn't disclose further details. Telekom owns 80% of the joint venture while Khazanah the rest.
The deal gives Telekom Malaysia, which aims to be a regional phone company, access to an experienced mobile phone company with the know-how to grow revenue in a saturated market.
M1 can potentially be Telekom Malaysia's largest overseas profit contributor, allowing it to significantly grow earnings while investing heavily in third-generation mobile phone technology.
Telekom Malaysia said the acquisition will boost earnings immediately, but it doesn't plan to seek effective control of the Singapore company or delist it. As potentially the largest shareholder of M1, it will get steady dividends from the investment. M1 pays out about 70% of its profits as dividend to shareholders.
"You have to look at it in terms of risk," said a person close to the deal. "The dividend from M1 is higher than the risk of investing in Singapore."
However, not everyone is convinced.
The deal "comes as a surprise as there's no real fundamental value for anyone to buy into M1," said OCBC Investment Research analyst Winston Liew.
Average monthly revenue per postpaid M1 user amounts to S$60.50 while ARPU at Celcom, Telekom Malysia's mobile phone arm, is lower at MYR129.
Singapore and Malaysia have three mobile phone operators each, but the market penetration rates differ markedly. In Singapore, nine out of 10 people own a mobile phone while the penetration rate is about 60% in Malaysia.
The majority government-owned Telekom Malaysia has been buying assets in the region recently as competition in the domestic market grows.
Telekom Malaysia has a 27.3% stake in Indonesia's Excelcomindo and it also owns Sri Lanka's Dialog Telekom Ltd. (DIAL.SL), the south Asian country's No. 1 mobile phone company. It was also an unsuccessful bidder for a 26% stake in state-owned Pakistan Telecommunications Co. Ltd.
The deal is the most significant acquisition by a Malaysian company since investment bank CIMB Bhd. (CIMB.KU) agreed to buy into Singapore stock broker G.K.Goh earlier this year.
Telekom Malaysia shares closed 1.8% higher at MYR11.10 while M1 finished up 1% at S$2.10.
By Hasan Jafri
KUALA LUMPUR (Dow Jones)--Telekom Malaysia Bhd. (4863.KU) and its state-owned parent have agreed to buy a major stake in Singapore's MobileOne Ltd. (M31.SG), in a deal that could provide the Malaysian operator with steady dividends despite the Singaporean market's limited growth potential.
Malaysia's biggest telecom company and Khazanah Nasional, the national investment company, have agreed to buy a 12.06% stake in Singapore's No. 3 mobile phone company by customers, and are seeking to raise the stake to as much as 30%, Telekom Malaysia said Wednesday.
The two companies will buy the stake, via a new joint venture, from Great Eastern Telecommunications for S$2.20 per share, a 4.8% premium to M1's closing share price.
Talks with M1 shareholders continue, the company said. However, Singapore Press Holdings Ltd. (T39.SG) said in a statement that it's not selling the 14.1% stake in MobileOne held by its unit SPH Multimedia "at this time."
Great Eastern Telecommunications is a venture between Cable & Wireless PLC (CW.LN) and Hong Kong's PCCW Ltd. (0008.HK). Keppel Telecommunications & Transport Ltd. (K11.SG) is another key shareholder in M1 with a 14% stake.
The deal gives Telekom Malaysia access to a mature and competitive market and underscores its regional expansion plans, said Telekom Malaysia Chief Executive Abdul Wahid Omar.
The deal is "not so much for growth, but synergy and product innovation and cross border transactions - that's why we're buying into this company," he told reporters.
Telekom, Khazanah Expand Overseas
The transaction is the fourth major cross-border deal in two years and indicates that warmer political ties between Singapore and Malaysia are translating into major business transactions.
Until recently politicians in the two countries were suspicious of cross-border deals, but they have been more welcoming as globalization forces the neighbors to rethink strategic interests.
"I don't think that there are any impediments to cross-border investments between the two countries," Abdul Wahid said.
It is Khazanah's first direct investment in Singapore and the third overseas deal in weeks, underscoring its regional expansion strategy. It last month bought a 52% stake in Indonesia's PT Bank Lippo (LPBN.JK) and followed it up with a 13.2% stake in India's Apollo Hospitals Enterprise Ltd.
"There are some interesting companies in Singapore with high cash-flow and strong market position, so companies like Khazanah and others are going to be interested," said Lim Jit Soon, the head of Singapore research at Citigroup.
Temasek Holdings, Khazanah's Singapore counterpart, already is a shareholder in Telekom Malaysia and Malaysian Plantations Bhd. (2488.KU), which owns Alliance Bank.
JV Will Have 17.7% Stake In M1
Telekom Malaysia and Khazanah also disclosed for the first time that their joint venture already owns 4.97% of M1 and on Wednesday bought another 0.67%, bringing their total stake to 17.7%, worth S$377.2 million. They didn't disclose further details. Telekom owns 80% of the joint venture while Khazanah the rest.
The deal gives Telekom Malaysia, which aims to be a regional phone company, access to an experienced mobile phone company with the know-how to grow revenue in a saturated market.
M1 can potentially be Telekom Malaysia's largest overseas profit contributor, allowing it to significantly grow earnings while investing heavily in third-generation mobile phone technology.
Telekom Malaysia said the acquisition will boost earnings immediately, but it doesn't plan to seek effective control of the Singapore company or delist it. As potentially the largest shareholder of M1, it will get steady dividends from the investment. M1 pays out about 70% of its profits as dividend to shareholders.
"You have to look at it in terms of risk," said a person close to the deal. "The dividend from M1 is higher than the risk of investing in Singapore."
However, not everyone is convinced.
The deal "comes as a surprise as there's no real fundamental value for anyone to buy into M1," said OCBC Investment Research analyst Winston Liew.
Average monthly revenue per postpaid M1 user amounts to S$60.50 while ARPU at Celcom, Telekom Malysia's mobile phone arm, is lower at MYR129.
Singapore and Malaysia have three mobile phone operators each, but the market penetration rates differ markedly. In Singapore, nine out of 10 people own a mobile phone while the penetration rate is about 60% in Malaysia.
The majority government-owned Telekom Malaysia has been buying assets in the region recently as competition in the domestic market grows.
Telekom Malaysia has a 27.3% stake in Indonesia's Excelcomindo and it also owns Sri Lanka's Dialog Telekom Ltd. (DIAL.SL), the south Asian country's No. 1 mobile phone company. It was also an unsuccessful bidder for a 26% stake in state-owned Pakistan Telecommunications Co. Ltd.
The deal is the most significant acquisition by a Malaysian company since investment bank CIMB Bhd. (CIMB.KU) agreed to buy into Singapore stock broker G.K.Goh earlier this year.
Telekom Malaysia shares closed 1.8% higher at MYR11.10 while M1 finished up 1% at S$2.10.
