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Sakmongkol ak 47

Thursday 2 December 2010

Madness in the heavens



Telekom Malaysia is selling 90 million shares in Axiata Group for about RM412-426 million, according to a term sheet obtained by Reuters. State-owned Telekom Malaysia will sell the shares at a price range of RM4.58-4.74 a share. The joint book runners for the placement exercise are CIMB and Credit Suisse. Shares of telecom operator Axiata closed at RM4.74 on Thursday


Sell to who? The report wasn't clear. Last week we were shocked by the revelation by none other than the PM himself that the award of the 700 MHZ spectrum wasn't made known to the cabinet.

Two, it wasn't done through the proper channels. These kind of political-speake cerates all sorts of innuendos that are easily responded with by any kind of unkind remarks labeled as fair comment. Rais Yatim can't blame anyone.

Now, this. What's happening to Telekom Malaysia? I presumed Telekom is selling its interests in mobile telecom services? People all over the world are scrambling to get a piece of action in mobile telephone services. Here we have Telekom Malaysia ditching whatever that remains in its portfolio that can bring in good business. This is madness!

Just wait, let me try to trace the history behind the emergence of Axiata. For now, let people know, this wasn't any added value creation. Telekom Malaysia, after the mindless cost cutting measures by Wahid had nothing else to cut. He came upon the brilliant idea of selling its mobile phone business and sold this business to Axiata. After creating the entire infrastructure, this asset was sold to Axiata. Axiata did nothing other than raising the necessary financing to buy the business.


OneMalaysian,  2 December 2010 at 22:28  

Dear Sakmongkol

Well, you need to brush up your history on the creation of Axiata, how Telecom Malaysia came to control it in a rather convoluted way, and now the idea of selling a portion by tender, which you seem to object to.

The history itself is interesting but that is not what I want to focus on. Rather, there are 2 questions that need to be answered. First, was it a good idea for Telecom Malaysia to split itself into 2 parts in 2007 by creating TM (to house all the fixed line business plus broad band i.e. HSSB), and spin off all the mobile business into TMI, now renamed Axiata? Second, after already selling a portion of TMI in 2007 when TMI was listed, is it a good idea to now sell some more shares to the public?

The main reason for splitting itself into TM and TMI in 2007 (Wahid’s idea) was so that the 2 very different businesses (fixed and mobile) could be run by different people because they had different business dynamics - the fixed line was a declining business (and dull) and the mobile business was growing and represented the future of telephony. The stock market gives a low price earnings ratio to dull, slow growing business and rewards the mobile business with much higher PE ratios. Thus it made sense both from value creation and business dynamics and management to split them. So today, the market value of Axiata far exceeds that of TM. So this split was good.

Now, was it necessary to list TMI (i.e. Axiata) in 2007? This is debatable. On the one hand by selling a portion, TM raised a substantial sum of money to pay down debts and also enabled it to pursue the HSSB project. It now transpires that this HSSB project costing about RM10 billion (60%) funded by government may not be so fantastic after all. Wimax (really 3G) and later true LTE 4G wireless BB will probably kill it. Lets wait and see.

Should TM now sell even more shares, that is, dilute its holding further? What might be its motive? Pay down more debts, or simply to comply with Khazanah thinking to increase liquidity of GLC counters to create a more attractive stock market? It is said that Khazanah holds too many shares in listed GLCs and this kind of makes the market illiquid and so big funds stay away. Different people have different ideas about this subject. Personally, if I had a gold mine I would want 100% of it if I could afford to. Why share?

Anonymous,  3 December 2010 at 00:39  

it being december..maybe someone got to meet headline KPIs in order to ride the gravy train?

I like the comment whereby a big boss CEO says their struggle is about limiting the loss of market share since they started with 100%..a focussed BOD would have kicked out that CEO for such a poor assessment of the markets and lack of understanding of their core business.

But its goes on.

U merge ur company cos u lack expertise but still remains on board as CEO..and the BOD pats u on the back.

If i tell my boss I can't do my job..i get 24 hours notice.In GLC/Pemandu lalala land,,ur boss tells u either merge or find a consultant to do ur job.

We do need a new model for the GLCs and its certainly not Khazanah multicolor books style of mgmt.

Anonymous,  3 December 2010 at 01:53  


With election talk now on almost everyone's thoughts, the next natural question is how about funding the campaign.

The sale proceeds will be in the books but actual cash can be elsewhere - for funding of election campaign?


umar,  3 December 2010 at 02:13  

Telekom Malaysia took over ailing CELCOM and renamed it TM International. Telekom was split into two units : one to focus in fived lines and TMI to expand into cellular mobile services in Sri lanka, Indonesia, bangladesh etc...
It was losing money badly. The share price dropped from $ 7.00 to $ 2.80 in 2008. Ha.. they hired the retired CEO from Maxis. He is still there. Yesterday they announced big profit for the quarter. Hence, TM wants to reduce its holding in Axiata. Poor business acumen. This is growth industry not the sunset fixed line collecting monthy rental for infra done 30 years ago.Many houses still keep their fixed lines and cursing paying monthly rentals.Easy money for TM. Their CEO get pays and perks and get rotated within khazanah group.Wonderful life. Whenever they need any business proposal, just hire the consultants. No need to think at all; no stress and just keep playing golf the corporate way !

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