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Sakmongkol ak 47

Friday 3 December 2010

TM sells its shares in a sunrise business

Here are two interesting comments to my short article regarding TM's intention of selling its shares in the mobile phone business.

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 monthly 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 gets pays and perks and gets 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!

This was a comment by a person named Umar. Another below, was a comment from One Malaysian.

…… 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?

Some issues troubled me. Is there some conspiracy somewhere that this idea of slowly killing off Telekom Malaysia is becoming an official policy? Are some consultants somewhere advising the cerebrally deficient Malaysian bureaucrats that an integral part of the Economic Transformation Plan is to cannibalize Telekom Malaysia?
Then, there is this question. If mobile services is the sunrise business and fixed line is the sunset business, wouldn't it be logical for TM to be acquiring more control over the mobile communications business and not selling a profitable source of business?
So far what we know is, TM is paring down its equity in mobile cellular services. We are not yet told whether this sale will be done in an open tender basis or TM has already talked to some parties.
The 3rd question is: what is the role of Khazanah and the consultants leeching themselves on huge fees in this deal? I mean both business entities are owned by Khazanah. Khazanah owns some 30% of TM and probably almost 50% of Axiata.
Isn't there a conflict of interest issue somewhere? Khazanah people sit in the board of both companies. Some will know of the decision in one company and know the destination of the sale.
Let's see where the sale is directed and see whether the shares in that target company have been mopped up in recent days. What if the buyer of the TM shares is Axiata itself?
Its sunshine everyday baby!


Anonymous,  3 December 2010 at 07:06  

I say sack the bugger running Khazanah! But first thing first sack the bugger who appointed the bugger from Khazanah. Sack the whole damn lot! The bloody corrupted Top Cat!

Anonymous,  3 December 2010 at 08:06  

Or, is it due to a widespread feeling that, come next elections, different people will be in power. So, let's get when the getting's good and leave crumbs to the next group?

Anonymous,  3 December 2010 at 09:13  

"A Chinese who is fearful of God is far more noble than a Malay who indulges in corruption, oppression, betrayal and so forth. No matter how high the songkok is on his head, without the fear of God, he is worthless."

This quote by Nik Aziz sums up the rot in UMNO.
We need more noble Malays to stand up to UMNO and its shenanigans. These UMNO Malays are destroying the country.

lan 3 December 2010 at 09:41  

there has to be a reason. Tm short of cash?!

Donplaypuks® 3 December 2010 at 10:38  


Pre split, Telekom was trading at about $12. Currently the combined value od TM and Axiata is about $8.30. For a long time it was well below $7.

Similarly, the pre merger price of Sime Darby, Golden Hope and Guthrie was in excess of RM 20 per share. Currently Sime (merged entity) is trading at below $9 per share!

Yes, the purpose of all this paper shuffling, re-branding and new logos is not to create more wealth and shareholders' value. It is to line someone's pockets.

A typical merger-demerger & re-branding exercise will cost $100 million. CIMB is reputed to have earned in excess of $500 million in fees in the Sime merger exercise which can be considered a dismal failure.

There is absolutely no reason for Telekom to take profit on Axiata when clearly it is undervalued at $4.74 when compared to Maxis which is trading at about $5.30. If Telekom needs to raise capital, it should do so with rights issue and not by selling its crown jewels.

Lastly, it would be useful to know who the bulk of these Axiata shares have been "placed" out to. A ceratin Sil is reputed to have made a killing in commissions the last time Telekom shares were placed out to Temasik of Singapore!!

we are all of 1 Race, the Human Race

Anonymous,  3 December 2010 at 11:08  

This selling action through middlemen and brokers means massive fees for some people. Guess where some the fees will go, in to the election coffer of some political parties. This is fund raising time, people.

Anonymous,  3 December 2010 at 12:30  

Anonymous said...
I say sack the bugger running Khazanah! But first thing first sack the bugger who appointed the bugger from Khazanah. Sack the whole damn lot! The bloody corrupted Top Cat!

3 December 2010 07:06

I second that...consider this as a test for Najib.

Pekan Mang.

OneMalaysian,  3 December 2010 at 14:16  

Dear Sakmongkol

Khazanah might be rightly called a sovereign wealth fund (SWF) because it is owned by the government and invests on behalf of government. If it is indeed a SWF, what then are its objectives? Is it like the Singapore Investment Corporation, whose recruitment message is: “ we recruit, develop and reward the best people”.

Now, a SWF is not like a normal, large investment or mutual fund like, say, Fidelity or Blackstone. These privately-held and run funds may have quite different investment strategies and risk profiles, but their common aim is to maximize returns for their shareholders. A SWF also seeks a return on capital, but it might have other quite different investment objectives like taking a leading role in large, strategic but risky projects at home, or to invest a part of the country’s foreign reserves overseas to diversify reserves risk. One thing it does not do is to invest in smallish companies thus competing with smaller investors, or take short-term views about markets.

It would be interesting to see what exactly is Khazanah’s mandate. Is it really behaving like a SWF, or is it some hybrid investor but merely owned by government, or is it no different from a run-of-the-mill fund manager except much larger, or does it exist to use the consolidated funds (belonging to all Malaysians) to further Bumiputra interests? Because Khazanah is so big it is the elephant in the investment room, and the public has a right to know what exactly is its mandate. Or does the Official Secrets Act prohibit its disclosure? Only when we know all this can we begin to judge its actions in the market place and its performance.

Anonymous,  3 December 2010 at 15:26  

There is this tendency to set strategy based on "market perceptions"...liquidity,premiums n all that jazz.This is fine for an individual who is only in the game to maximise his wealth.
For big corporations and especially GLCs..the thinking must go beyond short term fashion modelling.Companies create long term value by its operations/services/products..n what propels growth is consistency in growth,innovative & a step ahead of the competitors acumen.
My one cent worth to the GLCs..quit listening to the analysts & numerous advisers.Focus on building solid,growth businesses..even at the expense of some short term market cap downgrades.
In the long run the winners are never judged by last years share prices..

MAS >> grow your routes,fight for pax..don't give away market share and allow competitors to expand routes and frequencies w/out a fight.
TNB>> use your expertise (what little left after the cannibalism by the bean counters)and seek growth in untapped markets
TM/Axiata >> focus on maximising the various communications n data options within group.Synergise to give best to customers..Maxis n the lot have little to offer yet they do more for the customer.
Sime Darby >> increase yields..n that requires good planters not accountants.

Please KPI based on service/operational data..the financials will just follow thru as a result of good business sense.

No more paper shuffling please.

Wenger J Khairy,  3 December 2010 at 18:38  


I was so disappointed to hear than $10 m was spent on McKinseh to set up Pemandu.

I hope readers don't get me wrong. If the McKinseh + Pemandu alliance came up with worthwhile ideas, then its money well spent.

But honestly what did they come out with?

Jala's RM 1 trillion scare
RM 1 trillion ETP at the time when investment is steadily decreasing
Trumpeting the 10% year on year growth for Q1 only for Q3 to have the number slashed?

An load of acronyms that can rival Campbell's Alphabet soup?
(PS: Maybe thats how they come out with their names. These McKinseh + Jala folk cook a can of campbell's alphabet soup and try to make a new acronym with each spoon ful)

Well alas, on the bright side, well its only $10 million US.
On the brighter side, their analysis and recommendations are rubbish and those who was so taken by all of this gobbeldy gook will pay the price.

Anonymous,  3 December 2010 at 19:47  

Azman M (M for mangkuk),

Don't you think it's about time for you to get the fuck out of Khazanah? What has Khazanah's GLCs achieved since you took over the office from Anwar Aji? Khazanah is becoming nothing but a wannabe outfit for ex-consultants from BinaFucker, McKinzir, BigCuntGroup, Eii&Yucks, etc. All those jokers in Khazanah are pushing for M&A deals left right and centre that offer lucrative commissions for themselves.

OneMalaysian,  3 December 2010 at 22:21  

Dear Sakmongkol

It seems unfair to criticise the consultants used by government and the fees they get. Yes, prima facie that seems a lot in RM terms, and we are used to paying peanuts for good work, so we grudge these sums being paid out.

But first we must ask some questions. Why do we need to use international consultants? The answer seems pretty obvious. Most of our smart people are working overseas for these foreign firms and are probably assigned home to do this work. This is because if they set up local outfits and are not regarded as "Bumiputra" they can't get government jobs. But it is OK if they are employed by foreign consultants and work here. What irony.

Second, we have to ask, why is the government using so much consultancy? The answer seems obvious again. There is very little talent and depth in critical government departments. And why so? Because for a long time the government had a bad discriminatory employment policy that excluded non-Bumiputras, so the talent pool is that much smaller and poorer. This bad HR policy is the direct cause why both government departments and GLCs underperform. This knowledge and frustration is widely known and felt. So we now have to pay tens of millions to foreign consultants. Unfortunately, none of these criticisms will result in any change of policy.

Anonymous,  3 December 2010 at 23:56  

so whats on the cards mr.Dato sak?
Normal modus operandi? Let all and sundry share their views aka comments here and then put it to rest? Then what?Have any of the issues discussed here in this pretty blog of yours been resolved by the goverment of the day?
Menang sorak aje ler kome!

aji,  4 December 2010 at 08:21  

your articles seems like umno's pressure cooker's valve

Anonymous,  4 December 2010 at 11:08  


Perhaps Dato' would like to suggest to the BOD of TM for a check up in the eye clinic.

Apparently to the BOD of TM, the night disco light shines brighter than the morning sun.

walla 4 December 2010 at 12:22  

Since and probably more than Putrajaya i remain arguably a national authority on the big consulting firms - what they use and how they do and bill - i can relate to what OneMalaysian has written.

One suspects it is less how good they are than how bad the government remains at building internal brain resources that would have designed similar transformation programs.

Just look at Intan, Mampu, EPU and Khazanah and you will know how the lack of vision and focus beset the way this country has been run all these years by jerks using their knees for want of brains. That's how we get knee-jerks. The most notable thing about Khazanah for instance was the staff table tennis table at the foyer of its main office when last at PWTC.

If you look at the way the programs were rolled-out, it was a rush-job. And that must have been because Putrajaya suddenly woke up that the national situation has become untenable. And the alarm clock sounded louder because political urgency had also intruded. Putrajaya needed a new storyline and new catchphrases to shock and awe the rakyat who were ready to bray for blood. Putrajaya looked around for ideas, found none within, and so Putrajaya outsourced the entire problem, nodding their heads in relief when the powerpoints came back animating across their eyes just like what the MAS board had experienced when the now Khazanah guy was outside doing it to them.

Consulting business is tricky. As one gets more successful, the value of reputation increases beyond the quantum of fees and becomes more susceptible if results don't show up which themselves are dependent on factors like relevant data inputs, analytical complexion of the engagement team, and a myriad of other factors, for example, the global ecosystem has changed. Sometimes, they are just selling the art of selling with appropriate disclaimers.

Given sufficient and accurate data, one can blueprint anything but so long as the right professionally trained brains and national will are in place. For instance, if the consultants say remove all affirmative policies that will weaken national competitiveness but the national will fights shy of doing so, the recommendations will lose their power of change so invested.

Since most of the engagement team members would be locals trained in ivy-leagues with at best some local or regional experience in prior engagements whose skillsets were deemed to be equally needed for these transformation designs, one may therefore conclude the value they bring are reduced to people who were picked on merit, trained to global standards, equipped with knowledge resources and mentored to deliver without compromise.

walla 4 December 2010 at 12:22  


That's why you can see how some of the hair of the younger ones could turn white from the pressure of trying to de-im the impossible in the time they are given with the resources placed at their disposal to supply to clients whose perceptions may not be coherent, let alone aligned to what are being proposed.

There will be other transformation programs, blueprints, masterplans, and so on in years ahead. The government has also done a number of Malaysia Plans and so on. The question to Putrajaya is thus this:

"When are you going to start picking people on merit, training them to global standards, equipping them with knowledge resources and mentoring them to deliver without compromise?"

Since Putajaya is talking about a trillion ringgit economy, surely it can ask itself and answer such a simple question candidly in ten seconds?

After all, how relevant are the deliverables of an engagement is directly proportional to how intelligent the client can interface with the service provider.

And Putrajaya needs that because all the big ticket problems may be traced to optical delusion about the real state of the nation.

They don't know, they don't care and then they get others to do their homework for them. Like this how to pass any exam set by thinking and intelligent rakyat?

Back to TM. It is selling Axiata. There could be three reasons. One, the staff esos is due. Two, the short-term craving for rm800 million plus in capital gains. And three, possibly some issues with their XL market in Indonesia.

It seems to be tactical rather than strategic. Maybe they are starting to think mobile business is not unlike the auto business. Once the domestic uptake hits max, one must go out in order to sustain survival. If the answer is that they can't do that well, it then begs the question to not just TM and Proton but to all GLCs including their parent franchise holder whether they are over their heads in meeting the onslaught of complexity and challenges of this fully globalized planet.

And that question not even the biggest consulting firm would dare to answer.

Meanwhile one also understands that the big consulting firms do probono work like our legal profession. Maybe they can do that for our youth. A special national program, independent of Putrajaya and Umno, done on probono out of a higher sense of professionalism, that targets how to network all our youths together so that they can learn the techniques of real corporate thinking untethered from the distortions of local race-based politics. A get-real change management program.

Walla has spoken. (;P)

OneMalaysian,  4 December 2010 at 16:13  

Dear Sakmongkol

“After all, how relevant are the deliverables of an engagement is directly proportional to how intelligent the client can interface with the service provider. And Putrajaya needs that because all the big ticket problems may be traced to optical delusion about the real state of the nation”. Walla.

One may not agree with everything that Najib does, and even if one is his detractor one should give him credit for attempting this NEM. The NEM represents a very serious attempt to undo in 10 years the damage done to our economic and social systems over the past 40 years. While Najib may have a political vision, the problem that he encounters is a civil service that has atrophied and hollowed out through several decades of racially discriminatory recruitment and promotion practices so that it is nothing more than a fa├žade of civil management. It cannot hold a candle to its counter-part south of the causeway, whose senior ranks are staffed by Oxbridge graduates.

So, the need to bypass this shadow of a civil service by going to expensive international consultants. And because there is a danger that the senior civil servants may not even understand those concepts and programmes, Najib has set up Pemandu, the think-tank-cum-overseer to ensure that things stay on track. Consultants are never employed to execute an idea – that is not their job, which is to identify problems, put them in some perspective in relation to your objectives, study your resources, and then suggest ways to reach those goals. That job must perforce be done by “management”. But management (our civil service) is not up to the mark in many areas. So how does Najib deal with this? He has therefore “outsourced” a lot of the work to the private sector through the ETPs so that economic growth is much more a private sector driven initiative than one directed by the state. (This is always better anyway). But he has one more obstacle that no consultant can solve – PERKASA and the right wing of UMNO.

Anonymous,  4 December 2010 at 19:41  

Hello Walla 12:22

"Meanwhile one also understands that the big consulting firms do probono work like our legal profession. Maybe they can do that for our youth. A special national program, independent of Putrajaya and Umno, done on probono out of a higher sense of professionalism, that targets how to network all our youths together so that they can learn the techniques of real corporate thinking untethered from the distortions of local race-based politics. A get-real change management program."

For a start, revamp the whole education system. full stop.

Why Beaconhouse and a few others offering better modules than the ordinary kebangsaan school if I may ask?

Government has a lot of money - why they pussy footing around with our present and future children education?

look at uitm - they good in producing and creating mass bright talented students.

but when step up the ante in any different "english" environment they all pussy footing around as well! rarely the good ones really shine.

so mooyoodin and jibby has to step up the ante and revamp some of his advisors,cuntsultants and cabinet board.

thats the only way umno/bn has the easier path of retaking the 2/3 majority.

Ok fine, their currently on NEM that and this,

but come on, education is the next gold potential with all this GLC crap PM and DPM simply has to deal with something bolder.

- Ikan Tongkol -

Anonymous,  4 December 2010 at 19:48  

walla 12:22

part 2

additional to that - sugar and petrol spike albeit to cut government subsidy slowly and gradually

I would like to enquire within what happen to that one time petrol spike was RM2.78 per litre - where those money ?!

and yet the government at that time include paklah islam had hari yelled to the masses of malaysians "ubahh gaya hidup" do you find any justice to vote for umno/BN again?

I simply want progress not a hypocrite government.

- Ikan Tongkol -

Anonymous,  5 December 2010 at 00:04  

The wise Walla as always showing his age and deteriorating brain cells..

FYI most of the EPP was developed by genuinely local brains..the consultants was engaged to provide the framework and consolidating into presentable titbits.The brain power was largely local.

So why were the consultants paid so much?Cos we have people like Walla who hv no confidence in their own knowledge n thinks whites r always right.

Poor walla

walla 5 December 2010 at 08:42  


'Since most of the engagement team members would be locals ...'


Anonymous,  6 December 2010 at 18:06  

Ha ha ha..

About Con-Insult-In-Term (Consultan)....did Jibby trust Mat Salleh or Local????

Do U know, we have telented lacturer and profesor in our Universiti..why not use then as consultant instead of hire Con-insult-In-term????

It's insulting the Gov. officer and INTAN..for failure to grooms the best civil servant...ha ha ha..

Funny..ha ha ha..

walla 7 December 2010 at 10:43  

Maybe Jibby did ask them but they replied, 'sorry boss we're too busy trying to up our thes rankings otherwise not only malaysia but our jobs mampus.'

what do you...think?

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