Telekom surprises industry with investment in Singapore mobile market
Telekom surprises industry with investment in Singapore mobile market
Associated Press, Kuala Lumpur
State-controlled Telekom Malaysia Bhd.'s move to invest in
Singapore's saturated mobile phone market has surprised analysts
who see few immediate benefits from the deal.
Malaysia's largest telecommunications operator, tying up with
the state investment arm Khazanah Nasional Bhd., last week agreed
to buy a 12.06 percent stake in MobileOne Ltd., raising its
ownership in Singapore's No. 3 cell phone company by customers to
17.7 percent.
The move appears to be a shift in Telekom's strategy of
investing in red-hot Asian markets that can deliver quick
returns, such as Indonesia, Cambodia, Bangladesh and Sri Lanka,
as well as its hopes of expanding to emerging territories like
India and Pakistan.
"We are somewhat surprised by this announcement as it does not
fit into the company's previous strategy of acquiring high
growth-low penetration investments," investment bank Goldman
Sachs said in a statement.
Under the Singapore deal, Telekom will pay 856.3 million
ringgit (US$227.1 million) to become the largest shareholder in a
company with limited scope for growth.
Telekom has been buying assets elsewhere in Asia recently as
competition in the domestic market grows. It has a 27.3 percent
stake in Indonesia's Excelcomindo and also owns Sri Lanka's
Dialog Telekom Ltd., the South Asian country's No. 1 mobile phone
company.
Analysts said immediate financial gains from the MobileOne
deal are limited, as 3 million of Singapore's 4 million people
already own mobile phones sold by three established companies.
But Telekom believes that the deal is "not so much for growth,
but synergy and product innovation and cross border
transactions," said Abdul Wahid Omar, Telekom Malaysia's chief
executive.
"That's why we're buying into this company," he said.
Lee Chee Kunn, chief executive of Alpha Asset Management Sdn.
Bhd. in Kuala Lumpur, said the deal is positive in the long run
for Telekom because it will allow the company to tap MobileOne's
technical expertise, expand in the region and gain economies of
scale.
Telekom Malaysia and MobileOne can also cross-sell products,
jointly develop and sell third generation technology content and
gain leverage in buying equipment from vendors, said Tursina
Yaacob, a telecoms analyst at Mayban Securities.
Goldman Sachs said the deal won't have a major impact on
Telekom's earnings, but noted the company was probably attracted
to MobileOne's strong cash flow and dividend payout policy.
So far this year, Telekom Malaysia's stock is down 4.3
percent, underperforming compared to the Kuala Lumpur Composite
Index, which has gained 1.7 percent in 2005.
However, the stock has risen 22 percent since April, when it
hit its lowest level.