Big telco stake sale in Malaysia

Big telco stake sale in Malaysia

PETALING JAYA - Two foreign shareholders of large stakes in leading Malaysian telecommunications companies (telcos) are exploring the possibility of divesting their stakes, indicating that the industry could be maturing here.

Reports also indicated that these parties might be more keen on investing in higher-growth markets such as Indonesia and Vietnam.

In other parts of Asia, investments by foreign cellular companies (celcos) into Asian telcos had dried up.

Over the past few days, reports had emerged that Norwegian telco, Telenor ASA, might be considering a sale of its stake in Digi.Com Bhd, and Saudi Telecom Co was said to be exploring options to dispose of its indirect stake in Maxis Bhd.

Intense competition could be the main factor behind the decisions, insiders said, coupled with the fact that the telecommunications market in Malaysia is crowded, resulting in price wars and thinning margins.

Telecom penetration levels have reached nearly 150 per cent.

"Three players in the cellular field are ideal, four are still manageable but five to six have made the scene too crowded, not forgetting the growing number of many mobile virtual network operators," said an analyst.

CIMB Research pointed out recently that in the second quarter of the year, the telco industry mobile revenue fell 2.4 per cent quarter-on-quarter due to competition.

However, while these parties may be exploring a divestment of their stakes in Malaysian telcos, the big question is whether there will be takers for the stakes, considering the state of the industry in Malaysia.

Digi is trading at a price earnings (PE) multiple of 23.39 times and offers a yield of 4.26 per cent at its current price of RM4.81 (S$1.58), while Maxis' PE is at 24.40 times, with a yield of 3.25 per cent at its current price of RM6.15, Bloomberg data revealed.

In comparison, Singapore Telecom-munications Ltd is trading at a less demanding PE of 16.3 times and offers a decent yield of 4.41 per cent too.

An added complication is the concern investors would have if an owner like Telenor decides to sell down.

"Without Telenor's insights, Digi may no longer look as attractive," pointed out an industry player.

Maxis is the largest celco by subscriber numbers, while Digi ranks third. However, the churn rate among Malaysian celcos remains high and subscriber numbers change every month.

Last Friday, reports quoting sources said that Telenor might explore a joint-venture with Asian carriers or a sale of its stake in Digi if it didn't find the right partner.

Bloomberg quoting sources said that the deliberations were private and the review was at an early stage and no final decision had been made.

A Telenor representative told StarBiz yesterday that "as a principle, Telenor does not comment on rumours and speculation".

Telenor bought into Digi in 2008 with a 61 per cent stake, but had scaled it down to 49 per cent worth about RM18bil.

In another report, Bloomberg quoting sources said Saudi Telecom was exploring options for its indirect stake in Maxis.

It said Saudi Telecom was the biggest telecoms operator in the Gulf kingdom and has 25 per cent in Binariang GSM Sdn Bhd, which is the controlling shareholder of Maxis.

It added that the Binariang holding gives Saudi Telecom an effective 16.2 per cent interest in Maxis valued at about US$1.8bil.

Binariang has a 64.9 per cent stake in Maxis.

No comment was obtained by Bloomberg from Saudi Telecom and Maxis.

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