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Telekom Set to Swallow Rival
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Telekom Malaysia, which has a near-monopoly of fixed-line telephony in Malaysia, has tightened its stranglehold on the industry with a substantial stake in beleaguered cell phone rival Technology Resources Industries (TRI). Telekom currently holds a 31.25% stake in TRI and is pressing for four seats on the latter's 11-member board. The move may pave the way for an eventual merger of the two companies.
If the Telekom-TRI merger goes through, it would create Malaysia's largest cell phone service and reduce options for subscribers, who often have had to put up with poor coverage, service outages and high call rates. The possible merger also coincidentally comes just as the government is about to announce the winning bid for licences for the lucrative third-generation (3G) wireless technology. Telekom and TRI's cell phone unit, Celcom, have separately put in bids, along with three other companies, for allocation of 3G spectrum blocks in Malaysia for a period of 15 years.
Telekom chairman Muhammad Radzi Mansor downplayed talk of the possible takeover in reports to local media, saying the telco preferred "an amicable and friendly approach instead of going on the offensive." Under market rules, Telekom has to make a mandatory general offer to buy out TRI minority shareholders and swallow the company whole, if its stake hits the trigger point of 33%.
Raising the Stakes
TRI was founded and controlled by local tycoon and cell phone pioneer Tajudin Ramli, while German telco Deutsche Telekom owns a 16% stake in the company. The company is saddled with close to US$1 billion in debts, which have been mounting since the currency crisis and recession in 1997-1998.
In April, Tajudin's grip on the company was loosened when state bad-debt agency Pengurusan Danaharta Nasional moved in and forced disposal of his 13.2% stake in TRI to Telekom for 717 million ringgit (US$188 million), or 2.75 ringgit a share. Telekom then embarked on a series of additional purchases on the open market and through direct deals to raise its stake to the current 31.25%, making it the largest shareholder in TRI. Market reports suggest that Telekom may have spent as much as 1.7 billion ringgit during its acquisition exercise.
Telekom's sights were sharply focused on TRI's popular cell phone service Celcom, Malaysia's second largest cell phone provider, with 2.13 million customers as of end-2001. TRI is the third cellular company that Telekom has bought into since 1996 and it claims to have about a million cell phone subscribers of its own.
by Julian Matthews,
Kuala Lumpur
Websites:
Telekom Malaysia: http://www.telekom.com.my
(August 2002 Issue, Nikkei Electronics Asia)
If the Telekom-TRI merger goes through, it would create Malaysia's largest cell phone service and reduce options for subscribers, who often have had to put up with poor coverage, service outages and high call rates. The possible merger also coincidentally comes just as the government is about to announce the winning bid for licences for the lucrative third-generation (3G) wireless technology. Telekom and TRI's cell phone unit, Celcom, have separately put in bids, along with three other companies, for allocation of 3G spectrum blocks in Malaysia for a period of 15 years.
Telekom chairman Muhammad Radzi Mansor downplayed talk of the possible takeover in reports to local media, saying the telco preferred "an amicable and friendly approach instead of going on the offensive." Under market rules, Telekom has to make a mandatory general offer to buy out TRI minority shareholders and swallow the company whole, if its stake hits the trigger point of 33%.
Raising the Stakes
TRI was founded and controlled by local tycoon and cell phone pioneer Tajudin Ramli, while German telco Deutsche Telekom owns a 16% stake in the company. The company is saddled with close to US$1 billion in debts, which have been mounting since the currency crisis and recession in 1997-1998.
In April, Tajudin's grip on the company was loosened when state bad-debt agency Pengurusan Danaharta Nasional moved in and forced disposal of his 13.2% stake in TRI to Telekom for 717 million ringgit (US$188 million), or 2.75 ringgit a share. Telekom then embarked on a series of additional purchases on the open market and through direct deals to raise its stake to the current 31.25%, making it the largest shareholder in TRI. Market reports suggest that Telekom may have spent as much as 1.7 billion ringgit during its acquisition exercise.
Telekom's sights were sharply focused on TRI's popular cell phone service Celcom, Malaysia's second largest cell phone provider, with 2.13 million customers as of end-2001. TRI is the third cellular company that Telekom has bought into since 1996 and it claims to have about a million cell phone subscribers of its own.
by Julian Matthews,
Kuala Lumpur
Websites:
Telekom Malaysia: http://www.telekom.com.my
(August 2002 Issue, Nikkei Electronics Asia)
