Saturday, March 01, 2003
Evolution of the Malaysian cellular sectorBY Abdul Majid Abdullah
THE cellular telephone reached Malaysian shores with the introduction of ATUR 450 by Telekom Malaysia in 1985. Then, it was the first and only nationwide cellular telephone in Malaysia. An initial investment amounting to RM52.5 million led to the establishment of a network of five mobile exchanges and 954 radio channels, with a total capacity to serve 17,000 subscribers. Atur 450 (which uses the Nordic Mobile Technology – NMT) was very successful as it was used to connect those in the rural areas of Malaysia using a 450 MHz frequency.
At one time, Atur garnered up to 10 per cent share of the cellular market, amounting to about 120,000 subscribers nationwide. In fact, using Atur, Telekom Malaysia introduced the first wireless payphone in Malaysia specially for rural areas. Even today, Atur continues to maintain a base of about 40,000 subscribers, who find the service invaluable in the remote areas of the country.
In the next step of the evolution, in 1989, Telekom Malaysia became the first provider of the 900 MHz analogue service (010) in the country. This was the beginning of a company today known as CELCOM (Malaysia) Bhd. However, due to various business considerations, Telekom sold its 900 MHz analogue system to the Alpine Resources Sdn Bhd in 1989, which later changed its name to Technology Resources Industries Berhad.
A little later down the road, Telekom Malaysia invested in a 30 per cent investment in MOBIKOM Sdn Bhd (which operated the Mobifon 800 network – a dual mode analogue and digital system operating in the 800MHz band).
In 1998, Telekom acquired the remaining shares in Mobikom, that it did not already own, from Permodalan Nasional Berhad, Edaran Otomobil Nasional Berhad and Sapura Holdings Sdn Bhd; making Mobikom a wholly-owned subsidiary of Telekom Malaysia.
Continuing with its focus on the cellular industry, Telekom Malaysia had also in 1996 acquired 200 million shares in MRCB Telecommunication Sdn Bhd from Malaysian Resources Sdn Bhd for RM635 million, paving the way for Telekom’s entry into the PCN network. This was the beginning of TM Cellular Sdn Bhd (formerly known as Telekom Cellular) which introduced the digital cellular telephone service, TMTOUCH. TMTOUCH is based on the Global System for Mobile Communication (GSM) technology, operating on the 1800 MHz frequency spectrum, thus giving Telekom Malaysia the competitive edge with a foothold in the analogue and digital networks.
In a bid to gain market share in a dynamic industry, TM Cellular raced ahead with significant strategies to realise its aim of becoming the number one cellular provider in the country. However, it had to compete with emerging telcos that were fast on its heels, fighting for a bigger piece of the cellular pie.
So what did Telekom do?
Organic growth takes time – it is always faster to grow through acquisition. Hearing the government’s call for consolidation, Telekom Malaysia took up the challenge of forging the premier cellular player in Malaysia. So the race was on to find a merger partner with the best fit. This search began in early 2002 when Telekom initiated its plan for the possible combination of TM Cellular’s business with that of Celcom. The merger will see the emergence of a leading player in the cellular sector with approximately 40 per cent market share and ultimately 95 per cent coverage of the populated areas in Malaysia, as defined by Malaysian Communications & Multimedia Commission. There will be real wins from the merger in terms of cost savings in capital and operating expenditure, a wider network of customer service infrastructure, better service quality, less congestion, wider network and other benefits arising from economies of scale.
The synergies that will spring from a union of two leading cellular companies are indeed compelling. Even more so when one considers that it is a homecoming of sort on the part of Celcom. Why a homecoming? As earlier mentioned, Celcom was initially started by Telekom but later sold to TRI (then known as Alpine Resources). The business combination will see a return of Celcom to the Telekom Malaysia stable of companies.
Once all the approvals relating to the transaction have been obtained, the bigger task will be to integrate the two companies in a way that maximises the inherent synergies. The key point to remember is that for any merger to succeed, it must create value for stakeholders – whether shareholders, customers or the industry as a whole.
The merged TM Cellular – Celcom entity will continue to provide more applications and value added services to promote usage and data revenue among its customers. Value-added services encompass data services such as caller identification, call holding, waiting and forwarding, voice and short messaging service, and soon mobile technology will include data where the phones are as good as a pocket computer.
The service provider of the future will enable customers to do everything, not with a click of the mouse but with the tap of their fingers on their phones.
·Abdul Majid Abdullah is vice-president of Corporate Strategy and Planning, Telekom Malaysia Bhd