Telekom's foreign strategic partner may emerge after revamp

KUALA LUMPUR: Even prior to being spun off from the Telekom Malaysia Bhd (TM) group, TM International Sdn Bhd is already attracting bidding interest from foreign strategic partners. 

A foreign strategic partner could be in the works in conjunction with its listing in the second quarter of 2008. 

TM International chief executive officer Yusof Annuar Yaacob said the new entity's proposed unique portfolio of operations in 10 countries was attractive to potential foreign partners. 

Post-demerger, the company will house TM's regional mobile operations in 10 countries as well as its domestic mobile business – Celcom (M) Bhd. 

The proposed TM International operations are all directly owned compared with other regional operators who only have minority stakes in local mobile operators. 

“With direct control of operations, the strategic partner would be buying into the ability to have management control of these businesses in the region,” he said. 

The TM group has managed to build up directly owned operations in 10 countries in the region with over 31.8 million subscribers in the past decade. 

On who the strategic partner might be, Yusof Annuar said TM and largest shareholder Khazanah Nasional Bhd were talking to parties from Europe, the US and the Middle East. 

Also among the parties were private equity firms, he added. 

He said it was both Khazanah's and TM's aspiration for TM International to be “a regional champion for Malaysia”. 

During the briefing, TM group chief executive officer Datuk Abdul Wahid Omar said the partnership proposals were still under consideration and how much of TM International would be for sale was still undecided. 

Under TM International's post-demerger structure, its operations ranked fourth in earnings before interest, tax, depreciation and amortisation (EBITDA) margin among regional peers at 47.8% for 2006 earnings. This is ahead of SK Telecom, M1, DiGi.Com Bhd and AIS but below that of Maxis Communications, China Mobile and Globe. 

In terms of compounded annual growth rate of EBITDA at 40.7% from 2004 to 2006, it ranks third after Hong Kong's Hutchison and India's Bharti Airtel but ahead of Singapore's StarHub and DiGi and China Mobile. 

Among the top 20 mobile operators worldwide, based on revenues generated in Asia and the Middle East, the new business entity ranks a strong 12th place with US$2.5bil, just below Vodafone and Telkomsel Indonesia and ahead of Hutchison and Bharti. 

After the demerger, TM International is expected to be the bigger entity at an estimated market capitalisation of RM27.7bil versus TM at an estimated RM12.33bil. 

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