TM’s move to probe corruption allegations lauded

PETALING JAYA: Telekom Malaysia Bhd's (TM) move to set up a task force to investigate the alleged improper payments from Alcatel-Lucent SA to its staff is a step in the right direction towards better corporate governance, according to analysts.

“We view positively the move by both companies to carry out independent and joint investigations into allegations of graft, the findings of which should further strengthen and reinforce internal procurement policies and uphold the integrity of dealings with equipment vendors,” OSK Research said.

CLSA Securities Malaysia head of research Claire Chin said TM's move was the right way to go.

“I am all for it. It's a very good step in corporate Malaysia for TM to investigate and inform us of the findings. This will improve accountability and transparency of our corporates,” she said.

Another local bank-backed analyst concurred, adding that the probe was good for investors as well in the efforts to improve corporate governance.

On Wednesday, TM said it would investigate the alleged improper payments from Alcatel-Lucent to its staff regarding bids for Celcom-Axiata Bhd's 3G mobile services. The telco said that it would inform the relevant authorities if its internal probe came across any substantive findings.

Meanwhile, Axiata Group Bhd said it viewed these potential allegations seriously and would also carry out a probe. Axiata (known as TMI then) was still part of TM before the demerger exercise in 2008.

On Tuesday, Alcatel-Lucent and three of its subsidiaries had to pay more than US$137mil (RM423mil) in fines and penalties to settle US charges.

The US Securities and Exchange Commission and the Justice Department said Alcatel-Lucent was found to have given bribes to government officials to win or keep multi-million dollar contracts. The countries involved are Malaysia, Taiwan, Costa Rica and Honduras.

According to court documents, Alcatel-Lucent agents paid bribes to officials in Malaysia to obtain or retain a telecommunications contract worth US$85mil (RM263mil) .

RHB Research said the bribery scandal raised the possibility that the contract may have been inflated, though the SEC filing suggested that Alcatel-Lucent could have undercut its rivals to win contracts by finding out the quotes from rival bids.

“As the event took place in 2007, any potential further write-offs should not significantly affect core earnings as the assets involved would have depreciated somewhat (or written off completely) and they are non-cash items.

“Whether TM will seek recourse, if any, with Axiata as the equipment was related to Celcom's operations, remains to be seen,” RHB Research said, adding that it had left TM's earnings forecasts unchanged.

In the short term, however, RHB expects sentiment on the stocks to be hurt by the news but it still likes TM for potential active capital management.

“We view any dips (on TM) as an opportunity to accumulate the stock, as there is a high likelihood of significant special dividends, which may result in total dividend yield of 20.9% in 2011,” it said.

OSK Research said the developments related to the allegations and the participation of the Malaysian Anti-Corruption Commission in the probe were lauded as they safeguarded foreign perception and demonstrated that the Government took such allegations seriously in its efforts to promote foreign direct investments.

Shares of both telcos did not seem to be affected by the bribery report. TM closed unchanged at RM3.51 while Axiata added 1 sen to RM4.75 yesterday.

  TM :  [Stock Watch]  [News]For latest Bursa Malaysia indices, charts and other information click here

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Related Stories: Clean up the house for the New Year Minister asks TM to explain kickback allegations Is it time for telcos to self-regulate? TM to provide high speed broadband access to Maxis TM plans to sell Axiata shares for RM879m

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