Malaysia mobilzes MobileOne

Telekom Malaysia and Khazanah add to their investment in MobileOne as Cable & Wireless and PCCW hang up.

Cable and Wireless (C&W) and PCCW have announced that they have divested their 12.1% stake in Singapore's MobileOne to Malaysia's TM International (TMI) and Khazanah Nasional. The deal is expected to cost the consortium $157.1 million and is the latest acquisition by a Malaysian government-controlled entity in Singapore.

The MobileOne stake was owned through C&W's subsidiary Great Eastern Telecommunications Limited (GET), its joint venture with Hong Kong's PCCW. Upon completing the transaction, the UK telecommunications company will receive $87.1 million from the sale. PCCW will pick up $77 million due to its smaller stake in GET. JPMorgan advised the sellers and UBS advised the buyers on the deal.

The consideration will be S$2.20 per share and has been priced at a 4.8% premium to MobileOne's closing price of S$2.10 per share on Wednesday August 17th.

The latest purchase of MobileOne will increase Telekom and Khazanah's combined stake to 17.7%, which now represents a combined investment of $228 million. Sunshare Investments, the joint venture between Telekom (80%) and Khazanah (20%), is the official purchaser of the stake. The joint venture gained its initial piece of MobileOne in 2002, following its Singapore listing.

Following the announcement, sources at Telekom Malaysia said that the purchase would immediately add to its earnings. Malaysia's incumbent telephone operator also expressed a desire to raise its stake in MobileOne to around 30% in the future, with Keppel Telecommunications & Transport's 14% stake earmarked as a possible target.

In 2004, MobileOne posted a full year net profit of $93.3 million. The company also counts 1.24 million customers in the Singapore telecommunications market, which has recently been boosted by strong second quarter demand for prepaid mobile services. MobileOne's share price has also been performing robustly in the first eight months of 2005, hitting a new peak of S$2.20 on 7 June.

Given this backdrop, those close to the deal suggest that the timing was right for C&W to divest itself from the Singapore mobile market. According to C&W, the company is expected to recoup $80 million from its investment in MobileOne and will focus its attention on core investments in other markets.

For Malaysia Telekom, the 12.1% acquisition represents a further move into the regional telco sector undertaken to combat increasing saturation in its home market. Malaysia's incumbent telecommunications firm has investments in seven countries including its 27% share in Indonesia's Excelcomindo and in the emerging markets of sri Lanka, Bangladesh and Cambodia.

Its increasing investment in MobileOne also comes less than three months after it pulled a bid for a 26% stake in Pakistan Telecommunication Corporation (PTCL), citing a desire to focus on other markets.

Subject to approval by the Infocomm Development Authority of Singapore, the MobileOne transaction will completed by September 2005, with those close to the deal stressing that the process will continue smoothly.

Telekom and Khazanah's acquisition of MobileOne is the latest deal between the neighbouring countries and not the first to involve investments by state-backed enterprises and telecommunications.

In March 2004, Singapore's state-owned investment company Temasek Holdings paid $421 million for a 5% share in Telekom Malaysia. More recently, Temasek picked up a 15% stake in Malaysian Plantations (MPlant), the parent of Alliance Bank. The deal marked the first major investment by a Singapore entity in Malaysian financial institution.

Other notable transactions between the two nations have included Malaysia International Shipping Corp's (MISC) $445 million acquisition of American Eagle Tankers (AET), the former crude oil transportation company of Singapore's Neptune Orient Lines.

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