Saudi Telecom partners with recently privatised Maxis

The Saudi telco pays $3 billion and underwrites half of a $900 million loan for a 25% stake in Maxis and a 51% stake in Maxis' Indonesian subsidiary.
Saudi Telecom will invest $3.05 billion to form a strategic partnership with Binariang, the principal shareholder of Maxis Communications, MalaysiaÆs leading telco. Saudi Telecom will acquire a 25% effective interest in Maxis, which has operations in Malaysia and India, and a 51% direct stake in MaxisÆ Indonesian subsidiary, Natrindo Telepon Seluler. As part of the investment, Saudi Telecom will participate in a $900 million subordinated loan, which will be underwritten equally by Saudi Telecom and the existing shareholders of Binariang.

Binariang is an investment holding company controlled by Ananda Krishnan. On May 24 this year, it launched an offer to privatise and delist Maxis in a deal which valued the telco at $11.5 billion. The valuation is not comparable on a meaningful basis with the Saudi Telecom payment as Saudi Telecom is acquiring control of the Indonesian subsidiary as well as underwriting debt funding for Maxis. Also, management rights which Saudi Telecom may have negotiated with its investment, and could have influenced the valuation, were not disclosed.

Maxis is the leading mobile operator in Malaysia providing services to a mobile subscriber base estimated at 8.5 million, representing a market share of 41.5%. For the most recent fiscal year ended December 2006, Maxis revenues were M$6.96 billion ($2 billion) and Ebitda was M$3.76 billion.

Aircel is MaxisÆ 74% owned mobile subsidiary in India with operations in nine of the 23 telecom circles and licenses for the remaining 14 circles. The $900 million debt finance from Saudi Telecom is expected to be deployed to expand the Indian business.

Meanwhile, Natrindo Telepon Seluler is MaxisÆ 95% owned mobile subsidiary with a license to build and operate a national 2G and 3G mobile network in Indonesia. It is expected to launch operations by the end of the year.

The Maxis privatisation, which was the biggest buyout in Asia ex-Japan, was led and financed by ABN AMRO and CIMB. Binariang offered around a 20% premium to the then traded share price of Maxis, for the 41% of the company it did not own. At the time, sources said Krishnan privatised Maxis because of the aggressive investment he planned in higher risk markets, such as India, and the desire for the flexibility which being closely-held provides. Binariang announced on June 22 that it had increased its ownership of Maxis to 99.4%. The Saudi Telecom announcement follows close on the heels of the successful delisting.

Saudi Telecom offers fixed, mobile, data and internet services to more than 14 million mobile and 4.5 million fixed-line subscribers. In 2006, Saudi Telecom had revenues of $9 billion on which it earned an Ebitda of $4.4 billion. Saudi Telecom termed the Maxis investment a ômilestone in its developmentö. Saudi Telecom is one of the last large Middle Eastern telecom players to foray outside its home market. It has a stated objective to generate 10% of its revenues from markets other than Saudi Arabia by 2010.

ôWe will expand our footprint to over 1.4 billion people in some of the fastest growing telecommunications markets in the world. This transaction is consistent with our strategy to expand into high growth emerging markets not only to diversify our revenue but also to generate sustainable long-term growth for the future,ö commented Muhammad Bin Suliman Al-Jasser, chairman of Saudi Telecom.

Saudi Telecom also commented that the partnership with Maxis could enable the companies to collectively negotiate more favourable terms with vendors and service providers, helping to create value for both Binariang and Saudi Telecom shareholders.

Binariang chairman, Raja Datuk Arshad Raja Tun Uda, suggested that Maxis and Saudi Telecom could ôbroaden this partnership to jointly expand to other significant markets in Asia, the Middle East and Africaö.

Goldman Sachs advised Saudi Telecom on the Maxis deal.
¬ Haymarket Media Limited. All rights reserved.
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