Telenor directly sold a 10.2% stake in MalaysiaÆs third largest mobile operator through a placement, raising a total of M$1.64 billion ($491 million). The transaction, which took place yesterday and was arranged by CIMB and JPMorgan, ranks as the largest equity deal from Malaysia this year although it was primarily taken up by domestic investors.
One of those investors was government-controlled fibre optic network provider Time dotcom, which earlier yesterday announced that it had entered into a strategic alliance with DiGi that will see the two Malaysian companies pool their resources with regard to both infrastructure and services. As part of the alliance, Time will inject its 3G license into DiGi, allowing the mobile operator to build a third generation wireless network in order to compete with larger rivals Telkom Malaysia and Maxis Communications, which already offer 3G services.
In return, Time received 27.5 million DiGi shares, which is equal to a 3.5% stake in the company. Time, which is currently loss-making, also expects to get between M$10 million and M$15 million in additional revenues as a result of the tie-up and access to DiGiÆs wireless infrastructure and distribution network, according to a joint statement issued by Time and DiGi. There was no immediate information about how much of the placement Time bought, but a source says it is believed to be more than half.
The deal comprised 76.5 million shares that were offered at a fixed price of M$21.50, representing an 8.9% discount to the latest market price before the shares were suspended during MondayÆs trading session. DiGiÆs share price has had a good run this year, achieving a 55% gain and reaching a record close of M$25.50 on November 1.
TimeÆs participation in the transaction was likely crucial to getting the deal done in the current volatile market, although the sizeable discount to the last traded price would also have been helpful. After excluding the shares that were bought by Time, the placement was about four times covered and attracted approximately 40 investors overall, the source says.
The fact that the bulk of the deal was sold into the domestic market û despite being marketed to an international audience û suggests that international investors are getting more cautious about having exposure to what are widely perceived to be ôriskierö markets. However, Malaysia has been out of favour with the international investment community for most of this year and its year-to-date gain of 26% makes it a laggard among Asian markets.
Telenor, which is 54% owned by the Norwegian government, made its first investment in the Malaysian mobile operator in December 1999 and in 2001 received approval from the Malaysian government to increase its stake from 32.9% to 61%, making DiGi the countryÆs first telecom services firm to be majority owned by a foreign company. The 2001 transaction was completed through a limited voluntary offering to existing shareholders at M$6.60 per share.
Over the past year or so, the Malaysian government has, however, put pressure on the Norwegian owner to reduce its stake below 50% and yesterdayÆs direct sale by Telenor, together with the dilution resulting from the issuance of new shares to Time, will accomplish just that.
In a separate statement issued by Telenor, the company stressed that it remains committed to DiGi which plays an important role in the groupÆs plans for the future. Arve Johansen, TelenorÆs deputy chief executive officer and head of the companyÆs Asian operations, says it will continue to account for DiGi on a consolidated basis and will continue to act as the industry driver behind the Malaysian company.
Since Telenor bought a majority stake in 2001, DiGi has increased its number of mobile subscribers from 1.1 million to 6.1 million and increased its market share from 16% to 28%. In the first nine months of this year, it reported revenues of M$3.2 billion ($956 million).
ôWe believe this is a win-win for both Time dotcom and DiGi, and we look forward to working together to create even better telecommunication solutions for consumers. With the 3G platform, DiGi will contribute towards the ambitious broadband penetration goals that Malaysia has set,ö DiGiÆs Norwegian CEO Morten Lundal added.
The alliance between Time and DiGi is subject to regulatory approval and also needs the nod from shareholders at both companies.
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