The Star Online
Thursday July 9, 2009
By B.K. SIDHU
But exec director says merger makes sense in a competitive marketplace
PETALING JAYA: Axiata Group Bhd continues to look at ways to expand its business but there is nothing on the table with regard to the purchase of assets owned by Millicom International Cellular SA in Asia.
“It does make sense for two parties to combine (merge) in a very competitive marketplace.
“Internally, we look at all sorts of transactions but there is nothing going on,’’ said executive director and chief financial officer Datuk Yusof Annuar Yaacob.
Then again, even if Axiata were to consider buying the stakes, the issue of funding would arise and as Yusof puts it: “If it makes sense, do we have the money to buy the assets?’’
Yusof was responding to queries from StarBiz on a report which quoted sources as saying that Axiata was considering an offer for Millicom assets in Cambodia and Sri Lanka.
On Tuesday, Bloomberg reported that Axiata might pay as much as US$500mil for Millicom’s stake in Cambodia and US$200mil for the Sri Lanka operations.
Millicom is reviewing several proposals to sell its businesses in Cambodia, Laos and Sri Lanka separately or together.
Separately, Axiata – in an e-mail response to queries – said it would not comment on articles which were speculative in nature.
Millicom owns 100% of Celltel Lanka Ltd, the second largest mobile player in Sri Lanka; 58% of Cambodia’s dominant player MobiTel, which has 2.8 million subscribers; and 74% stake in Millicom Lao Co in Laos.
Axiata, on the other hand, is a pan-Asian player that has investments in several countries. It owns 85% of Sri Lanka’s dominant player Dialog Telekom, which has 5.8 million subscribers.
In Cambodia, Axiata controls TMI Cambodia, the country’s third largest player with 600,000 subscribers.
Both are fragmented markets where size matters. Even though Dialog Telekom is the largest player in Sri Lanka, a merger with Celltel will allow it to solidify its dominant position, given the fact that competition has intensified with the entry of India’s Bharti in Sri Lanka.
Cambodia has nine players but the market offers huge potential for cellular growth and a deal with Millicom will give Axiata the strength and spread to strengthen its base.
Axiata is in consolidation mode but group chief executive officer Datuk Seri Jamaludin Ibrahim has often said that “at the right price, we will never say no.’’
Whether or not such a deal goes through, some analysts are already upbeat that a purchase will do Axiata good. However, others worry that Axiata may be taking on more debts.
For the first quarter ended March 31, Axiata’s net debt stood at RM17.1bil or a net gearing of 1.5 times.
A research house said the acquisitions, should they happen, could result in net debts ballooning by a further RM2bil if they were 80% debt-financed.
“We are unsure of the profitability of these units, hence uncertain over the potential earnings impact following the acquisitions,’’ it said in a report.
Growing capital expenditure requirements remain another concern, especially for its Indian operations, as bidding for the 3G spectrum there may be on soon.