Axiata makes bid for Mobitel

Photo by: Sovann Philong
A Mobitel-branded vendor sells mobile phone cards in Phnom Penh.

The Phnom Penh Post
Thursday, 09 July 2009
STEVE FINCH

COMPETITION for control of Cambodia's mobile phone market has intensified with news that Axiata - the Malaysian company with the controlling stake in local operator Hello - may have bid for Millicom's International Cellular SA's Asian assets, which include a majority share in the Kingdom's market leader Mobitel.

Bloomberg News reported Tuesday that Kuala Lumpur-based Axiata may have bid US$500 million for the controlling share in Mobitel after Millicom announced July 2 that Goldman Sachs had been appointed to advise a strategic review of its assets in Cambodia, Laos and Sri Lanka.

"If there are opportunities which make financial and strategic sense, the group would certainly consider them," Bloomberg reported an Axiata official as saying.

Millicom was unavailable for comment on Wednesday but the Post understands that the Luxembourg-based mobile operator may have received up to eight offers for a combination of its Asian assets after it first announced it would consider selling at the end of last year. It owns a 58.4 percent stake in Mobitel.

The Royal Group, which owns a 38.5 percent share in Cambodia's leading operator by users, made a bid for Millicom's stake earlier this year, meaning that it is effectively now competing with Axiata for the market leader - Mobitel held a 55 percent share of the market at the end of last year while Axiata's Hello, the No 3 operator, had a 15 percent market share.

The Royal Group on Wednesday confirmed that it was still in negotiations to purchase Millicom's stake in Mobitel, adding that a successful bid by another company for the stake - including by Axiata - would require a level of cooperation.

--------------------------------------------------------------------------------
Anyone who wants to come in has to have our [Royal group's]say so.
--------------------------------------------------------------------------------

"We have got shareholder protections," Chief Financial Officer Mark Hanna told the Post. "Anyone who wants to come in has to have our say so."

Other bidders for the Milllicom stake remain unknown. Millicom's Luxembourg office was unavailable for comment on Wednesday.

The possible permutations of a deal for Millicom's Cambodia assets create intriguing possibilities given the dominant position of Mobitel in the market and the competitive nature of the Kingdom's mobile sector.

There are already nine operators in the country, a situation most analysts agree is untenable in the long term.

Should Royal Group be successful in its bid - the details of which it has not disclosed - then it would secure a commanding position in Cambodia with a 96.9 percent stake in Mobitel.

Former Millicom employee Muhammad Akhtar Zaman controls the remaining 3.1 percent share of the company.

In the event of an Axiata acquisition, the Malaysian company would then hold a controlling stake in both the No 1 and No 3 operators in Cambodia with a combined market share of 70 percent at the end of 2008 and would conceivably have to receive the green light from Royal Group CEO and Chairman Kith Meng, as acknowledged by Hanna.

According to Millicom's financial results for the first quarter, Mobitel added 52,620 users this year up to the end of March, a 16 percent year-on-year increase that brought its total number of users to 2.17 million.

Millicom's performance in Cambodia was outstripped by its Asian assets when combined, which saw a 34 percent annualised increase in users in the same period. Revenues for Millicom's three Asian assets climbed 7 percent in the first quarter year-on-year

"There's a lot of interest [in the Millicom stake]," Hanna said.

Simon Perkins, Hello's newly appointed CEO in Cambodia and a former Millicom employee, declined to comment on Wednesday.

Perkins, as a Millicom employee, was previously on Mobitel's board of directors from 2002 to 2005 and is understood to know Kith Meng well.

"We haven't had discussions with anyone else," Hanna said, referring to other mobile operators in Cambodia.

Hanna added that Royal Group had only made a bid for Millicom's Cambodia stake, while Axiata looks to have bid for Cambodia and Sri Lanka - the Malaysian company owns an 85 percent stake in Dialog Telekom Plc, Sri Lanka's largest mobile phone operator.

Asset split unknown
Although Millicom has said it is ready to sell its assets in Cambodia, Sri Lanka and Laos, it remains unclear whether these would be sold separately or as a package, or whether a bidder would be in a stronger position were it to make an offer for multiple country assets, as appears to be the case with Axiata, according to reports.

"I don't think it's got any bearing on that [a possible decision by Millicom] whatsoever," Hanna said, adding that Royal Group would not be in a position to take on assets in Laos or Sri Lanka.

The expected length of time required to complete the process remains unclear, although Hanna predicted that a Royal group acquisition would speed up the process.

Despite the apparent level of interest in Millicom's Asian assets, its Nasdaq shares fell 1.4 percent to $56.27 on Tuesday at the close of trade. On the Nordic OMX exchange its stock climbed 1.11 percent Wednesday.