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Telekom Malaysia gives consent over selling its 60% stake in Guinea operator Sotelgui to the Guinea government. The government already holds 40 percent in the national operator and took over management of the company in 2005. In 1995 TM first invested in Sotelgui and proclaimed in 2005 plans to sell the holding. TM is selling the stake for a token price of $ 1, while the government has also agreed to pay debts of $2.04 million toTM. Value of the stake to $1 was already written down, but it will also make a currency exchange loss of MYR 82 million on the deal.The Guinea government is expected to prepare the operator for a new privatisation, after the completion of deal.

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PT Excelcomindo Pratama (XL), Indonesia’s third largest mobile operator by subscribers, reported that its net profit for the first six months of this year grew 15-fold on the corresponding period of 2007, driven by a doubling of its subscriber base and foreign exchange gains. XL posted net profit of IDR631.3 billion (USD69.25 million) for the January-June period, against IDR41.04 billion a year ago, while its revenue climbed 59% to IDR5.84 trillion. The operator, whose main shareholders are Telekom Malaysia (83.79%) and Emirates Telecommunications (close to 16%), said its customer base leapt 124% year-on-year to 22.9 million by 30 June, although it said increased competition was exerting a squeeze on profit margins.

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Japanese cellco NTT DoCoMo has placed an offer for a 30% stake in GSM operator Telecom Malaysia International Bangladesh (AKTEL) currently owned by Bangladeshi conglomerate AK Khan & Co, reports local newspaper the Daily Star. The stake, valued at around USD300 million, has also been targeted by UK-based Vodafone Group, which has previously sent representatives to negotiate with AK Khan & Co. ‘It is true that we have tendered a bid for the AKTEL stake,’ an official of NTT DoCoMo confirmed to the Star, whilst an AKTEL official told the paper, ‘We are still in the dark about our new partner. But something is going on. NTT DoCoMo is on the priority list.’ AKTEL is 70%-owned by Telekom Malaysia, and is currently in third place in Bangladesh’s mobile market. According to regulator the BTRC, the Malaysian-owned firm’s subscriber base rose by 90,000 in the first three months of 2008 to 7.45 million users, but it fell behind Orascom Telecom subsidiary Banglalink’s customer base, which grew by 430,000 to 8.31 million in the same period.

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State-controlled Telekom Malaysia Bhd ™ said on Thursday shareholders have approved its proposed demerger, and plans to float its mobile and overseas operations by June remain on track.

Malaysia’s largest telecommunications company is planning to spin off its mobile and non-Malaysian businesses, housed under TM International Bhd (TMI). TMI will then be listed as a separate entity on the main board of the Malaysian bourse.

Telekom Malaysia’s fixed-line voice, data and broadband operations will be housed under TM, the existing listed company.

Under the demerger proposal, TM shareholders will receive one TMI share for every single TM share held.

‘We believe that this will result in significant operational and strategic benefits to both TM and TMI moving forward. Their approval is an endorsement of the group’s transformation efforts,’ said TM chairman Mohammad Radzi Mansor.

Abdul Wahid Omar, chief executive officer of TM, said TMI is on track to be listed in the second quarter.

‘We still have a few other approvals to be obtained, we hope we will be able to get all these remaining approvals in the next two months,’ said Wahid.

The TM chief said the demerger is expected to be completed next month when the company holds its annual shareholder meeting, and the listing of TMI will happen thereafter.

‘We have been given the time guidance by the end of the second quarter, so indeed, the listing should happen before June,’ he said.

Wahid said the company has yet to decide whether or not to bring in a foreign partner at TMI. The company previously said it may sell a portion of its stake in TMI to a foreign entity.

‘We are still evaluating, there is no specific proposal to be evaluated per se. The first step will be to determine whether we really need a partner,’ he said.

Earlier media reports said TM has shortlisted at least three foreign parties for the proposed sale of the TMI stake and France’s Vivendi SA and China Mobile Ltd were quoted as among the interested telcos.

TM has a 95 percent market share in the Malaysian fixed-line industry and controls 96 percent of the broadband business. It also owns significant mobile assets in Sri Lanka, India, Indonesia, Singapore and Bangladesh.

The company, controlled by government investment arm Khazanah Nasional Bhd, is the contractor for the 15.2 billion ringgit project to develop Malaysia’s nationwide high-speed broadband infrastructure.

At 4.06 pm, TM shares were up 10 sen or 0.9 percent at 11.10 ringgit. TM’s share price has dropped 0.9 percent so far this year, against the benchmark composite index’s 7.7 percent fall.

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Telekom Malaysia Bhd., Southeast Asia’s second-largest phone company, said it will keep control of its wireless business in any stake sale, dimming the appeal for potential suitors including Orascom Telecom Holding SAE.

“We must be able to actually control its operations,'’ Telekom Malaysia Chief Executive Officer Abdul Wahid Omar, 44, said in an interview at the company’s Kuala Lumpur headquarters yesterday after reporting record full-year profit. “Should any decision be made to bring in a partner it will not be a majority, it would be a minority stake.'’

Insisting on control may hamper Telekom’s ability to reap a premium for the business, which it estimates is worth 28 billion ringgit ($8.7 billion). Orascom, the biggest mobile carrier in the Middle East and North Africa by users, has said it is interested in bidding for joint control of Telekom.

“The issue has always been: who would want to pay that kind of valuation for a minority stake?'’ said Khair Mirza, an analyst at Aseambankers Malaysia Bhd. in Kuala Lumpur with a “fully valued'’ rating on Telekom shares. “Would Telekom cede control, holding 90 percent?'’

Orascom Telecom Chief Executive Officer Naguib Sawiris didn’t immediately reply to an e-mail seeking comment.

Telekom shares rose 0.9 percent to 11.50 ringgit at 10:51 a.m. in Kuala Lumpur after the company announced a record profit yesterday.

Book Value

The phone operator is trading at twice its book value, compared with an average of 30 times for telephone companies in the Pacific Rim, Bloomberg data show. Singapore Telecommunications Ltd., Southeast Asia’s biggest phone company, is trading at more than three times book value.

Telekom may opt for a partner who can help the Malaysian company expand in Vietnam or Pakistan to complement its overseas operations, instead of accepting the highest offer, said Abdul Wahid, who will leave Telekom Malaysia to become chief executive officer of Malayan Banking Bhd., the country’s largest bank, in July.

The phone carrier, which has mobile-phone operations in nine countries including Indonesia, Singapore and India, might consider a suitor with assets in other Asian nations, he said.

“There are some partners that may be able to add in terms of assets, assets which we couldn’t have otherwise gotten,'’ he said. It’s “not just pure money.'’

Interested Parties

Vodafone Group Plc, Emirates Telecommunications Corp., AT&T Inc., China Mobile Communications Corp. and Vivendi SA have expressed interest in bidding for a stake in TM International Bhd., the holding company for Telekom’s domestic and overseas mobile assets, the Malaysian company said last month. TM International is scheduled to be listed in Malaysia by July.

Greg Brutus, a Hong Kong-based spokesman for AT&T, didn’t immediately reply to messages left on his phone. Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, said she wasn’t aware of any expression of interest by the company in Telekom Malaysia’s mobile-phone unit.

China Mobile bought Pakistan’s Paktel Ltd. last year, while Emirates Telecommunications, based in Abu Dhabi, owns 16 percent of PT Excelcomindo Pratama, Telekom Malaysia’s Indonesian mobile unit. Vodafone bought control of Hutchison Essar Ltd., India’s third-largest wireless operator, in May, and AT&T has operations in Vietnam.

Telekom is separating the faster-growing wireless division from the domestic fixed-line business to increase the appeal of a possible sale. In Malaysia, where at least 70 percent of the population own a mobile phone, the company is relying on demand for Internet connections to sustain earnings as it rolls out a high-speed nationwide network.

Telekom, which yesterday reported full-year profit rose 23 percent to a 2.55 billion ringgit, may not need an investor. TM International’s listing may raise $700 million, the company has forecast, and Abdul Wahid said yesterday the company hasn’t decided if a partner is required at all.

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Vodafone has emerged as frontrunner to acquire a 25 percent stake in Telekom Malaysia’s internetional business, according to a report from the UK’s Times. TM International has stakes in mobile operators in nine Asian countries, including Indonesia, Cambodia and Bangladesh, as well as Malaysian operator Celcom. In total it has 32 million subscribers. TM has received interest from a number of operators and private equity firms for a stake in the operation. It expects to complete the spin-off and a stock market listing of TM International by mid-2008. A stake of 25 percent is expected to sell for up to USD 3 billion. TM already has a marketing deal to sell BlackBerry services with the Vodafone brand. In response to the report, Telekom Malaysia issued a statement to the stock exchange saying it does not comment on speculation.

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British broadsheet The Sunday Times is reporting that Vodafone is the frontrunner to buy a strategic 25% stake in the soon to spun-off wireless arm of Telekom Malaysia. Six weeks ago TM’s board announced it would radically reorganise its business in 2008, spinning off its domestic wireless arm Celcom and its international businesses to create a stand-alone unit (dubbed RegionCo) worth in the region of MYR28 billion (USD8.2 billion). The new company will comprise Celcom, as well as the group’s stakes in Excelcomindo (Indonesia), Dialog (Sri Lanka), TM International (Bangladesh), MobileOne (Singapore), Spice Communications (India), Telekom Malaysia International (Cambodia) and Mobile Telecommunications of Esfahan (Iran). Under the new set-up RegionCo will focus on overseas expansion in high growth markets, as a pure-play wireless operator. ‘In anticipation of a sale, TM has been courted by a range of foreign operators and private-equity firms,’ the Sunday Times said. Vodafone already has a branding deal with Celcom.

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The Telekom Malaysia Group ™ has announced the demerger of its cellular unit, Celcom, from the group’s fixed voice and broadband business. TM says this is to permit greater transparency, accountability and management focus.

Celcom will be absorbed into Telekom Malaysia International’s (TMI) umbrella of mobile assets in ten countries across the region, which is to be headed by current TM Group CEO, Dato’ Abdul Wahid Omar.

The regional and mobile-focused holding company – RegionCo – will comprise TMI and Celcom and will then be spun-off from Telekom Malaysia Berhad and be listed separately during the first half of 2008, possibly with a strategic foreign partner from the US, Europe or the Middle East.

TMI has made various acquisitions in recent years and it now owns stakes in several mobile operators across the region including PT XL (Indonesia), Dialog Telekom (Sri Lanka), Aktel
(Bangladesh), M1 (Singapore), Spice (India), TMI (Cambodia) and MTCE (Iran). The listing of TMI will allow the company greater flexibility in obtaining financial resources for expanding its regional mobile business.

TM or FixedCo is to be headed by Zamzamzairani Isa and has been identified as a participator in the Public-Private Partnership project to roll-out high speed broadband infrastructure over the next ten years.  The ecost of the xercise is believed to amount up to RM15.2 billion, with 33 per cent being contributed by the Malaysian government.

Besides touting FixedCo as focusing on domestic broadband growth, TM released a statement saying that FixedCo remains focused in enhancing international connectivity within the region. This , it says, will help establish Malaysia as a regional Internet Protocol hub, serving as a digital gateway for Southeast Asia. FixedCo is described as the second largest ISP in south east Asia.

TM is also leading the Asia-America Gateway consortium and it is  building an IP hub in collaboration with Verizon, both are due to be operational before the end of the year. With these two facilities in place, Malaysia will be able to peer with Tier 1 ISPs in the region, besides as well as encouraging content hosting in the capital,  Kuala Lumpur.

However, an anonymous source comments, “It would appear the AAG will fall under RegionCo (and Wahid) given the separations of the Lines of Businesses.” Other observers note that the separation of fixed and mobile businesses seems to be bucking the trend of fixed and mobile convergence seen so often elsewhere in the world.

TM says, “All FMC benefits can still be realised through arms-length agreements post-demerger.” However, splitting Celcom from TM may inevitably pose challenges for TM in attempting effectively to bundle fixed, broadband and mobile services, particularly via integrated sales, branding and customer support.

Further details such as group debt allocation between the two new entities, capital management strategies and expected capital expenditure have yet to be made public but are expected by the first quarter of 2008. When reached for comment, Dato’ Shazalli Ramly stated, “I am the status quo… still CEO of Celcom…so it’s business as usual.”

Both RegionCo and FixedCo remain state-owned with stakes of 40 per cent held by Khazanah Nasional, the Malaysian government’s investment holding arm.

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Telekom Malaysia has announced plans to spin off its wireless divisions to create a unit worth MYR28 billion (USD8.2 billion) that can focus on overseas expansion. Under the plan TM International will become the holding company for Celcom, Telekom’s domestic cellular business, as well as subsidiaries in countries including Sri Lanka and Indonesia. Telekom said it may sell a stake in the new company to a foreign partner. The separation will give the new company the autonomy necessary to make takeovers. TM International will be listed on the Malaysian stock exchange. The proposed spin-off is due to be completed by the end of the second quarter of 2008.

Some private equity firms and foreign phone companies have already expressed interest in buying a stake in TM International, Yusof Annuar Yaacob, TM International’s chief executive officer, told reporters. A partner will probably not be allowed to buy a controlling stake, Yusof added.

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Telekom Malaysia International Bangladesh (TMIB, operating under the AKTEL brand) has awarded Swedish technology provider Ericsson a frame agreement to upgrade and expand its EDGE-enabled GSM/GPRS network. Under the contract, Ericsson will install new base stations and mobile softswitch equipment that will enable TMIB to minimise network costs while evolving towards an all-IP network. The vendor will also supply software upgrades to increase capacity and network performance. The upgrade project encompasses more than 1,000 sites in and between Dhaka and Chittagong. AKTEL launched a trial EDGE network in March 2007.

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