Maxis may use SLT as launching pad for India

Global Telecommunications Holdings (GTH) chief Ananda Krishnan, who made history in Sri Lanka by purchasing 35.19 percent of Sri Lanka Telecom (SLT) at Rs.32 billion, making it the single largest transaction of the Colombo Stock Exchange (CSE), is seen using Sri Lanka as a launching pad to strengthen the company’s operations in India, reliable industry sources said.

GTH is involved in some aspects of radio in Calcutta but the sources say Krishnan, of Sri Lankan origin and whose group owns Malaysia’s biggest mobile operator Maxis, is looking to further expand in the Indian market with SLT supporting and complimenting those interests.

The source said Krishnan's style of business is to have total and complete control over all operations. "Krishnan doesn't get involved in any business project where he does not have total control," one source explained. "This is his style and it has nothing to do with SLT. He functions that way anywhere in the world. It doesn't matter which proportion of the shares he owns. Whatever he gets himself into, he needs to have total control to implement his business strategies."

The source further stated that even though the public is unaware, it is obvious that there are discussions or agreements being worked out about management control. When asked if GTH was interested in acquiring majority shareholder status, overtaking the government of Sri Lanka's 49.5 percent stake in SLT, the source speculated that majority shareholding is not a major concern at the moment. "It is the management agreement that is the major concern, details of which are being kept private." The source said that if things are going well for GTH, they will definitely go for the management share option and make an offer to the government that they won't be able to refuse.

GTH announced on Tuesday that it had acquired 635 million shares from Japan's Nippon Telegraph and Telephone (NTT) Corporation. GTH stated that as a result of the acquisition, the company will be required to undertake a Mandatory General Offer for the remaining shares of SLT which it does not already hold.

Maxis entry into the market sees a high stakes Malaysian battle emerging on foreign turf with Mobitel taking on Dialog, in which Telekom Malaysia has a majority stake.

On Friday, SLT CEO (an NTT nominee) Shoji Takahashi announced his resignation at a special board meeting and attended a farewell gathering with executive staff.

Secretary of the Board of Directors of SLT Ms. P.G. Dias said that details of the board meeting were sent to the Colombo Stock Exchange and she is unable to comment on the latest development.

Another senior SLT official said that Takahashi had announced his resignation and a new appointment will be made soon by the new management. The Sunday Times FT reliably learns that a British-educated, Malaysian telecom expert will take up the position shortly. A spokesman for the Joint Trade Union Front of the SLT said that they are closely monitoring the situation and the unions are not opposed to any move, if intended, by Maxis to raise its stake to over 50 percent after the completion of the mandatory offer, which is – according to industry analysts – is unlikely to happen.

GTH said that its Board views the investment in SLT to be a strategic investment and looks forward to working with the other shareholders of the company, including the government of Sri Lanka, government related and other Sri Lankan institutions, to further grow the company and enhance shareholder value.

Meanwhile Alex Lovell, a local investor based in Dubai who bought over 25 million shares of SLT mid last month, stands to make ‘big bucks’ if he takes up the mandatory offer for the remaining shares of SLT by GTH. The shares were bought by GTH at Rs.50.50 per share. "Lovell bought a share on average at Rs.40. He bought shares at different price points but this was the average price he paid. So if he takes up the mandatory offer now, he stands to make Rs.10 more on each share that he bought," a stock market analyst said.

Theoretically, it is possible for GTH to acquire a majority stake in SLT to supercede the government's 49.5 percent stake.

owever for practical purposes, the analyst feels it is asking a lot. "The two parties are in communication with each other and don't want to come out as hostile," he said. "They would prefer to go down the non-hostile route for the betterment of the company as a whole." The decision to sell or not depends entire on the individual shareholders and their intentions. Some who feel GTH can add value to the company and perhaps lift Mobitel to a higher level will hold onto their stake.