Good assets and value for money in SLT - Maxis

By Natasha Gunaratne

Kuala Lumpur -- Maxis Communications, which took a major stake in Sri Lanka Telecom (SLT) recently, hosted a group of Sri Lankan journalists this week at its headquarters in Kuala Lumpur and declared that the reason for buying into the Sri Lankan company was based on SLT's current set of assets across the fixed and mobile businesses as well as national and international long distance services.

The trip was designed to counter the slew of bad publicity in the Sri Lankan media regarding the purchase of SLT shares from Japan's NTT and the ensuing litigation beginning in mid-2007 which concluded a few months ago, allowing the deal to go through. A fundamental rights petition had been filed last year by the late Sripathi Sooriyaarachchi, a former minister, alleging fraud and corruption surrounding the proposed deal but the Supreme Court of Sri Lanka allowed the purchase of SLT shares by Global Telecommunications Holdings (GTH) to be done in a transparent manner.

Maxis Chief Executive Officer Sandip Das told the group he feels that the expertise and knowledge of Maxis enables it to help and assist SLT in devising new strategies. "We are fresh in the alliance but we hope in the next couple of weeks, we will be able to put out a strong proposition on what SLT can do and we are optimistic about synergizing the assets and knowledge we have," Das said. However, Das did say questions on the SLT deal should be directed to GTH which purchased the shares but there were no GTH representatives present. "In all fairness, I am here to speak on behalf of Maxis and really the investment vehicle in Sri Lanka is GTH and I think these questions should really be posed to them," he said.

Little is known about GTH which is a holding company incorporated in the Netherlands Antilles. The parent company of GTH is Global Communications Investment NV which in turn is wholly owned by the Usaha Tegas Berhad Group (UT), the largest private investment holding company in Malaysia which owns Maxis. UT is ultimately controlled by the trustee of a discretionary trust, the beneficiaries of which are members of the family of Ananda Krishnan Tatparanandam, Malaysia’s biggest businessman who is of Sri Lankan origin, and foundations including those for charitable purposes. The GTH Board of Directors comprises Augustus Ralph Marshall, Than Chee Beng, Jeremy Paul Abson and Amfion Management NV. Marshall is among officials who have visited Sri Lankan regularly in connection with the negotiations. GTH is a special purpose vehicle which was established in order to acquire and hold the SLT shares.

GTH originally sought agreement from SLT for a due diligence exercise to be carried out in March 2007. In March 2008, GTH purchased 635,076,318 shares, representing a 35.19 percent stake in SLT for just over Rs.32 billion and recently sent out a mandatory offer to buy out the rest of the SLT shares, the closing date which is 2 June 2008. Sandip Das said the mandatory offer period is still on so there is no word as yet on the structure of the SLT Board of Directors. UT's Assistant Manager of Corporate Finance Vernon Das who has made several trips to Sri Lanka to finalize the deal said the government of Sri Lanka will not accept the mandatory offer.

The offer document states that 'the Board of GTH will offer its experience and expertise to assist in the achievement of SLT's strategic and financial objectives and improve its overall performance to enhance shareholder value. GTH expects that the day to day running of the operations of SLT, including such matters as the deployment of resources and fixed assets of SLT and the recruitment and termination of employees of SLT and its subsidiaries, will continue to form part of the duties and responsibilities of the management of SLT and its subsidiaries, respectively.' The offer document further stated that the commercial justification for the investment by GTH is to 'enable the expansion of the telecommunications business of its parent company, UT, into both the attractive Sri Lankan market and a company with good prospects for long term growth and profitability.'

When asked why GTH remained silent throughout despite numerous attempts to reach them for comment, even after the deal was concluded, a company official said it was not the style of the company to make public comments particularly during litigation. Therefore, journalists from Sri Lanka had to be taken to Malaysia to be addressed on the company's terms. In fact, this trip had originally been scheduled for last year but after the Supreme Court of Sri Lanka made an interim order barring any further action to be taken on the proposed Maxis deal, it was cancelled and then rescheduled for this month, subsequent to the finalization of the agreement between GTH and SLT.

It also shows that the company did not anticipate the problems which ensued following its proposal to purchase the SLT stake last year if a delegation of journalists were scheduled to be taken in 2007. Maxis had also made a bid for a mobile operator licence to the Board of Investment (BOI) a few years back. Sandip Das said entering the market as a new player and rolling out a new network was timely and that the SLT option was a 'no-brainer'.

"In our current position and with our experience in the mobile world, we feel that we will be able to contribute strongly straightaway in Mobitel, where the biggest impact of our experience will be felt." He added that data services and value added services can come in immediately and can be used in Sri Lanka without any problem.

SLT senior officials have also been in Malaysia for discussions with another round of talks having been scheduled for this past week. Das said that regardless of shareholding and the politics surrounding SLT, there are products available at Maxis which Mobitel can use across the board where the business and customers will stand to benefit.

"I also feel there is good business to be done and very few people will interfere. There is so much knowledge and so many products and projects that can be easily assimilated into SLT. I can't see any reason either where the environment or the state of control of the company has to do with this." He added that going forward, SLT will be enthusiastic about what they can adopt from Maxis.

Maxis

Maxis Telecom Group, launched in 1995, is the largest Group in terms of turnover and sheer size in the UT Group with full fledged operations in India, Indonesia and Malaysia. Das said the Saudi Telecom giant, Saudi Telecom Company acquired a 25% stake in Maxis in September 2007. Maxis dominates in Malaysia with 42% of the market share and the Group revenue for 2007 was US$2.3 billion, the bulk of which comes from its operations in Malaysia although Das said Indian revenues are rising by the day.

Maxis currently has 10 million subscribers in Malaysia and 11 million subscribers in India through Aircel, a joint venture between Maxis and the Apollo Group but is expecting the number of Malaysian and Indian subscribers to increase to 11.5 and 19 million respectively. From its currently overall subscriber base of 20 million, Maxis is aiming to increase this to 30 million by the end of 2008.

A variety of factors have contributed to the success of Maxis in Malaysia. Das said the company has 49% of the postpaid mobile market, more than a disproportionate share and also has about 40% of the prepaid market. In the prepaid market, Maxis has agile pricing and innovative products through its brand, Hotlink.

"The other reason why our profitability is good is because it comes from good data leadership," Das explained. "What has been remarkable about performance as a company is the enormous amount of strides we have made in data services. Maxis has an enviable record and some of the data services we have provided are contemporary, not only the first in Malaysia but the first in the world." Maxis has been first globally in launching HSPA Broadband, mobile to mobile remittances, NFC trials which allows consumers to use mobile payments for a variety of services, WiMax, GPS Navigation and Fixed Wireless Access.

Maxis is also a member of Bridge Alliance which has a large base of 11 market across Asia with 200 million customers and high value roamers, giving the best quality networks over a diverse regional market. Maxis held its Initial Private Offering (IPO) in 2002 and was listed on the Bursa Malaysia on July 8, 2002.

In May 2007, Binariang GSM Sdn Bhd (a subsidiary of Usaha Tegas Sdn Bhd) made a general offer to take Maxis private. Maxis market capitalization prior to delisting stood at US$12 billion. Maxis was subsequently de-listed from the Bursa Malaysia on June 25, 2007 following the successful completion of the general offer exercise.

(The writer was among a large group journalists from Sri Lanka who were sponsored by Maxis to visit its headquarters and that of subsidiary companies and be briefed on their activities in Malaysia).