Defence nod sought for telecom deal

A government-appointed committee examining the proposed sale of Japanese NTT (Nippon Telecom) stock in Sri Lanka Telecom to Maxis of Malaysia, wants Defence Ministry clearance if the sale was to go through.

The Sunday Times last week revealed that there was a rush to close the deal with Maxis and raised issues of transparency. The report said the deal was shrouded in secrecy though it carried national security risks. Questions were also raised as to why an offer by an Indonesian telecom giant was not duly considered.

A top telecom industry source close to the committee, said the defence clearance request was in keeping with the sensitivity of the sector.

“Telecommunications is a network used extensively by the government across the country and there is a need to ensure that security is not jeopardised to whoever party the stake is sold,” the source, who declined to be named, said.

The cabinet-appointed committee which includes representatives from the Treasury, the Planning Ministry, SLT chairman (himself) and director-general of the Securities & Exchange Commission, was set up to formulate a new shareholders agreement between the government and the new buyer. NTT has informed the government that Maxis is interested in purchasing 25% of NTT’s 35% stake in SLT, leading up to the appointment of the cabinet committee. The shareholders agreement with NTT was also lapsing at the same time, resulting in the need for a new one.

The source said the issue of security clearance (particularly in the context of the LTTE) didn’t arise in the case of NTT (in 1997) because the Japanese telecommunications giant was 40 percent owned by the Japanese government. “In the case of Japan there was no serious threat linked to the LTTE for Sri Lankan government clearance in the SLT stake whereas the current deal has some real concerns because the Tigers are known to have dealing with some Malaysian parties,” the source said.

Ananda Krishnan, a powerful Malaysian businessman owns a majority of Maxis and has Sri Lankan Tamil roots. But former aides say that the reclusive business baron is a devout Buddhist with a son who is a Buddhist monk, and helps the Sri Lankan origin community in Kuala Lumpur.

Yet questions are being raised about the allegedly hurried effort to close the Maxis deal, the shutting out of a bid by Telkomsel of Indonesia and the ‘power play’ of a top government advisor and a powerful stockbroker also seen as the Colombo strategist for controversial multi-level marketing firm GoldQuest.

The latter two are believed to be broking the deal with the commission expected to be more than a billion rupees ($10 million).

Senior government sources, however, rejected the claim that the Indonesia telecom firm’s bid had not been accepted. “NTT is at perfect liberty to sell its stock to anyone. Also the Telkomsel should have sent their offer to NTT not to the government. The cabinet committee is formulating a shareholders’ agreement that would apply to any stakeholder that NTT wants to sell its stock, though in this case the buyer has been identified,” the government source said.

NTT officials were avoiding comment despite many efforts to reach them at SLT, raising further suspicion about the deal. Senior SLT management also declined to comment.

Alexis Silva, Director-General of PERC, said the agreement between NTT and the government permitted the former to sell its shares with the consent of the Sri Lankan government. However he added this deal would have happened with the knowledge of the government.

He confirmed that Indonesian Telkomsel had faxed an expression of interest which had been passed on to the SLT chairman for necessary action. “I can’t understand why this was sent to PERC,” he said, adding that PERC is working as ‘facilitators to the committee and to assist on legal issues’.

Indonesian Telkomsel has business ties with Maxis and Singtel Singapore, which is also believed to have shown interest in the NTT stake. In November 2006, Telkomsel and six other Asia Pacific operators – Bharti India, Globe Philippines, Maxis Malaysia, Optus Australia, Singtel Singapore, and TCC Taiwan – signed a joint venture agreement to form Bridge Mobile, a regional mobile alliance aimed at providing additional benefits to the region's mobile subscribers.

Indonesian Telkomsel, in which Singtel has a 35 percent stake, is listed in stock exchanges in Jakarta, New York and London and is reported to have made a fresh offer to purchase NTT shares.