Tan Sri Vincent Tan’s hopes for another strong strategic partner for his 3G mobile operator, U Mobile Sdn Bhd, have been answered. After six months of courtship — not just by Newfields Advisors, the dealmaker, but also by the founder and chairman of Berjaya Group himself — Temasek Holdings’ Singapore Technologies Telemedia Pte Ltd agreed to come on board.
“ST Telemedia, which has been actively making acquisitions, is seen as the best fit for U Mobile... [Tan] was convinced enough to personally meet ST Telemedia several times the past few months. The biggest concern was a regulatory go-ahead, but that has been sorted out,” a source close to Tan tells The Edge.
ST Telemedia’s entry into U Mobile also marks Singapore’s first acquisition of a sizeable block in a Malaysian telecommunications operator that comes with the chance to be in the driver’s seat.
The only other major Singaporean investment in the sector was Temasek Holdings Pte Ltd’s acquisition of a 5% block in the “old” Telekom Malaysia Bhd in 2005, around the same time TM and its parent Khazanah Nasional Bhd bought a stake in Singapore’s MobileOne Ltd. The TM deal marked what was seen as a paradigm shift from the old school “nationalistic” stance, widely believed to be the reason behind Singapore Telecommunications Ltd’s failed bid for a 20.59% stake in Time dotCom Bhd in 2000.
But that’s a decade ago. Today, governments around the world are more willing to liberalise strategic sectors.
Malaysia’s Information, Communications and Culture Minister Datuk Seri Utama Rais Yatim is scheduled to be present at the signing in Kuala Lumpur this Monday (March 15), according to a media advisory. Representing ST Telemedia is its chief executive Lee Theng Kiat who was in Vietnam last week to seal another acquisition.
ST Telemedia, which in January completed its acquisition of Ireland’s biggest telecommunications company eircom Holdings Ltd, last week reportedly paid some 20 billion dong (S$1.5 million) for a 10% stake in VNPT Global, the international arm of Vietnam Posts and Telecommunications Corp.
Expectations are that ST Telemedia will be paying less than US$200 million for a 33% stake in U Mobile — Malaysia’s fourth and smallest mobile phone operator with an estimated 4% market share, barely one-fifth of the No 3 player’s pie in terms of SIM card count, two years after it launched its first service plan in April 2008.
ST Telemedia is also expected to have secured a buyout clause from Tan, the same deal given to U Mobile’s previous strategic partners — South Korea’s KT Freetel (KTF) and Japan’s NTT DoCoMo — which parted ways with Tan in April and September last year. (The Korean and Japanese operators each received US$100 million for their respective 16.5% stake, the same amount they paid when jointly taking up the 33% block in December 2007.)
Due to the failed attempt by its previous Korean and Japanese strategic partners, U Mobile’s fortunes are not expected to magically take a turn for the better in the near term. But a plus point for the Singaporean operator is this: unlike Japan and Korea where most content access is in their language, mobile phone users across the Causeway, like Malaysia, are more interested in the mainstream English-language content. Hence, STT’s understanding of the Malaysia market is probably better.
Mobile data is seen as the next earnings growth driver for mobile phone operators, a battle ground that is seen to be still young enough for a new player to carve a niche. The odds are of course tipped in favour of the Big Three mobile operators — Maxis Bhd, Celcom Axiata Bhd and DiGi.Com Bhd — which have an existing subscriber base to market to and bigger war chests.
A source says Tan has over the past four years pumped in over RM500 million into U Mobile (formerly MiTV Corp Sdn Bhd), which won a 3G spectrum assignment in March 2006 and adopted its current brand “U” in September 2007.
“Banks were willing to lend [to Tan] but, internally, there was the need to come up with a more complete plan that gives greater visibility in terms of U Mobile’s ability to eventually fund itself. There was an intent to raise funds from the market by floating U Mobile using the infrastructure listing route but that meant the risk of U Mobile being sold short of its potential.
Valuations would be difficult to justify because it is a small player, and more so without a credible strategic technical partner,” the source adds.
Among U Mobile’s envied possession is its 018 prefix — seen to be an auspicious number.
Companies in ST Telemedia’s stable include Asia Mobile Holdings (AMH), which owns StarHub Ltd — previously speculated to be the party interested in taking up a strategic stake in U Mobile. However, StarHub told analysts just last month at its 4Q2009 earnings conference it was not mulling a tie-up with U-Mobile, and remained “focused in Singapore”.
STT’s other holdings include Cambodia’s Mfone, Lao Telecommunications Company (LTC), Nasdaq-listed communications solutions provider Global Crossing Ltd, SGX-listed regional mobile handset distributor and IDD services provider TeleChoice Ltd and satellite communications solutions provider ST Teleport.
STT’s entry may have filled the void left by NTT and KTF’s exit. But it remains to be seen if STT can achieve what the Japanese and Korean operators attempted, but could not do, for U Mobile.
This article appeared in Corporate page, The Edge Malaysia, Issue 797, Mar 15-21, 2010.