In the light of the ongoing dispute between the new concessionaire of the Kuala Lumpur Tower (KL Tower) and the outgoing operator, The Edge reached out to both parties to better understand their positions. Khairil Faizal Othman, CEO of LSH Service Master Sdn Bhd and managing director of Service Master (M) Sdn Bhd, represents the new operator, while Datuk Abdul Hamid Shaikh Abdul Razak Shaikh, managing director of Menara Kuala Lumpur Sdn Bhd and director of Hydroshoppe Sdn Bhd, speaks on behalf of the outgoing concessionaire.

CEO of LSH Service Master Sdn Bhd

Managing director of Service Master (M) Sdn Bhd

The Edge: Menara Kuala Lumpur Sdn Bhd (MKLSB) on March 27 filed a lawsuit against the government, the Ministry of Communications,its minister, LSH Service Master Sdn Bhd (LSHSM), LSH BEST Builders Sdn Bhd and Service Master (M) Sdn Bhd, challenging the award of the KL Tower concession. Could you share with us the reasons for this and what the situation is now?

Khairil: We believe the lawsuit is without merit. The KL Tower concession was awarded to LSHSM through a transparent, government-led request for proposal (RFP) process. The process was managed by the Public-Private Partnership Unit (UKAS), then reviewed and approved by the cabinet. Five companies, including MKLSB, or the plaintiff, participated in the bidding process.

From what we understand, it is disputing the government’s decision to award the concession to LSHSM. The concession is effective April 1, 2025, but the plaintiff is preventing the government and LSHSM from entering the premises, disrupting the handing over process.

The government has stated clearly that KL Tower remains its property, and our role is strictly to manage and operate the tower under the concession. We’ve engaged legal counsel and will allow the legal process to proceed. Meanwhile, we remain fully committed to fulfilling our responsibilities under the concession.

The lawsuit was filed between March 21, the day Lim Seong Hai Capital Bhd (KL:LSH) was listed on the ACE Market, and April 1, the effective date of the new concession. What could be the objectives of the plaintiff? On what grounds is it suing LSH Capital’s related companies?

While we can’t speculate on the actual motives of the plaintiff, from the documents filed, it appears to be alleging that it had some form of agreement to the extension of its concession. Neither LSH Capital nor its subsidiaries and Service Master (M) were a party to any previous arrangements or discussions between MKLSB, Hydroshoppe Sdn Bhd and the government.

We stand firm that the concession was awarded to LSHSM, following an open RFP exercise evaluated and approved by the cabinet. We believe the process was conducted fairly and lawfully. Any suggestion of misconduct is without basis.

Did LSH Capital and its related companies see the lawsuit coming or was this unexpected? What is your next course of action?

The lawsuit was not expected. We followed a legitimate public RFP process just like the other bidders, including MKLSB.

We are clear on our next steps — we’ll abide by all legal requirements, cooperate fully with the authorities and stand by the integrity of the RFP process. Most importantly, we want to ensure that this transition is handled responsibly, especially for the sake of the workers terminated by MKLSB and the nation’s image, as KL Tower continues to welcome foreign tourists and local visitors.

Is LSHSM expecting to begin its concession for KL Tower?

Yes, we have already prepared in advance of the commencement date. On April 1, we reported to the Ministry of Communications on the current situation. As this is a government-owned asset, we will await instructions from the government on how and when to proceed. We want to ensure that everything is done in accordance with the law, respectfully and professionally. In the meantime, we will do everything we can to secure partial site access for public safety purposes and ensure that KL Tower remains safe and functional for all visitors and staff.

To add on, MKLSB was fully aware of the transition date when it signed the fifth interim agreement with the government on July 1 last year. The interim agreement was effective for nine months, from July 1, 2024, to March 31, 2025.

As part of the transition, MKLSB served termination notices to its employees in December 2024. LSHSM then proactively offered employment opportunities to the affected staff, and 94% of these employees have accepted our offer. Nearly all of these employees are bumiputeras, and their employment with LSHSM commenced on April 1 this year, protected with full pay and benefits under the ‘no less favourable’ employment terms that we had committed to the government.

MKLSB had 205 employees, including its CEO, as at April 3. Of these, 192 have accepted the offer from LSHSM.

MKLSB and its parent company Hydroshoppe are alleging contractual breaches and misconduct that led to the award of the concession to LSHSM. What is your comment?

We stand firm that such allegations are without merit and a mockery of the RFP process. We reject any such allegations. We bought the RFP documents, joined the site visits and submitted our bid alongside other qualified companies. The process was competitive and properly administered by the authorities.

To our knowledge, no contract between MKLSB and the government exists beyond the interim agreements. The government clearly stated that it had the discretion to reopen the concession through an RFP process. We took part in that process in good faith, just like the other four bidders, including MKLSB. There was no wrongdoing on our part. We did not interfere with any other party’s arrangements, nor were we aware of any.

How did LSHSM secure the new concession?

In [the first quarter of] 2024, the government issued an open RFP for the operation, maintenance and management of KL Tower. LSHSM, as one of five qualified companies, submitted our proposal based on the RFP requirements. We followed the government’s procedures from start to finish.

The RFP was evaluated by UKAS and approved by the cabinet. After careful evaluation by the government, a letter of intent was issued to LSHSM on June 7, 2024. LSHSM then signed the concession agreement with the government on March 10, 2025, followed by a land lease agreement on March 26, 2025.

This concession carries a 60% bumiputera participation requirement, and we fully embrace this commitment. LSHSM is led by a bumiputera CEO, and our operational, employment and vendor policies are designed to uplift local and bumiputera participation across all levels, from staffing to subcontracting.

The concession was never a direct appointment. There was a competitive government procurement process where we were chosen based on merit.

Are the LSH Capital-related companies considering a counterclaim? Will you be open to settling the case out of court?

Right now, we have three urgent responsibilities to focus on:

i.     Ensure all committed employees continue to receive their rightful pay without disruption, especially during the festive season;

ii.     Extend our fullest cooperation to the government for a smooth, lawful transition in accordance with all applicable regulations; and

iii.     Safeguard public safety and the national image, as KL Tower continues to welcome both Malaysians and international visitors.

We are carefully evaluating the situation with guidance from our legal counsel. We do not wish to escalate matters unnecessarily, but we remain confident in our position and will take the necessary steps to defend ourselves and protect the best interests of our stakeholders.

What about the existing vendors at KL Tower? What should they do?

All existing vendors must be clear that any agreements signed between vendors and the previous operator will be unlawful. We strongly urge all vendors to review their contracts carefully and seek legal guidance before making financial or business commitments.

Managing director of Menara Kuala Lumpur Sdn Bhd

Director of Hydroshoppe Sdn Bhd

The Edge: Please explain the series of events leading to the lawsuit against LSHSM. When did MKLSB first become aware that its KL Tower concession was at risk?

Abdul Hamid Shaikh: MKLSB built and completed the KL Tower in 1996 and since then, for almost 30 years, has been operating it. On May 8, 2019, the government approved Telekom Malaysia Bhd’s (KL:TM) application for a third concession of 30 years. Pending formalisation, the concession was continuously extended on an interim basis.

In 2021, TM officially notified the government of its intention to exit KL Tower and focus on its core business. Consequently, the government invited several bumiputera companies to undertake the third concession by the sale of 100% equity stake in MKLSB. This would enable MKLSB to continue to operate KL Tower in the third concession, under a different ownership to ensure no disruption to operations.

Pursuant to an evaluation process of five 100% bumiputera companies, Hydroshoppe Sdn Bhd was selected by the government to acquire the entire shareholding of MKLSB for the third concession. This was approved by PM9 (Datuk Seri Ismail Sabri Yaakob) on Oct 20, 2022, upon the recommendation of UKAS and the Minister in the Prime Minister’s Department (Economy).

The terms of the third concession required Hydroshoppe to:

(a)     Assume all assets and liabilities of MKLSB of over RM11 million and an arbitration contingent liability of RM314 million;

(b)    Take over the maintenance and improvement work per the Value Management Lab (VM Lab) report; and

(c)    Retain all MKLSB employees for at least three years.

The acquisition was completed on Oct 31, 2022 [less than three weeks before the general election]. Hydroshoppe would not have agreed to undertake MKLSB’s liabilities and/or the obligations imposed on it if not for the promise of the third concession.

So, what happened subsequently, and what has changed?

The 15th general election [in November 2022] resulted in a change in government, with Datuk Seri Anwar Ibrahim as the new PM and Fahmi Fadzil as the Minister of Communications and Digital. The formalisation of the third concession was delayed.

In January 2024, MKLSB was informed that the third concession would not be formalised. In May 2024, it was announced that the KL Tower concession was awarded to a subsidiary of LSH Capital. This is a breach of the concession promised to Hydroshoppe.

LSHSM committed further breaches by failing to absorb MKLSB’s personnel on no less favourable terms and by a certain date, which resulted in MKLSB being burdened with termination and lay-off benefits (TLOB).

The government was also required to make payment of about RM25 million by March 15, 2025, for the following:

(a)    The monthly interim fee for nine months — RM4.5 million;

(b)    Compensation for the VM Lab works — RM17.4 million;

(c)    Compensation for TLOB — RM2.69 million; and

(d)    Proposal on compensation for Hydroshoppe/MKLSB’s loss of the third concession — RM1 billion.

Hydroshoppe had notified the government that unless the payments were made, Hydroshoppe would insist on the continuance of the third concession to its full tenure of 30 years. As there was no positive response from the government, Hydroshoppe/MKLSB filed a legal suit on March 27, 2025, and an injunction application on March 28, 2025, to preserve its rights and the status quo.

What actions did you take before resorting to legal action?

MKLSB had sought many meetings with the Ministry of Communications to resolve the wrongful termination of the third concession. There were no forthright answers to the issues raised by MKLSB. Several significant meetings took place between June and August 2024.

MKLSB had notified the government that unless all dues are paid — [about RM25 million], the reimbursement of the capital expenditure of RM35 million for the upgrading of KL Tower and compensation for the loss of the third concession — MKLSB would not surrender vacant possession.

Instead of addressing MKLSB’s grievances, LSHSM indicated that it would forcibly take possession of KL Tower on midnight of March 31, 2025, which was the first day of Hari Raya Aidilfitri. The ministry conspired with LSHSM by issuing notices to PDRM (Polis Diraja Malaysia) and the Land Office.

Left with no recourse, Hydroshoppe/MKLSB filed a legal suit under KLHC Suit No: WA-21NCvC-22-03/2025 against Datuk Ahmad Fahmi Mohamed Fadzil (communications minister), the government, LSHSM, LSH BEST Builders and Service Master (M). Hydroshoppe/MKLSB also filed an injunction application. We hope that the defendants will respect the court process and will not do anything to disturb the status quo.

Is there any documentary evidence proving that your concession was unlawfully taken from you?

A formal letter dated July 14, 2022, from the Ministry of Communications to UKAS, states that after evaluating five companies, the ministry decided to select Hydroshoppe to take over MKLSB and manage KL Tower.

A formal letter dated Oct 21, 2022, from UKAS to MKLSB, and copied to the ministry, TM and Hydroshoppe, confirms that Hydroshoppe was approved to acquire 100% of MKLSB shares and liabilities as part of the restructuring. UKAS instructed that the transfer be completed by Oct 31, 2022.

The memo from UKAS to the prime minister confirms that the Minister of Communications, UKAS, the Minister in the Prime Minister’s Department (Economy) and the prime minister fully endorsed the plan. The memo explicitly states that Hydroshoppe was recognised as a 100% bumiputera company and was to receive the third concession for an initial 15 years.

Why do you think the new government proceeded with an open RFP in the first quarter of 2024?

You will have to ask the government why they did that. As far as we are concerned, there is a breach.

You participated in the RFP too. Why did you lose?

We did not lose. That is also a question you should ask the government. As far as we’re concerned, there was already a plan to award it to LSHSM.

You claimed that your concession was wrongfully terminated by the government in November 2022. What were the reasons given for termination?

No reasons were given. As far as we’re concerned, at the time of the bid, LSHSM was not incorporated and did not fulfil the 30% bumiputera requirement.

Did you formally contest this termination at that time? If so, what was the outcome?

We stated our objections in several meetings, but we were ignored.

Given that the government has already awarded a new concession to LSHSM, how do you expect the government to transfer the concession back to you?

In the same way that the government terminated it wrongfully.

Are you open to any form of settlement?

We have always stated our conciliatory position and deference to the government, but we were continuously ignored.

Hydroshoppe is under scrutiny due to bribery charges involving you and former communications and multimedia minister Tan Sri Annuar Musa. What is the latest status of that trial?

The timing of the bribery charges is too coincidental. You can draw your own conclusions as to why this happened, leading to the new RFP. Our innocence will be proven in court.

Do you believe the case could affect your credibility in your lawsuit against LSHSM?

We hope not. We trust the judicial system to deliver justice and not to be persuaded by unfair tactics.