British Telecom Buys Stake in Malaysian Telecom Firm

Posted on July 28, 1998 
Filed Under AsiaBizTech, Julian

By Julian Matthews

July 28, 1998 (KUALA LUMPUR) — British Telecommunications Plc. has acquired a one-third stake in Binariang Bhd., a cash-strapped telecom company, for 1.8 billion ringgit (about US$450 million).

The deal is the single largest investment for BT in the Asia Pacific region, and the biggest by a foreign party in a Malaysian telecom company.

The July 24 announcement ended months of speculation in which Binariang had been linked with various foreign telecom firms including Britain’s Cable and Wireless Plc. as well as Singapore Telecommunications Ltd.

Richard Slogrove, BT’s managing director for Asia Pacific, said BT decided to invest in the company because it is confident of Binariang’s long- term prospects.

“Our investment in Binariang represents a total and long-term commitment of a foreign company in the local telecommunications industry as a whole and Binariang specifically,” he said.

Slogrove said BT’s investment in Binariang would assist the local company in becoming a global player.

Binariang chief operating officer Jamaludin Ibrahim said BT will provide Binariang with more technical and financial resources to pursue the company’s vision of becoming “the preferred supplier of communications services to all Malaysians.”

Binariang operates a fast-growing GSM mobile phone service, maintains a small fixed-line network and has an international gateway license.

It also owns two satellites. They are a part of a satellite- based regional television broadcast service called Astro, which is run by a related company.

Prior to the deal, Binariang was in need of a capital injection. The regional economic crisis had cut into its revenues, undermined its expansion plans and forced the company to postpone indefinitely its scheduled public listing. In recent months, the company has reduced its staff and halted fixed-line network expansion in an attempt to curb the slide.

Jamaludin said the 1.8 billion ringgit cash infusion by BT represents a portion of the 3.5 billion ringgit to 4 billion ringgit that Binariang had planned to raise over the next five years for capital expenditures and network enhancement. He said the company also plans to alter the ownership structure of its satellite business.

Additional funds may be raised from the international bond market in the future.

Jamaludin said that about 60 percent of the capital raised will go toward expanding and upgrading its Maxis Mobile cellular network service, which has a market share of 22 percent.

The company said its cellular subscriber base is expected to grow from the current 422,000 to about 500,000 by the end of this year and up to 650,000 in 1999.

Jamaludin also confirmed that the fixed-line network expansion, which was suspended, will likely be revived.

Binariang will be able to tap into BT’s global business services called Concert Communication Services, and become a non- exclusive distributor of Concert together with Telekom Malaysia Bhd.

Following BT’s move, Binariang’s existing foreign shareholder, MediaOne Group Inc., formerly a part of US West Inc., will have its 19 percent stake diluted to 12.67 percent.

Local conglomerate Usaha Tegas, controlled by prominent businessman T. Ananda Krishnan, will have its stake reduced from 76 percent to 49 percent, while the remaining 5 percent stake held by state investment fund Permodalan Nasional Berhad will be maintained.

Total foreign equity in the company will be 46 percent, still well below the government-allowed foreign equity cap of 61 percent. The government raised the cap twice this year first from 30 percent to 49 percent, then to 61 percent, in a bid to attract much-needed foreign capital for ailing telecom companies.

“The 33.33 percent represents an appropriate stake in an appropriate company at an appropriate time,” Slogrove said.

Slogrove also said he hopes that BT’s acquisition will set a trend for more foreign companies to come to Malaysia to form partnerships with local companies.

BT is one of the world’s largest telecom companies and serves more than 27 million residential and business exchange lines through a largely digital network in the United Kingdom.

Published in Asia BizTech, Jly 28, 1998

by Julian Matthews, Asia BizTech Correspondent

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