Perfect Match – DIGI-GreenPacket and Telekom-Time

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May 09 2007
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After Malaysian second richest man, Ananda Krishnan decided to call it a day for Maxis Communications Berhad (KLSE: MAXIS, stock-code 5051) when it launched the VGO to privatize his cash-cow, most of the minority investors are sad, furious but still helpless as there seems to be no other alternative but to sell-off (unless more than 10% of minority shareholders decided to fight heads-on and stay united). Looking at how the local presses are playing the game of brain-washing public minds by dropping propaganda of why shareholders should take up the offer, the hope of seeing Maxis keep listed in the stock market is very slim.

Moving forward, assuming exising shareholders were to need to re-park their “wind-fall” from the generous tycoon, there’ll be billions of ringgit ready to be flood into the stock market. Assuming also these new cash-rich investors are diversified and plan to re-invest their money into telco companies to fill their portfolios, there’s only two candidates namely Telekom Malaysia Berhad (KLSE: TM, stock-code 4863) and DIGI.com Berhad (DIGI: stock-code 6947). One is held tightly by Malaysian Government while the other by Norway’s Telenor ASA (OSL: TEL). One is a boring stock with hardly price movement due to inefficiency in operation and cost-control. The other is super-efficient with excellent cost-control and world-class marketing plan and innovative solution roll-out.

But with the Malaysian rules and regulations, DIGI.com has no choice but to sell down its’ current 61% controlling stake to the minority figure of 49% by end of this year, 2007. Already DIGI.com is not spending but instead rewards the shareholders with huge dividends. If you haven’t read how smart DIGI was in counter-attack the pressure from the Malaysian Government to bail-out Time DotCom Berhad (TIMECOM: stock-code 5031), you should read its’ strategy in DIGI – If You Can’t Beat Them, Suck the Coffer Dry.

After DIGI.com recent yet-another-good earning announcement, DiGi chief executive officer Morten Lundal said DIGI.com is open for acquisition into a company with a high-speed WIMAX or 3G licence and was in talks with several firms.

I’m pretty sure DIGI.com is set to acquire a company, whether it’s a WIMAX or 3G Company is immaterial. DIGI.com has the ready-plan up its sleeve for either one as it has already tried but failed to bid for both spectrums before. In fact DIGI.com is rushing to find a partner with whom it can sleep with rather than being forced to marry a partner which will de-stablize its’ management and operation. With news that Green Packet Berhad (KLSE: GPACKET, stock-code 0082) is open to the possibility of working with other companies, including DiGi.Com Bhd to roll out its broadband network, the bet is now bend towards this WIMAX winner.

Looking into the end of 2007 when DIGI.com is scaled down to a minority shareholder with 49% (though still might be the single largest shareholder) it might makes more business sense for DIGI.com to choose Green Packet as its’ new sleeping partner fast. It’s better than to consider Time DotCom which is still bleeding with losses and might just eat up into DIGI.com’s cash-flow. The jewel of Time DotCom lies on its’ fiber-optic network but if there’re too many holes to cover it just not justifiable to rescue it. With Green Packet, at least both parties share a common understanding – both have good management teams. However good thing comes with a price, so the partnership might be more expensive for DIGI but it’s worthwhile.

Should DIGI.com not come with a plan by end of the year authorities might send the signal to DIGI.com to “rescue” Time DotCom. Frankly I think DIGI.com and Green Packet should make a great couple while Telekom and Time DotCom is a perfect match. What do you think?

# TIP: Should you believe DIGI.com will buy into Green Packet, it’s time to accumulate the latter’s shares.

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