Maxis is Coming (back) to Town but are Investors Excited?



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Jul 26 2009
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More than two years ago Ananda Krishnan, a self-made billionaire who controls Maxis Communications, Tanjong Plc, Measat and Astro dropped the bombshell to take Maxis private and almost instantly raised eyebrows of millions of investors. Many Maxis investors back then was furious with the privatization plan simply because it disrupted their long-term investment plan – good dividend from a good organic-growing and well-managed telecommunication company. Ananda offered RM15.60 per share (inclusive of RM0.30 per share dividend) for all the minority shareholders, a 20% premium to the last-traded price of RM13.00 a share before the announcement to take the company off the stock exchange.

The 71-year-old media mogul is also reportedly toying with the plan to buy English football club Newcastle United for £80 million, a deal represents loose change to the tycoon. Ananda, whose family originates from Jaffna, Sri Lanka, is the third wealthiest man in Southeast Asia behind Robert Kuok and Ng Teng Fong and was reported to be the wealthiest Tamil in the world. His purchased of 46% of Maxis Communications from British Telecom and AT&T for $680 million thus raising his stake to 70% must be one of his greatest business decisions to date.

Newcastle-United

When Ananda decided to take Maxis private more than two years ago, the minorities were mad because they believed Ananda shouldn’t promised them the sunshine pre-listing but after using their monies to expand the company, the minorities were told to get out. But the tycoon was said to be sulking because the stock price did not reflects the actual value of the company hence the privatization. Compared with government-controlled Telekom Malaysia (KLSE: TM, stock-code 4863) (mobile player Celcom was part of Telekom) and Telenor’s DIGI.com Berhad (KLSE: DIGI, stock-code 6947), Maxis was trade at the lowest P/E (price to earnings) ratio. But investors preferred Maxis because DIGI.com was too expensive while Telekom was too crappy *grin*.

There were also other speculations as to why the sudden exit from the local and institutional’s funds. Just like Genting Berhad, Ananda was said to be cautious with the previous Badawi’s weak and auto-pilot administration especially in the economic sector hence the next logical thing to do was to exit the listing status in order to ease his fortunes relocation elsewhere. However one cannot deny the fact that the telco market was already reaching saturation level and it was none other than DIGI.com that was the leader in “price-canabalizing” which frustrated Maxis very much then. In reality Ananda was obsessed with India and Indonesia markets so much so he can’t wait to inject these overseas’ operation with cash. But his voyage into the Indonesia (PT Natrindo Telepon Selular), India (Aircel Ltd.) and Sri Lanka’s soils were not easy particularly in India due to this Jaffna Tamil roots.

It’s interesting to read that Maxis plans to re-list again in the local Kuala Lumpur Stock Exchange. But what makes everyone puzzling was the way the news was announced – the Prime Minister Najib Razak seemed very eager to get the telecommunication giant listed once again. You may see it as an endorsement to Maxis’s intention to list and in the process scoop the public monies but what about its’ foreign operations? Maxis commanded about RM40 billion in market capitalization before delisting from KLSE and that’s a lot of money. But why relist now when Maxis was adamant to pull out two years ago? Could there be an agreement between Maxis and the Malaysian government to create a win-win solution?

Lara-Dutta-Aircell-Mumbai

Maxis may be a darling company but Ananda has learnt that it’s still a long journey to make it big in India’s market. Maxis plans to invest $5 billion more in its Indian joint venture, 75% stake in Aircel Ltd., to expand the mobile service provider’s network after spending $5 billion for the current fiscal year ending Mar 31. With the ambition to offer 3G in India, Maxis’s needs huge amount of money and every billions of dollars count so where else do you farm for money if not Malaysians? Competition is tough in India – while Maxis was trying to establish its foot-print, player such as Bharti is already talking about a merger of its India’s Airtel and South Africa’a MTN (largest cell-phone operator in Africa), creating world’s third largest telco in terms of subscribers. Bharti Airtel and competitor Reliance Communications have been cutting each other’s throat in their fierce fight for subscribers.

Most Indians who can afford cell phones have already signed up with Airtel, Reliance or other rivals but with the cheapest rates in the world, the fight is for the rural customers. But to build new towers just to win customers who may generate $10 a month in revenues is a tough battle for big boy like Airtel who has about 100 million Indian customers, what more to new comer such as Maxis Communications. In order to survive the harsh environment especially in the 3G market naturally Maxis has to turn back once again to Malaysian investors for funds – lots of it.

On the other hand, PM Najib was having tough time convincing foreign investors to park their hot money in Malaysia despite the much trumpeted 30% stake abolishment (certain sectors only) in mandatory Bumiputra stake. But most foreign investors are adopting wait-and-see attitude towards the latest news due to the frequent flip-flop in government policies. Najib’s mentor, former PM Mahathir, didn’t help the situation when he once again played the racial card claiming that the Malays (or rather UMNO?) are still very far away from owning the targeted stake and the Chinese was the actual master in Malaysia. But youngsters and the educated ones know Mahathir’s comment was obsolete but such comment was enough to convince foreign investors that UMNO-led government is still very risky a governement to trust, at least for the time being.

Maxis re-Listing

Thus, the story to get Maxis to be re-listed by Najib was a clever way to attract foreign or institutional funds. Nevertheless assuming that it was true that Maxis is to be re-listed end of the year 2009, will the investors equally excited about the story, the same way Maxis was listed in 2002 with the IPO price of RM4.85 (institutional) and RM4.36 (retail) a share respectively? Obviously Maxis cannot demand the same valuation for the listing since the risk factors have increased since then. But barring any sudden tumble in Dow Jones now is perhaps the best time to test the water with Maxis relisting story. So far, local IPOs have been very disappointed and Maxis may be the only candidate to reverse that. Again, another party to benefit from Maxis relisting (end of the year) is definitely PM Najib’s own brother, Nazir Razak, because the underwriter for such a massive IPO (speculated in Oct 2009) is none other than CIMB Investment Bank.

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