By Soraya Permatasari
July 8 (Bloomberg) -- Axiata Group Bhd., Southeast Asia’s second-largest mobile-phone operator, is considering an offer for Millicom International Cellular SA’s assets in Cambodia and Sri Lanka, according to two people with knowledge of the matter.
The Kuala Lumpur-based company may bid as much as $500 million for Millicom’s stake in its Cambodian unit and $200 million for the Sri Lankan operations, one of two people with knowledge of the plan said yesterday, asking to not be identified because the discussions are private.
“This is a good move” and the acquisition “comes at the right time,” Izz Al-Din Maslan, an analyst at AmResearch Sdn. in Kuala Lumpur, said today. “In Cambodia, if they can hold the lion’s share in the number one player, they can control the market.”
Expanding in Cambodia and Sri Lanka may help Axiata boost earnings as the government-controlled phone operator faces slowing growth at home, where wireless subscriptions are estimated to have exceeded the country’s population. Luxembourg- based Millicom said last week potential suitors had submitted “expressions of interest” for its Asian assets and that the company hired Goldman Sachs Group Inc. as an adviser.
“The indicative price tag” seems “fair, based on recent telecoms M&As in emerging markets, where penetration is still low,” Jeffrey Tan, an analyst at OSK Research Sdn. wrote in a report today. Tan kept his “trading buy,” recommendation on the stock.
Axiata shares fell 0.8 percent to 2.40 ringgit as of 9:21 a.m. on the Malaysian stock exchange, while the benchmark stock index lost 0.5 percent.
Good Time to Buy
The company may be able to get a better valuation for the assets now when the market is still depressed, said Izz Al-Din, who recommends investors “hold” the stock. Izz said Axiata shouldn’t have any problem financing the acquisition.
Axiata, whose 100 million customers place it behind Singapore Telecommunications Ltd. in Southeast Asia, has fallen 2.6 percent this year in Kuala Lumpur trading. Millicom, which trades on the Nasdaq Stock Market in the U.S., has risen 25 percent.
Millicom is reviewing several proposals, Chief Financial Officer Francois-Xavier Roger said in an interview yesterday, declining to name any potential bidders. The company is considering selling its businesses in Cambodia, Laos and Sri Lanka separately or together, he said.
Spun Off Unit
Axiata declined to confirm or deny the talks, saying in an e-mailed response to questions from Bloomberg News that the company “has always communicated that in-country consolidation is of strategic importance in some of our markets.” Edward Naylor, a Goldman spokesman in Hong Kong, declined to comment.
Axiata was spun off as the mobile-phone unit of Telekom Malaysia Bhd. in April 2008. The company operates in about 10 countries and spent about $2 billion last year buying a stake in Idea Cellular Ltd. in India and merging it with Spice Communications Ltd.
The Malaysian company reported cash and equivalents of 3.9 billion ringgit ($1.1 billion) as of March 31 and said last month it’s exploring opportunities for acquisitions in Bangladesh, Cambodia and Sri Lanka.
Axiata owns 85 percent of Dialog Telekom Plc, which as Sri Lanka’s largest mobile-phone network has 5.8 million mobile customers in the country. It also controls Telekom Malaysia International (Cambodia) Co., with about 600,000 subscribers.
‘Strategic Sense’
“If there are opportunities which make financial and strategic sense the Group would certainly consider them,” Axiata said in its e-mailed response to questions.
Millicom owns 100 percent of Celltel Lanka Ltd. in Sri Lanka and 58 percent of MobiTel in Cambodia, according to its Web site. The company also has a 74 percent stake in Millicom Lao Co. in Laos. Celltel has about 2.1 million subscribers, while MobiTel has 2.2 million customers, Millicom said.
About 8 out of 10 people in Cambodia didn’t have mobile phones at the end of 2007, compared with three out of five in Sri Lanka and 1 out of 10 in Malaysia, according to data from the Geneva-based International Telecommunication Union compiled by Bloomberg. The number of wireless subscribers exceeded the population in Malaysia as of the end of March, according to Khair Mirza, a Kuala Lumpur-based telecommunications analyst at Maybank Investment Bank Bhd.
Millicom’s Asian operations and joint ventures generated revenue of $68 million and net income of $4 million in the first quarter, Millicom said in its statement on July 2. Its subscribers in Asia increased by 34 percent to 4.5 million in the three months ended March 31, the company said.
To contact the reporter on this story: Soraya Permatasari in Kuala Lumpur at soraya@bloomberg.net.
Last Updated: July 7, 2009 21:50 EDT
