Published July 27, 2009

MALAYSIA INSIGHT

Ringing in some cheer

The relisting of Maxis would liven up Bursa Malaysia - and please Krishnan and his investors

By S JAYASANKARAN
KL CORRESPONDENT

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ACCORDING to a senior Malaysian telecommunications executive, former prime minister Mahathir Mohamad wasn't pleased when tycoon T Ananda Krishnan took his telco firm Maxis Communications private in a RM39.9 billion (S$16.5 billion) deal back in 2007.

Mr Krishnan received his telecom and satellite-TV licences during Dr Mahathir's tenure and the former premier presumably felt that the tycoon was depriving the local stock exchange of one of its jewels. According to the executive, however, Mr Krishnan promised Dr Mahathir that he would relist Maxis in three years.

That would make the date of Maxis's return to Bursa Malaysia at some time around 2010. But now it looks like the flotation could be sooner rather than later.

Last week, no less a personage than Prime Minister Najib Razak asked for Maxis's relisting, explaining that such a move would add liquidity and excitement to the stock exchange. Mr Najib added that he had spoken to the firm's owners and they were 'considering the proposal seriously'.

Mr Krishnan, whose private companies own 75 per cent of the telecom firm, should be chuffed by Mr Najib's request. Given that the request came from the country's chief executive, his firm can expect total cooperation from all quarters including the regulatory authorities. That is a big deal, where any listing is concerned.

The question is: can Maxis get the kind of valuation it wants?

Mr Krishnan took the company private at RM15.60 a share in one of Asia's biggest deals. A few days after the company was delisted, he sold 25 per cent to Saudi Telecom for US$3.05 billion which, on the face of things, would be a 5 per cent premium over what Mr Krishnan paid when he took the telco private.

The biggest money-spinner in Maxis is its Malaysian operations, which are in a mature, even saturated, market and have little or no debt. According to news reports, its local operations made nearly RM3 billion in pre-tax profit in its 2008 financial year.

The big growth deal going forward for Maxis lies in its overseas operations in Indonesia and India. But competition in both countries is frenetic with huge amounts required to drive network expansion going forward.

Indeed, the Rating Agency of Malaysia described the balance sheet of Binariang-GSM, Maxis's parent company, as 'constrained'. It estimated the firm's debt to swell to RM25 billion by 2010 from RM21.35 billion last year.

In addition, Maxis is facing increasingly tough competition at home. The firm's share of the lucrative post-paid market is slipping gradually - to 47 per cent last year from 49 per cent the year before. Even so, Maxis remains the 800-pound gorilla on the block.

Mr Krishnan will want to return to the stock market in style in much the same way as he exited two years ago.

To make sure of that, he could just list Maxis's Malaysian operations, which are clean, relatively debt-free and immensely profitable. Having a RM40-50 billion company suddenly trading on the local bourse would add breadth to the exchange and act as a catalyst towards reigniting excitement in Bursa.

That would please Mr Krishnan and his Saudi investors. It should also enthuse Mr Najib. And let's not forget the value that can be realised from Binariang's overseas operations at a later date.