Published September 11, 2009

Japan's KDDI buying 50.1% of DMX

Firm will invest $183.1m in plan to boost Chinese telco sales

By WINSTON CHAI

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JAPAN'S second-largest telecom operator KDDI Corp will invest $183.1 million for a majority stake in Singapore-listed DMX Technologies under its plan to boost sales in the burgeoning Chinese telecommunications market.

Ms Teo: Says DMX will gain from KDDI's customer referrals and technology transfer

DMX, which specialises in providing systems integrations services to telcos in the region, plans to issue 588,772,535 new shares to KDDI at 32 cents a share.

This will translate to a 50.1 per cent ownership of the Singapore firm's enlarged share capital. Tokyo Stock Exchange-listed KDDI plans to maintain DMX's Singapore Exchange listing upon completion of the deal.

This placement is subject to the approval of DMX shareholders at a special general meeting in November. It is also subject to the subscriber being granted a whitewash waiver by the Securities Industry Council.

If approved, KDDI will displace contract manufacturer Venture Corporation as DMX's single largest shareholder.

Venture currently owns about 27 per cent of DMX.

DMX's shares surged 46 per cent higher to close at 47.5 cents after the counter resumed trading yesterday afternoon following a one-day halt.

KDDI is looking to foreign expansion to help make up for sluggish domestic demand, particularly for its fixed line network services. Its president Tadashi Onodera was previously quoted as saying that he planned to double the company's overseas revenue to 200 billion yen (S$3.1 billion) by 2013.

The latest investment is expected to give KDDI a stronger foothold in China, which accounted for more than two-thirds of DMX's US$172.7 million sales tally in FY2008.

According to DMX chief executive Jismyl Teo, the company plans to use up to 25 per cent of the net proceeds from the placement to fund the development of new software and technologies.

The company will use another 20 to 35 per cent to finance the expansion of its digital media and infrastructure solutions business, while the remainder will fund general work capital requirements and possible acquisitions.

'DMX's business is capital-intensive. In the past, we had to turn down some projects due to working capital constraints,' Ms Teo said.

Besides boosting its war chest, DMX will also gain from KDDI's customer referrals and technology transfer, Ms Teo told reporters at a media briefing yesterday

KDDI's announcement comes a day after arch-rival Nippon Telegraph and Telephone Corp (NTT) minted Singapore as the regional headquarters for its IT services unit NTT Data.

NTT Data is aggressively expanding overseas in an attempt to increase revenue contributions outside Japan from five to 20 per cent over the next three years.

Its parent NTT also owns a 10 per cent stake in Singapore's second-largest telco StarHub.