Global Insight Perspective | |
Significance | The parent group of Maxis acquired a 35.2% stake in Sri Lanka Telecom (SLT) and has offered to buy the remaining shares of the company. |
Implications | The deal is in line with the desire of the Maxis parent to expand its foothold in emerging telecoms markets further. |
Outlook | Mobile business will be the key growth area for SLT. |
The Malaysian group Usaha Tegas Sdn Bhd, which controls Maxis Communications, has bought the shares of Sri Lanka Telecom (SLT) for 50.50 rupees (US$0.47) each through its subsidiary, Global Telecommunications Holdings. The deal is the biggest single transaction ever conducted on the local Colombo Stock Exchange. Global Telecommunication Holdings also announced a mandatory offer to buy the remaining shares of SLT. The company said it is obliged to make an offer to the holders of SLT to acquire the remaining ordinary shares carrying voting rights held by them in SLT. The Sri Lankan government holds a 49.5% stake in SLT, while the 15.3% balance is held by the public. Global Telecommunications Holdings is believed to be aiming to obtain management control of SLT, which was privatised in 1997 with 35.2% of the company sold to NTT for US$225 million.
Outlook and Implications
- Mobile Business to Drive SLT Growth: SLT, Sri Lanka's incumbent operator, had 931,737 fixed-line customers and 520,017 CDMA fixed wireless customers at the end of 2007. The group's mobile unit, Mobitel, had 1.40 million customers at end-2007, up from 885,000 year earlier. The mobile business has been the strongest growth area for SLT in the recent years and will continue to help drive overall growth for the group. There were an estimated 7.98 million mobile subscribers in Sri Lanka at end-2007, representing a mobile penetration rate of about 38%. The mobile market is currently led by Dialog Telekom (a unit of Telekom Malaysia), with 4.26 million customers—a 53% market share. Other competitors include Tigo (part of Millicom International Cellular) with 1.18 million customers and Hutchinson Telecom with 1.14 million customers. India's leading mobile operator, Bharti Airtel, which last year won a licence to become Sri Lanka's fifth mobile operator, plans to start operations this month.
- Further Overseas Expansion for Maxis Parent: The deal is in line with the wishes of Malaysian tycoon T. Ananda Krishnan, the owner of Usaha Tegas, to expand the group's telecoms-asset portfolio in high-growth emerging markets. Usaha Tegas also controls Maxis, which is the largest mobile operator in Malaysia and has presence in India and Indonesia—two of the most populous and fast-growing telecoms markets in the world—via Aircel and NTS, respectively. Maxis aims to become one of the leading regional operators and is seeking new investment opportunities in markets with low penetration and high growth potential. In order to raise capital to fund Maxis' further overseas expansion, Usaha Tegas in June 2007 introduced Saudi Telecom Co (STC) as a strategic investor in Maxis in a US$3-billion deal (see Asia-Pacific: 27 June 2007: Saudi Telecom Strikes US$3.01-bil. Deal with Malaysia's Maxis; Gains Foothold in India, Indonesia).