Ananda Krishnan did some mental acrobatics and hi-jink gymnastics.
He took Maxis private in 2007 and sold some percentage to the Saudis. He then went for an Indian sub-continent adventure in telecommunication acquisition hoping to increase Maxis footprint in India.
Now, he has been called back to do national service. Get Maxis back into Bursa! This was the call from the then Deputy Prime Minister in January 2009.
A self-made billionaire who controls Maxis Communications, Tanjong Plc, Measat and Astro,he dropped the bombshell in 2007 to take Maxis private and almost instantly raised eyebrows of millions of investors. Many Maxis investors back then were 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 which is just 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%. This was his greatest coup after acquiring Tanjong Plc.
To many of the ex-shareholders, Ananda was too cunning for them. He decided to take Maxis private more even though he had promised shareholders a bright future during its pre-listing. Once he got his cache of cash, he booted them out.
Apaprently, the tycoon was said to be sulking because the stock price did not reflect 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 traded at the lowest P/E price to earnings ratio. However, investors preferred Maxis because DIGI.com was too expensive while Telekom was too crappy then.
There were also other speculations as to why this sudden exit from the local and institutional’s funds took place.
Just like Genting Berhad, Ananda was said to be cautious with the previous Badawi’s weak and his auto-pilot administration. The local 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.
Ananda was desperate to get out and be free to relocate elsewhere. India looks promising then. Ananda became obsessed with India and Indonesia markets. He was impatient and wanted to immediately used the cash horde to make his mark in those 2 markets.
Unfortunately, his foray into India and Indonesia was short of his expectations. His voyage into Indonesia viz PT Natrindo Telepon Selular and to India via Aircel Ltd as well as on Sri Lanka’s soils were not easy particularly in India due to this Jaffna Tamil roots.
Now, we see an intended re-listing in the local Kuala Lumpur Stock Exchange possibly by year end 2009.The unseen hand had turned visible in the form Prime Minister Najib. Najib wants Maxis to come in to scoop the available monies in the market. So what is Ananda going to do with his foreign operations|?
Maxis commanded about RM40 billion in market capitalization before delisting from KLSE and that means Ananda is flush with cash.
But why re-list 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? A sanctioned move?
Let us look at teh Indian scenario.
Lara-Dutta-Aircell-MumbaiMaxis 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., and 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 billion of dollars count so where else do you seek funds if not from 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 the 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. Just to build new towers to win low revenue customers who may generate $10 a month in is already tough for a big player like Airtel who has about 100 million Indian customers, what more to newcomer 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 – and there are lots of it, as investors move funds out of fixed deposit accounts because of the current low interest regime.
The other sceanrio is PM Najib is having a 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 favouring the affirmative policy. Such flip-flops will continue to make investors look elsewhere to invest particulalry to Sri Lanka, Vietnam and China.
The Maxis re-listing will provide that much needed fillip to boost morale on the Bursar.Thus, as the story goes, Najob hopes to use Maxis as a strategy to pull on foreign investors.
Let us assume, Maxis is fast-tracked to re-list in December 2009. Will investors be equally excited to buy in at the price offered in 2002 with the IPO price of RM4.85 a share for institutions and RM4.36 for retail players?
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 the Maxis re-listing story.
So far, local IPOs have been very disappointing and Maxis may be the only candidate to reverse that. Again, another party to benefit from Maxis re-listing 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.
So is Maxis back with a revenge to play Round 2 as Axiata strengthens up under Khazanah? Remember under Azman Mokhtar,Axiata is no longer as crappy; nor will Telenor be giving up its DIGI market share anytime soon.
Maxis must be prepared to accept a Johnny-come-lately role now that home players have smartened up.
This educative article is in conjunction with the introduction of a smaller tick size which will be made available by Bursa Malaysia and is planned for implementation on Aug 3.
