Axiata- The PT Excelcomindo Pratama Tbk Rights Issue

Axiata is the majority shareholder of PT Excelcomindo Pratama Tbk (XL)through is subsidiary, Indocel holdings. It will undertake to buy all its share of the rights issue as well as to subscribe to all the unsubscribed shares after the share issues closes. To do this,Indocel which holds 83.8% of XL, has entered into a Standby Buyer Agreement to undertake to subscribe to all these unsubscribed shares,if any. The rights issue is expected to be completed in December 2009.

Let us look at the structure of the rights issue.

USD300 million worth of rights issue of 1,418 million new Ordinary shares of IDR100 each (“Ordinary Share”) will be issued on the basis of 1 Rights Share for every 5 existing Ordinary Shares at an issue price of IDR2,000 per share.The subscription by Indocel of its entitlement and the Unsubscribed Rights Shares does not
require the approval of Axiata’s shareholders. The extraordinary shareholders meeting to obtain the approval of the shareholders of XL in relation to the Rights Issue is expected to be held on 16 November 2009.

For those who need to know some background of Axiata, here is a short brief of the creature.

Axiata is one of the largest Asian telecommunication companies, focused in high growth low penetration emerging markets. It has controlling interests in mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia with significant strategic stakes in India, Singapore and Iran. India and Indonesia are amongst the fastest growing markets in the world. In addition, the Malaysian grown holding company has stakes in non mobile telecommunication operations in Thailand and Pakistan.

The Group’s mobile subsidiaries and associates operate under the brand name ‘Celcom’ in Malaysia, ‘XL’ in Indonesia, ‘Dialog’ in Sri Lanka, ‘AKTEL’ in Bangladesh, ‘HELLO’ in Cambodia and ‘Idea’ in India, ‘M1’ in Singapore and ‘MTCE’ in Iran (Esfahan).

As of December 2008, the Group, including its subsidiaries and associates, has over 90 million mobile subscribers in Asia. The Group revenue for 2008 was RM11.3 billion. The Group provides employment to over 25,000 people across Asia.

Axiata’s vision is to be a regional champion by 2015 by piecing together the best throughout the region in connectivity,technology and people, uniting them towards a single goal: Advancing Asia.

Axiata was awarded the Frost & Sullivan 2009 Asia Pacific ICT Award for Best Telecoms.

Question: What is the impact of this rights issue on Axiata and its shareholders? How is the rights issue for Indocel's potion going to be financed? Are they going for a rights issue again? No, unlikely as it would be too soon. A PDS? This is very likely if they can work out a revenue forecast that the payment towards the debt notes pose no issue.