Axiata's Asia Dream Fades as Rivals Bid for Its Overseas Units

(Bloomberg) -- Axiata Group Bhd.’s dream of building a carrier that spans southern Asia from Singapore to Pakistan, Indonesia and India is fading as it risks losing hold of overseas units to rivals.

Malaysia’s biggest wireless carrier received an offer from Singapore Press Holdings Ltd. and Keppel Corp. to buy out its stake in M1 Ltd., the latest in a series of challenges to its regional presence.

The view was rosier for Axiata in 2016, when Chief Executive Officer Jamaludin Ibrahim signaled interest in raising its stake in M1. He also planned to double the number of telecommunication towers in South and Southeast Asia in three years and eventually offer the assets in a public offering. Since then, its stake in Idea Cellular Ltd. was diluted by half after the Indian carrier merged with Vodafone Group Plc, and its plan to buy Veon Ltd.’s tower unit in Pakistan was called off.

M1 remains a “strategic asset” for Axiata, and the Malaysian carrier will continue to review all available options, with the sole objective of upholding shareholders’ value, the company’s spokesman said in response to Bloomberg. It has presence in 11 countries now, compared to 10 a decade ago, and has expanded to tower infrastructure and the digital business.

“We are much more of a regional player today compared to when we first started, and we will continue to pursue our expansion in areas that enable us to grow and enhance shareholders’ value,” the spokesman said.

Fully Repaid

Higher competition and regulatory hurdles are the key reasons for its overseas troubles, Shafiq Kadir, analyst at KAF-Seagroatt & Campbell Bhd said by phone. “They will have to seek other acquisitions or expansion, and increase focus at home and in Indonesia, to make up for this,” he said.

Axiata still has operations in Indonesia, Bangladesh, Sri Lanka, Nepal and Cambodia. The Malaysian carrier paid S$260.8 million for an early 12.1 percent stake in M1 in 2005 at S$2.20 per share. It would gain S$547 million if it accepts SPH-Keppel’s offer of S$2.06 as M1’s dividends over the years have fully repaid the debt and equity used to buy its current 28.68 percent stake, according to Bloomberg calculations.

Analysts at Daiwa Capital Markets Singapore Ltd. and Citigroup Global Markets Inc said Axiata can counter SPH-Keppel’s buyout offer if it chooses to.

“We think it is unlikely it would agree to the offer,” Ramakrishna Maruvada, analyst at Daiwa Capital Markets Singapore Ltd., wrote in note on Thursday. “On the strength of its balance sheet alone it has adequate resources to engage in a bidding war up to S$2.50.”

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