Mobile service operators start talks on merger and acquisitions

PETALING JAYA: Consolidation talks have begun in the telecommunication space where as many as nine parties have licences to offer mobile services.

“There are clearly too many operators for a market like Malaysia and it would naturally result in some form of consolidation,” said a telco analyst.

Industry sources said that one of the more active players pursuing a merger and acquisition exercise was the YTL Group which has approached Asiaspace Sdn Bhd and Green Packet Bhd.

Asiaspace chairman Datuk Abdul Ghani Abdullah said that consolidation was the most “logical” thing to do.

Same wavelength: From left: Puan, YTL Communications executive chairman Tan Sri Francis Yeoh, Tan and Abdul Ghani. A telco analyst points out that there are too many operators in a market like Malaysia and it would naturally result in some form of consolidation.

“Capital expenditure is so high in this industry that it is impossible for smaller companies to survive,” he told StarBiz when contacted yesterday.

YTL had not answered StarBiz queries at press time while Green Packet officials declined to comment.

Last year, the Malaysian Communications and Multimedia Commission named nine companies as recipients of the 2.6 GHz spectrum, to be used for the roll-out of long-term evolution (LTE) or 4G services.

These are the four 3G players namely DiGi.Com Bhd, Celcom Axiata Bhd, Maxis Bhd and U Mobile Sdn Bhd; and four WiMAX players Asiaspace, Packet One Networks Sdn Bhd or P1 (a subsidiary of Green Packet), REDtone International Bhd and YTL Communications Bhd.

The ninth player named was Puncak Semangat, a company controlled by billionaire Tan Sri Syed Mokhtar Al-Bukhary.

Abdul Ghani said consolidation would enable players to combine their spectrum to offer more efficient services to customers, and hence, help solve the issue of spectrum being spread too thin among too many players.

“However, the (consolidation) talks are still at an early stage,” said one industry source.

Aside from the three incumbents in the telco voice market, namely DiGi, Celcom and Maxis, the other players that have made the most inroads in the 4G industry are YTL Communications, P1 and U Mobile which is controlled by tycoon Tan Sri Vincent Tan.

YTL Communications launched its YES 4G wireless network in November 2010 and as at November last year, the company was said to have a subscriber base of more than 300,000.

It was reported that the company would break even when it had one million subscribers.

Green Packet has also been keeping busy with its investments in the area of broadband.

For the third quarter ended September 2011, Green Packet reported net loss of RM24.3mil compared with net loss of RM13.7mil a year earlier, largely due to such investments.

“But it will be an historic year for P1 this year, as in less than four years it will turn EBITDA (earnings before interest, tax, depreciation and amortisation) positive. You must realise that we are in an industry where the gestation periods are long,” said group managing director C.C. Puan recently.

As for U Mobile's financial position, this cannot be immediately ascertained as it is privately owned.

Meanwhile, amid reports that U Mobile was seeking to be listed, a source said that Green Packet had been approached by investment banks to consider an initial public offering of P1.

“If Green Packet turns EBITDA positive this year, PI should be in a good position for a listing,” said the source.