A Government-appointed Presidential Committee on Friday rushed to wrap up a proposed agreement between Maxis, Malaysia`s biggest mobile telephone operator, and Sri Lanka Telecom (SLT) to purchase a part of the stake owned by the Nippon Telegraph and Telephone Corporation (NTT), completely ignoring a rival offer from one of Indonesia`s largest telecom operators.
No official announcement has been made by any of the parties in what appears to be a `mad-rush` to close the deal with the Malaysians, according to insiders. The NTT sale of at least a part of its 39 per cent stake at SLT is valued at more than US $ 260 million (Rs. 27.5 billion), carrying a brokerage fee of around 8 percent of the sale value which was estimated to be a sum of US $ 24 million (Rs. 2.64 billion), largely handled by Sri Lankan officialdom.
`We concluded the shareholders agreement between Maxis and the government. The buyer had already been identified,` a committee source, who declined to be named, said. He said the new agreement would be neutral and provide more powers to the government than the earlier one with NTT which could be manipulated to suit the Japanese company.The Sunday Times learns that Telecomsel, Indonesia, a company listed in the New York Stock Exchange and with 40 million customers in Indonesia had faxed PERC, the Sri Lankan state agency overlooking privatisation programmes, and made an expression of interest for the NTT shares, but the matter has not been even considered.
Many officials of the Presidential Committee told The Sunday Times that nobody had informed them of the Telekomsel Indonesia offer.
The Indonesian firm`s proposal included providing a broadband series, a long-haul investment programme with a view to making Sri Lanka its South Asian hub. It was the company`s first major investment bid overseas.
Their first fax had been to the Finance Ministry, The Sunday Times learns, but upon being told that the Ministry had not received their offer, they re-faxed their proposal to PERC. NTT, Japan`s largest telecommunications company, has a 39 percent stake in SLT which it purchased in 1997 for US$ 225 million and now wants to exit from the country`s largest telecommunications provider in which the government has a 49.5 percent stake.
The sale will be handled by Usha Tegas Sdn, a subsidiary of Maxis Communications Bhd, and for the moment involves 25 percent of the NTT stake. `The company is purchasing 25 percent in order not to trigger the Takeovers & Mergers Code which requires a mandatory offer (for 30 percent and over) to all shareholders. Later they would purchase the other lot,` the source said.
The committee which includes officials from the Treasury, the Planning Ministry, the SLT chairman and director-general of the Securities & Exchange Commission, was appointed by the cabinet to clear the Maxis proposal. The Malaysian company has already completed a due diligence of SLT. There were plans for some SLT directors to visit the Maxis headquarters in Kuala Lumpur ? accompanied by a group of business journalists ? to further the discussions and look at the Maxis operation but latest reports say the trip has been postponed.
The largest single owner of Maxis is Ananda Krishnan, a Malaysian businessman with roots in Jaffna. His company has some 6 million telecom customers in Malaysia. The source said the shareholders agreement was lapsing with NTT and the government felt it was a good opportunity to work out a new agreement. `In the earlier agreement, issues like tenders could be manipulated by NTT. They had a lot of powers under the former agreement,` he said.
`On the other hand we don`t want to have an agreement that is one-sided and would kill the spirit of cooperation because the partner comes to add value in addition to investment. The new agreement will give more powers to the board which is chaired by a Sri Lankan government nominee,` he said.
Privatisation specialists say the agreement is similar to what the government is seeking in the case of SriLankan Airlines in which the management agreement with Emirates is up for renewal next year. Under current proposals prepared by a government-appointed committee, the new shareholders agreement at SriLankan (currently under negotiation) will give the board more authority in decision-making, appointment of senior managers, procurement and route permits.
The government has a majority 51 percent stake against Emirates` 43.6 percent but the latter is in full management control and most important decisions are taken without board consent, In the SLT case too, NTT was responsible for management and most of the decision-making. `Some of the government-appointed directors on the SLT board hardly question NTT decisions as they are either not conversant with the topic or have not done their homework,` an SLT official said.