Malaysian firm Maxis is aiming for a bigger slice of Sri Lanka Telecom (SLT) to get substantial control of the telecommunications giant but overcoming a huge public outcry and Defence Ministry clearance are major roadblocks it is facing, industry analysts said.
Public condemnation that almost led to a parliamentary debate this week on an allegedly corrupt deal that is shrouded in secrecy has also put the government into a defensive mode, they said.
`We have very reliable information that Maxis is negotiating through a VIP official for a 50 percent or more stake inclusive of the 25 percent stake held by Japan`s NTT,` one analyst said, adding, `The brokerage (commission) got higher from US$ 5 million to US$ 8-10 million when the Malaysian party asked for majority control of the company ? not only the NTT stake.`
The analyst said Maxis was not the actual buyer but would ultimately `run the show` and would want a `much more than 25 percent say in the company.`
In a March 20 statement, SLT said its directorate had approved a request for a due diligence exercise by Global Telecommunications Holdings NV, (GTH) of The Netherlands, a subsidiary of Usaha Tegas Sdn Bhd, controlled by Ananda Krishnan, Malaysia`s second richest man and who is regularly featured in the influential Forbes Richest Men list. (See page 6 for profile) Usaha also controls Maxis and recently Krishnan, whose parents came from Jaffna, made a bid to take control of Maxis where he and his associates currently have little over 50 percent ownership.
SLT, at that time, quoted NTT (Nippon Communications Corporation of Japan), which owns 35% of SLT, as saying the Japanese firm was in talks with GTH. The Sunday Times reliably learns that the due diligence was over recently, an exercise in which Maxis senior executives also were involved.
A public outcry broke out this week over the proposed deal with posters on Monday by unknown groups warning of the dangers of a `partial sell-out` of SLT stock to Maxis, and later on Friday, posters plastered in some parts of the city spoke of a nexus between Dialog and Maxis` opponents. However Dialog, which has steered clear of the furore, says it is ready and relishes new competition. (See story in FT on Sunday).
The UNP and the JVP have both questioned the deal to `sell SLT shares` and said it smacks of corruption and demanded more transparency in the sale of government stock.
Government spokesman and Media Minister Anura Priyadharshani Yapa rejected the claims at a news conference, pointing out that SLT shares were not for sale and the stock held by NTT was a private affair and can be sold to any party so desired.
But the analyst, close to the deal-making process and who didn`t want to be identified, said the sale of SLT shares was also coming into the picture though publicly it is just the NTT share that is being discussed.
In the meantime, the government committee examining the shareholders` agreement between the Treasury (which owns the state stock in SLT) and the GTH, this week sent a report to Treasury Secretary P.B. Jayasundera.
However, informed sources said the committee was still awaiting Defence Ministry clearance it has sought for the deal. Dr. Jayasundera told The Sunday Times on Friday that the committee was still examining the SLT deal. `The SLT deal is still not finalised. The committee is discussing it,` he said.
Security clearance has been asked for due to Krishnan`s family ties with Jaffna, once the stronghold of Tamil Tiger rebels. Former aides of Krishnan, who shuns publicity but who together with Bob Geldof helped organise the global Live Aid concert in the mid-1980s, reject claims of any LTTE links with the billionaire businessman, saying he is a devout Buddhist and has a son who is a Buddhist monk.
Yet the nature of the transaction -- with the asking stake in SLT now going higher -? has raised security concerns given that all government communications go through SLT.
Other questions being raised are as to why GTH, which has relatively little experience in telecommunications, is the buyer when Krishnan would have used Maxis for a direct transaction.
Also being strongly raised is the telecom tariffs issue where SLT is believed to be violating an Appeal Court order in 2005 that its increased tariffs were illegal. SLT went to court subsequently and won special leave to appeal from the Supreme Court but no order was given at the time staying the Appeal Court verdict. These tariffs continue to be imposed.
The industry analyst said NTT was exiting from SLT because the Japanese company felt it was being stifled in profit-making opportunities. ]`The NTT deal itself in 1997 ? also the one between Emirates and the government for the national airline ? was based on a selective process without any open tender. The NTT won many concessions including absolute management control of the company though only owning 35 percent of the shares. Now the screws are on through the court decision and that is hindering operations on the 1997 terms,` he said, adding that the then shareholders agreement ?- now being revised fully by the government committee ?- had no specific focus on tariffs.
In 2005, Maxis, along with Singapore Telecommunications and India`s Reliance Infocomm, made a bid for Sri Lanka`s fifth mobile telecommunications licence, according to news reports. Other industry players said Maxis has been `sniffing` around for a business opportunity in Sri Lanka in mobile communications.
Last week however the Telecommunications Regulatory Commission (TRC) awarded the fifth licence to India`s Bharti Airtel. A Parliamentary debate due this week on the SLT deal was postponed to early June as it clashed with another adjournment motion proposed by the UNP to examine another hot issue ? the MIG deal.
The debate as to why other interested investors including Telkomsel of Indonesia were shut out continued this week. Other sources, tracing the origins of the SLT deal, said when news hit the stockmarket some months back that SLT`s NTT stake was up for sale, there were many interested parties.
It was at this time that a top government advisor brought Maxis into the picture and terms were discussed. No other bid was considered or even came on the table.