Malaysian cellular operators near merger

A merger of the cellular phone operations of national carrier Telekom Malaysia Bhd. and Technology Resources Industries Bhd. (TRI) moved closer Thursday with the appointment of four Telekom nominees to the board of TRI, according to the government news agency Berita Nasional Malaysia (Bernama).

TRI has been resisting the overtures of Telekom, which holds a 31.25-per cent stake in TRI, and want to merge its TM Cellular operations with those of TRI’s Celcom unit. At last week’s TRI annual meeting, Telekom Malaysia representatives were barred from taking part on the grounds that their proxy voting forms were not in order.

On Tuesday, deputy Prime Minister Abdullah Ahmad Badawi intervened, saying that Telekom, and a pension fund, which holds another 10 per cent of TRI, should be allowed to vote.

On Wednesday, four TRI directors resigned after conceding they would lose power at the next shareholders’ meeting later this month, and were replaced by Telekom nominees, Bernama said.

One of the new TRI directors is Mohamad Khir Abdul Rahman, chief executive of Telekom Malaysia, who said the way was now clear to move TRI forward.

“Our immediate challenge over the next few months will be to proactively continue the momentum already begun towards achieving our stated objective-the combination of the operations of Celcom and TM Cellular,” he said in a statement Thursday.

Ousted TRI board member Lim Kheng Yew said that Telekom Malaysia had agreed to set up a joint independent committee to evaluate the proposed merger and to protect the interests of minority shareholders, Bernama reported.

The merger has been seen as inevitable by local media after Malaysian prime minister Mahathir Mohamad said in May that five telecommunication companies was too many for a country the size of Malaysia.

“We need three companies only,” Mahathir was quoted as saying. With the advent of 3G (third-generation) mobile services and the huge capital investment required, it was obvious the industry had to consolidate, Mahathir said.

The Malaysian Communications & Multimedia Commission (MCMC) recently announced that it will be allocating new 3G mobile service spectrum licenses to three players. It will assign spectrum later this month leading to the launch of 3G services in late 2003 or first half of 2004, MCMC has said.

Research figures estimate that Celcom had a 27.9 per cent share of Malaysia’s 7.65 million mobile subscribers at the end of 2001, well ahead of Telekom Malaysia’s 17 per cent. A merger of the two operations would enable Telekom to overhaul the market leader Maxis, whose market share is estimated at 30 per cent.