Axiata sells Multinet for US$26m

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KUALA LUMPUR: Axiata Group Bhd has relinquished control over its Pakistan-based subsidiary Multinet Pakistan (Private) Ltd  in a share sale exercise, a move which enables the Malaysian state-owned telecommunication firm to focus on growing its mobile operations.

Axiata said it had disposed of its entire 8.9 million shares or 89% of Multinet for US$15 million (RM48.45 million), or US$1.69 a share to Multinet’s existing shareholder Adnan Asdar Ali who owns the balance of 11%.

Multinet offers non-mobile telecommunication services for the business-to-business segment via its digital fibre optic network across Pakistan. Optical fibre enables transmission of telecommunication signals across longer distances and at higher bandwidths compared to other forms of  telecommunication technology.

Under the deal, Adnan will also repay Axiata the shareholders’ advances to Multinet  amounting to 973.3 million rupees (US$11.37 million or RM36.53 million), and obtain the release of all guarantees and financial support provided to Multinet in relation to banking facilities totalling US$65 million.

“Axiata has always expressed its intention to exit its non-core businesses and concentrate on its primary business of mobile communications. The divestment of Multinet reflects this new strategic direction, allowing us to focus on our core areas.

“Since our initial investment in 2005, Multinet has grown into an established fibre infrastructure company, the first company to launch a 5,000km-long nationwide fibre network,” Axiata president and group CEO Datuk Seri Jamaludin Ibrahim said in a statement yesterday.

An analyst from Inter-Pacific Research Sdn Bhd said the share divestment was not expected to have a substantial impact on Axiata’s net profit and  revenue as Multinet accounted for less than 1% of Axiata’s revenue.

“The contribution is too small,” the analyst told The Edge Financial Daily over the telephone yesterday.

AmResearch Sdn Bhd wrote in a note that it did not foresee the share divestment having a material impact on Axiata’s cash flow or operating  profit.

“Proceeds from the sale of RM86.2 million (cash sales plus advances return) or one sen/share would not be sufficient for any dividend, going forward. We hold a favourable view of this latest corporate action, for its long-term value,” said AmResearch which calls a buy on Axiata, with a fair value of RM5.05.

Telekom Malaysia Bhd, via TM International (L) Ltd, had in February 2005 acquired a controlling 78% stake in Multinet for US$17.16 million, making it the single largest shareholder.

The acquisition was undertaken prior to the corporate revamp in 2007 which placed TM’s global telecommunication operations under Axiata, formerly known as TM International.

TM  had initially acquired 780,000 million shares or 78% of Multinet for US$5.46 million or US$7 a share from Multinet shareholders — Adnan Asdar and Nasser Khan Ghazi who each held 500,000 shares or 50% each in the company with a paid-up capital of one million shares.

Following the transaction, the paid-up capital expanded to 10 million shares whereby TM further acquired 7.02 million shares for US$11.7 million, resulting in it holding 7.8 milllion shares or 78% of the enlarged capital base. The remaining 2.2 million shares or 22% of Multinet were equally owned by Adnan and Nasser.

Prior to the latest share divestment, Axiata had earlier acquired Nasser’s 11% stake, hence, pushing up Axiata’s stake in Multinet from 78% to  89%.

Income from Axiata’s Pakistan operations was not specified in notes accompanying the latest quarterly financials of the company which posted a first quarter net profit and revenue of RM921.48 million and RM3.81 billion, respectively.

Axiata’s global mobile telecommunication business includes operations in Malaysia, Indonesia, Bangladesh, Sri Lanka, and Cambodia, apart from India, Singapore and Iran. The company undertakes non-mobile telecommunication operations in Thailand and Pakistan.

In Thailand, Axiata’s non-core ventures are undertaken via Samart Corp which is involved in information and communication technology solutions.

Shares of Axiata fell one sen to close at RM4.10 yesterday for a market capitalisation of RM3.46 billion. The stock has so far this year advanced 34.43%, signficantly outperforming the 4.76% rise in the FBM KLCI.

This article appeared in The Edge Financial Daily, July 20, 2010.