STT to invest RM1b in U Mobile

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KUALA LUMPUR: Singapore Technologies Telemedia Pte Ltd (STT) will invest over RM1 billion via the acquisition of a 33% stake in U Mobile Sdn Bhd from Tan Sri Vincent Tan’s U Television Sdn Bhd (U TV) and the subscription of new shares via a rights issue in the country’s fourth and smallest 3G mobile operator.

“(STT) will own 33% of the enlarged share base... (U Mobile’s) existing shareholders will also be subscribing to the rights issue... (the total amount raised from the rights issue) is substantial enough (for U Mobile) to beat the competition,” U Mobile’s chairman and controlling shareholder Tan told reporters here yesterday following the signing of the definitive agreement between U Mobile and STT for the strategic partnership.

Tan said 50% of the RM1 billion investment would go to U TV, while the other half would boost U Mobile’s coffers via the rights issue, which would be taken up by all the shareholders. Apart from U TV, U Mobile’s only other shareholder is Multi-Purpose Holdings Bhd, with a 3.9% stake.

U Mobile, Tan added, planned to accelerate its 3G network rollout and give its customers better service experience, leveraging on expertise of its new Singaporean partner, which owns the island state’s No 2 mobile operator, broadband and incumbent pay-tv provider, Starhub Ltd.

Unlike the arrangement with its former strategic partners — South Korea’s KT Freetel (KTF) and Japan’s NTT DoCoMo — STT had not been granted a put option to sell back its stake to Tan, should the investment in U Mobile turn out to be below its expectations. “Once bitten, forever shy,” Tan jokingly said.

Tan had to fork out US$200 million (RM662 million) to buy out KTF and NTT’s respective 16.5% stake in U Mobile in April and September last year, the same amount the Korean and Japanese operators paid when jointly taking up a 33% stake in U Mobile in December 2007.

U Mobile, which uses the 018 pre-fix, currently offers its services in the Klang Valley, Seremban, Ipoh and Johor Bahru.

STT’s entry into U Mobile marks Singapore’s first acquisition of a sizeable block in a Malaysian telecommunications operator that comes with the chance to be in the driver’s seat.

The only other major Singaporean investment in the sector was Temasek Holdings Pet Ltd’s acquisition of a 5% block in the “old” Telekom Malaysia Bhd in 2005, around the same time TM and its parent Khazanah Nasional Bhd bought a stake in Singapore’s MobileOne Ltd.

The TM deal had marked what was seen as a paradigm shift from the old school nationalistic stance, widely believed to be the reason behind Singapore Telecommunications Ltd’s failed bid for a 20.59% stake in Time dotCom Bhd in 2000.

The Temasek-controlled STT’s core competencies are in mobile communications and global IP services.

The ceremony yesterday was witnessed by Minister of Information, Communication and Culture Datuk Seri Utama Rais Yatim as well as former prime minister Tun Dr Mahathir Mohamed, who is in London, via teleconferencing.

U Mobile is expected to benefit from a transfer of skills and technology to pave the way for improved mobile service delivery. It is planning to accelerate the 3G network rollout in the next three years.

U Mobile deputy chairman Datuk Rosman Ridzwan said the strategic partnership would enable U Mobile customers to be offered a “totally new broadband experience and this will set a new benchmark of excellence for others to emulate”.

“Our immediate attention is to expand the multimedia experience and mobile service that we offer to Malaysians,” he said.

STT president and CEO Lee Theng Kiat said the robust telecommunications market in Malaysia provided potential for future growth and it believed that its investment in U Mobile was the “right strategic decision”.

“STT’s investment in U Mobile will provide us with an opportunity to expand into the telecoms industry of Singapore’s closest neighbour and one of our largest trading partners,” he said.

“With its strong wireless and data focus, U Mobile will be a valuable addition to ST Telemedia’s mobile footprint and is an excellent business fit for us. Our combined capabilities and market expertise will result in a significant partnership that brings long-term mutual benefit,” said Lee.

STT is a leading information-communications company with operations in the Asia-Pacific region, the Americas and Europe, according to the company website.

Its group of companies includes Asia Mobile Holdings (AMH), which holds interest in StarHub Ltd, Mfone in Cambodia, Lao Telecommunications Company (LTC), Global Crossing Ltd, TeleChoice Ltd and ST Teleport.

This article appeared in The Edge Financial Daily, March 16, 2010.