Malaysia's Time Bhd. Cancels SingTel Deal

HONG KONG (05/12/2000) - Time Engineering Bhd., owner of Malaysia's largest telecommunications backbone, today effectively canceled the sale of a minority stake to Singapore Telecommunications Ltd. (SingTel), throwing future plans for both carriers into question.

Debt-plagued Time Engineering in April reached a preliminary agreement with SingTel under which the incumbent Singapore carrier would buy 14.5 percent of Time and 20 percent of its subsidiary Bhd for approximately US$550 million. [See "SingTel Set for $550M Stake in Malaysian Telco," April 7.] The deal was approved pending further negotiations with a deadline of May 11.

Today, with no final deal, Time announced in a statement that it had not extended the deadline.

SingTel said in a statement issued late today that it regrets it could not complete the deal with Time, but it remains open to working with Time in the future. SingTel will continue to look for ways to beef up its presence in Malaysia, the statement said.

With the SingTel deal effectively dead, Time may be forced to instead sell a controlling stake to one of two Malaysian companies, analysts said. For SingTel, the second failure this year to buy into a foreign market may mean the company's effort to become a regional player is stalled, they added.

The unsuccessful sale to SingTel, which is majority-owned by a Singapore state holding company, most likely fell victim to influence by Malaysian leaders who did not want part of the country's telecom industry controlled by its neighbor, analysts said.

"No matter how good from a commercial standpoint, the chances of getting this through (were) very slim," said Sandra Ng, an analyst at International Data Corp. (IDC) Asia-Pacific, in Singapore. "In telephony, there are always political issues involved, because telecom is such an important part of any economy."

Other possible bidders now include Malaysian telecommunications equipment maker Sapura, which launched an unsuccessful bid on April 29, as well as government investment arm Khazanah Nasional. Japan's NTT Corp. also is rumored to be considering a bid.

Time, one of five licensed competitors to incumbent Telekom Malaysia, built a massive backbone network but was unable to complete its last-mile connections to customers before the Asian financial crisis hit in 1997, said Bertrand Bidaud, an analyst at Gartner Group Inc., in Singapore.

The company is looking to a stock offering to pay off its debts and continue building its business, Bidaud said.

"There is a plan to go public in the coming months, and I don't think they will find that very easy if they don't have a credible partner, like SingTel," he said.

Malaysian manufacturing conglomerate Sapura also bid to buy a stake in Time, but the deal with SingTel offered greater potential, Bidaud said.

"The business model of Time would change overnight, because they would become a significant international carrier," he said.

For SingTel, owning part of Time's 3,600-kilometer network across Malaysia would give it a link to Thailand, where the company owns 20 percent of the country's biggest mobile phone operator, Advanced Info Service PLC.

Coming just a few months after its bid to buy Hong Kong carrier Cable & Wireless HKT Ltd. was thwarted by local bidder Pacific Century CyberWorks Ltd., SingTel's rejection may set off alarms, IDC's Ng said.

The bids may have failed for reasons other than politics, but SingTel should be aware of potential problems with its link to the government, she said.

"Perhaps SingTel and the Singapore government should consider what are the lessons they should learn from these two proposed mergers," Ng said. "As long as the Singapore government remains the largest shareholder in Singtel, it will always be a very big obstacle. It's safe to assume that there will always be another agenda."

The specter of possible government interference may slow the transformation of Asia's telecommunications industry, she added.

"If there's going to be too much government interference, and the interference isn't going to promote the industry, definitely it will slow down the market in terms of competitiveness," Ng said.

SingTel, in Singapore, can be reached at +65-838-2740 or online at Time Engineering, in Kuala Lumpur, Malaysia, can be reached at +603-466-8100.

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