| Malaysia OKs Higher Foreign Equity for Telcos, New ISPs
March 5, 1998 (KUALA LUMPUR) -- The Malaysian government has
raised the ceiling on foreign ownership of telecommunication
companies to 49 percent from 30 percent, and granted four new
Internet service provider licenses.
|Energy, Telecommunications and Posts Minister Leo Moggie said the
moves were aimed at further liberalizing the industry.
Foreign parties interested in acquiring stakes in local telcos
must have proven track records and be able to add value to the
companies they are buying into, he said. Analysts said raising
foreign equity was a lifeline to local operators facing tight
liquidity as a result of the region's financial crisis.
Local telcos have found it difficult to raise funds to expand and
upgrade existing networks because of the credit squeeze, rising
interest rates and market downturn recently.
The number of competing operators has also aggravated the
Apart from government-controlled Telekom Malaysia Bhd., Malaysia
has six other operators competing on the same turf offering
either fixed-line or mobile services or both.
The six are Celcom (M) Sdn., Bhd., a unit of Technology Resources
Industries Bhd. (TRI), Binariang Sdn., Bhd., Mutiara Swisscom
Bhd., Time Telecommunications Sdn., Bhd., a unit of Time
Engineering Bhd., Mobikom Sdn., Bhd. and Prismanet (M) Sdn.,
Bhd., formerly Syarikat Telefon Wireless Sdn., Bhd.
At present, four foreign telcos already have interests in local
telcos. Germany's Deutsche Telekom AG has a 21 percent interest
in TRI, Celcom's parent company. US West Inc. has a 19.8 percent
stake in Binariang. Swiss Telecom has a 30 percent stake in
Mutia-ra Swisscom. And International Wireless Corp. has a 30
percent stake in Prismanet.
Industry sources say that Binariang is now being courted by
Britain's Cable & Wireless Plc., while Time Telecommunications is
being wooed by Singapore Telecom Ltd. and Australia's Telstra
There were about two million cellular mobile subscribers and more
than 4.5 million fixed-line subscribers in the country as of the
end of 1997. At least for one company, Binariang, the massive
investments in satellite broadcasting, fixed-line and mobile
services has begun to take its toll. Binariang recently halted
new fixed-line expansion and retrenched 600 staff.
Binariang and Time Telecommunications have also shelved plans to
raise funds through initial public offerings last year because of
the weak share market.
Last month, the government also allowed TRI, Binariang, Mutiara
and Time Telecommunications to offer Internet services from this
June to make them more attractive to foreign capital injection.
Currently, only Telekom Malaysia and Mimos Bhd., a government-
owned research institution, run Internet services with about
250,000 subscribers between them.
The liberalization of the industry began in the early 1990s,
which gave rise to a number of operators all competing for the
A slew of licenses were issued on an ad hoc basis, mainly to
politically-connected groups, for mobile phones and fixed-line
networks, fiber-optic transmission, international gateways and
satellite communications. In 1996, the government attempted to
consolidate the industry by forcing the operators to merge. The
rationale was that the Malaysian market, with a population of a
mere 21 million, was not large enough to sustain so many
The proposal was also to avoid duplication of resources, reduce
high import of equipment and exposure by local banks.
The government abandoned the attempt after the operators balked,
claiming they were already committed to infrastructure build up.
Market forces were left to decide their fates, and the recent
financial meltdown may have already accelerated that process.
(Julian Matthews, Asia BizTech Correspondent)