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FEER: Tajudin Thwarted
By S. Jayasankaran
9/11/2001 4:31 pm Fri
The Far Eastern Economic Review
By S. Jayasankaran
Tajudin Ramli is likely to lose control of Technology Resources
Industries, his telecommunications conglomerate, after the authorities
recently blocked a crucial part of TRI's debt workout plans. It could
pave the way for a renewed consolidation of Malaysia's telecoms
In 1992, when the industry was deregulated, there were eight players.
Now there are five, with combined debt of nearly 20 billion ringgit
($5.3 billion). Moreover, 7 billion ringgit has been spent on
infrastructure, much of it wasteful duplication. Kuala Lumpur has been
prodding them to share resources or, better still, to merge, but it's
been slow going.
The TRI impasse opens the way for national utility Telekom Malaysia to
buy it out. It dovetails with the government's plan to accelerate the
restructuring of Malaysia's indebted conglomerates. Kuala Lumpur wants
to replace indebted owner-managers (read Tajudin) with institutions
(Telekom Malaysia) and professional management. Other conglomerates
going through such management changes include Malaysia Airlines,
infrastructure group Renong, media and property group Malaysian
Resources and Pernas International Holdings, a hotel, property and
The Tajudin story can be easily understood by examining TRI. With 2
million subscribers, it has potential. But with nearly 4 billion
ringgit in debt, Malaysia's second-largest cellular-phone operator was
barely surviving. And Tajudin couldn't concentrate on TRI as he had
bigger problems elsewhere. His 47% owned Naluri was the biggest
shareholder in Malaysia Airlines, which was haemorrhaging money with
10 billion ringgit in debt.
In December, the government bailed Naluri out, paying it 1.79 billion
ringgit for its 29% Malaysia Airlines stake. The deal was widely
criticized and MAS went on to record even more spectacular losses but
Naluri, after paying off its own debt, had a cash hoard of more than
800 million ringgit.
Now Tajudin could concentrate on TRI. In June, TRI came up with a
credible plan to prune 1.8 billion ringgit of debt. One component
involved a restricted issue of 724 million new TRI shares at 1.45
ringgit apiece to "strategic investors." The investor was mainly
Naluri. It had the money and that was comforting to the creditors who
had already agreed to take 10% discounts.
No, said the Securities Commission on November 2, immediately sparking
speculation about Tajudin's status in TRI. The exercise would have
enlarged TRI's equity and diluted Tajudin's stake down to 14% from
over 25% now. But had Naluri come in, it would have ended up with
another 32% of TRI and Tajudin would have strengthened his grip.
(Naluri said it would appeal the decision.)
But the restructuring plan stands and TRI has until April--when the
money must be paid to creditors--to seek "strategic investors." These
could be a combination of foreign interests or, if the government has
its way, it could be state-owned Telekom Malaysia.
There are lots of good reasons for this. One, it would reduce the
playing field to four. Two, it would provide Telekom Malaysia with the
one prong it lacks --a strong cellular-phone division. Three, Telekom
can easily afford it, having netted 900 million ringgit in cash after
recently selling its stake in a Thai cellular-phone company.
Finally, TRI is relatively cheap. At the government's urging, Telekom
has looked at TRI before but no deal ever materialized because of
pricing. But at 1.45 ringgit per share, TRI is valued at around $600
per subscriber. In contrast, Singapore Telecommunications recent
purchase of 22% of Indonesia's Telkomsel valued the latter at $1,100
That's not all: There's politics as well. The nixing of Naluri is
viewed as part of the continuing corporate fallout rippling from the
June exit of Finance Minister Daim Zainuddin. It was Daim who pushed
through the December buyback of MAS from Naluri. The consequent public
backlash against the deal--the government paid Naluri almost three
times the market worth of the MAS shares--was one of the reasons cited
for his alleged rift with Prime Minister Mahathir Mohamad.
Indeed, the Securities Commission reports to Mahathir, now finance
minister. "I think that the idea of Tajudin using money paid to him by
the government to retain control of TRI was unacceptable to the
Finance Ministry," says a businessman closely linked to the
It's also doubtful if Tajudin will be given free rein over Naluri's cash. There is precedent for this. Early this year, the government didn't allow the shareholders of listed Phileo-Allied to freely use 1.3 billion ringgit it obtained from selling its bank to state-owned Maybank. Eventually, Phileo was persuaded to buy the nation's postal services and will ultimately be owned by the government.