Malaysia’s leading telecom company, Maxis Communications Berhad and its Indian joint venture company (JVC) will acquire a 100 per cent interest in one of India’s leading mobile operators, Aircel Ltd. Aircel is part of the Sterling Infotech Group and is Tamil Nadu’s leading telecom company.
Maxis and the Indian JVC will jointly invest $1.08 billion to purchase the 100 per cent stake in Aircel, of which $280 million will be injected into the company as cash. This implies a pre-money equity valuation of $800 million for Aircel.
On completion of the proposed acquisition, Maxis will hold a 65 per cent equity stake in Aircel directly, while the JVC will hold the remaining 35 per cent. The JVC will be an Indian company jointly owned by Maxis and its Indian partner in a ratio that will give Maxis an overall equity interest in Aircel of 74 per cent, the maximum foreign ownership permitted in Indian telecom companies. Maxis’ Indian partner in the JVC is the Chennai-based Reddy family.
Said Maxis Chairman, Tan Sri Dato’ Megat Zaharuddin, “We are delighted to make this strategic entry into the Indian telecom market. As you know, the Indian economy is one of the largest economies globally and one of the fastest growing in the world with an expected growth rate of 6-7 per cent pa in the medium term. While the mobile penetration rate is currently low at 6.2 per cent, the Indian mobile market is also amongst the fastest growing, and the number of subscribers is expected to grow between two to three times from the current 67 million.”
“This exciting acquisition, which is also the largest Malaysian investment ever in India, marks another milestone in our aspiration to be a regional communications player of choice. With investments in both India and Indonesia, we now have the opportunity to build strong footholds in two of the world’s most attractive high growth, low mobile penetration markets while diversifying our market base,” he added.
On behalf of the JVC, Suneeta Reddy, said, “Our investment philosophy is to invest in businesses that continuously enhance the lifestyle of our customers. We believe that this telecom venture, in partnership with Maxis, would be a perfect fit in our endeavour to grow the telecommunications market.”
The transaction will be executed in two independent stages – the first, a subscription for new equity shares (26 per cent of the expanded capital) and the second, the purchase of all of the existing equity shares held by Aircel Televentures Ltd. The second transaction will be subject to shareholders’ and Malaysian as well as Indian regulatory approvals.
Aircel is the No. 1 mobile operator in Tamil Nadu with 2.2 million subscribers as of October 2005. Given its leadership position and a low 10 per cent mobile penetration rate among Tamil Nadu’s 65 million strong population, the southern state itself represents a very good growth opportunity for Maxis.
Commenting on this acquisition, Aircel’s Director, V Srinivasan, said, “Aircel has taken rapid strides from being a single circle operator to spreading its wings across various geographies in North and East India. Aircel is proud to have created a strong platform of performance and profitability that will help realise Maxis’ vision of entering the Indian market and becoming a leader in the Indian telecom space.”
The financial advisor to Maxis for the proposed acquisition is Standard Chartered Bank.