About TM
Corporate Profile
The Demerger Proposition
On September 28, 2007, TM’s Board of Directors approved the proposal for a strategic demerger exercise which was designed to lay the foundations for the Group’s continued success.
A year before, TM had begun to address the performance issues of its domestic fixed-line business which was facing revenue decline, and its mobile operations in Malaysia, which suffered from intense competition. A Performance Improvement Programme (PIP) was launched to improve operational efficiencies at all levels in August 2006. TM executed a number of programmes to bring about real and positive change – from the top, to the front-liners, by way of employee-engagement and productivity-enhancement exercises. Under PIP, TM also undertook a restructuring exercise to consolidate and strengthen its domestic operations under a new Strategic Business Unit called Malaysia Business whose team would focus on arresting fixed-line revenue decline and maximise operational synergies across the organisation.
 The PIP initiatives resulted in an enhanced performance of TM’s core businesses in fixed and mobile operations and demonstrated that a sharper focus on each core competency would yield desired results. Demerger to further rationalise both operations was inevitable as the next step. The proposition was to demerge TM’s operations into two separate legal entities – FixedCo (TM) and RegionCo (TM International) – each with its own leadership and teams and growth strategies independent of one another, with the ultimate objective being to improve operational excellence and deliver better shareholder value. FixedCo would retain the listed TM’s domestic interests in fixed-line voice, data and broadband and other non-core services under TM Ventures. RegionCo, on the other hand, would group TM’s regional mobile operations under TM International, and domestic mobile operations under Celcom, and pursue listing status as a separate entity. Both companies would have the freedom to chart their own growth while standing on their individual merits with distinct investment-value propositions.
TM’s aspirations were for FixedCo to focus on growing the domestic broadband market even as it continued to boost performance for fixed voice and data. In this regard, FixedCo was to collaborate with the Government of Malaysia to roll out high speed broadband (HSBB) services. While FixedCo was well positioned as a leader in the domestic market, RegionCo would emerge as a regional mobile champion leveraging on its assets and expanding and increasing its footprint across Asia and other emerging markets.
DEMERGER TRANSACTION STEPS
1. The first step involves an internal restructuring exercise which will group all TM's mobile and
overseas businesses under TM International;
Demerger Transaction Step 1:
Internal Restructuring/Asset Transfers
Objective – To group all mobile assets under TMI, and to ensure ownership of fixed business under TM
- Fibercomm1 to be transferred by Celcom (Malaysia) Berhad (“Celcom”) to MB for RM33 million (at book value)
- Telekom Enterprise Sdn Bhd (“TESB”) to transfer Celcom to TMI for RM4,677 million (at cost of investment)
- Sunshare RCPS2 to be transferred to TMI for RM141 million (at book value)
- TMB to transfer 3G licence to Celcom for RM40 million (at book value). Consideration is paid by Celcom in cash
- Settlement of amount owing from TMI to TMB of RM3,041 million
2. The second step sees the separation of the fixed-line and mobile businesses into ‘TM
International Group’ and ‘TM Group’.
Demerger Transaction Step 2:
TMI Share Distribution to TM Shareholders
Objective – To distribute shares in TM International to existing shareholders of TM in the ratio of 1:1, as a result of which, TMI will cease to be a subsidiary of TM
- Distribution
> Distribution via special dividend on a one share of TMI for every one share in TM
> This approach has been adopted as it provides the highest degree of transaction certainly
and reduces execution complexity
- Listing
> TMI to be listed separately
With the completion of the share distribution, TM International ceases to be a subsidiary of TM and effectively demerged from TM.
THE METAMORPHOSIS
The complex exercise of demerger was simplified for TM’s key stakeholders by open and transparent communications from the onset. Through regular disclosure and dialogue, TM articulated the rationale and benefits, and shared the process and way forward post-demerger plans. Demerger involved two key stages of transition. The first stage called for an internal restructuring exercise to group all TM’s mobile and businesses under TM International, while the second stage focused on separation of the fixed-line and mobile businesses into ‘TM International Group’ and ‘TM Group’ respectively.
As at end December 2007, the demerger process was on track and key deliverables already in place.
The first quarter of 2008 saw regulatory and compliance activities in progress, including submissions for approval to the Malaysian Communications and Multimedia Commission, the Securities Commission, Foreign Investment Committee and Bursa Securities. TM obtained its shareholders’ approval to proceed with the demerger exercise at an Extraordinary General Meeting (EGM) held on 6 March 2008.
A Demerger Program office headed by Khairussaleh Ramli was set up to manage the demerger exercise.
The demerger is targeted for completion at the end of the second quarter of 2008, when TM International is expected to be listed. With that, the TM Group will effectively move forward as two different companies, each with their own value proposition.
TM: MALAYSIA’S LEADING NEXT GENERATION COMMUNICATIONS PROVIDER
TM, optimising on its strengths of 95% and 96% market share in the fixed-line and broadband businesses respectively, intends to focus on new business segments as its growth engine, namely broadband, global business and wholesale.
With a commitment to embrace customer needs through innovation and execution excellence, TM will capitalise on consumer demand and growth opportunities through upstream partnerships and deploying differentiated service offerings under High Speed Broadband in the downstream consumer segment. It will also focus on the small-medium enterprise (SME) market, as well as enhance international connectivity within the region to establish Malaysia as a regional Internet hub and digital gateway for South-East Asia.
In the long-term, TM will drive HSBB as an important engine for national growth.
TM INTERNATIONAL: THE LEADING MOBILE OPERATOR IN SOUTH & SOUTH-EAST ASIA BY 2015
TM International is on a new growth trajectory by aiming to expand its footprint beyond the existing 10 countries where TM has a presence and where the mobile subscriber base is about 39.8 million. To strengthen its position in high-growth markets in South Asia and South-East Asia, TM International will be considering strategic collaborations with existing and new partners especially to facilitate a mutual exchange of resources, technology and international best practices.
TM International has great aspirations for Celcom to make it a player capable of contributing significantly to the growth of TM International across the region. With its track record and strong position in mobile operations in Malaysia, Celcom will anchor TM International and provide continuing technological, brand and marketing leadership through access to product and service innovations and offerings.
In conclusion, TM Group is determined to continue its evolution as one of Malaysia’s foremost companies, by providing the impetus to the growth of two companies which will build on Malaysia’s telecommunications legacy separately and independently, as well as achieve prominence at home and leadership in the region. Demerger is a strategic exercise whose value proposition is to deliver tangible benefits to all TM stakeholders far and wide with a new vision and renewed energy.
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