| Q1 |
Has 2006 been a fruitful year for business overseas? |
| A1 |
Performance of up to Q3 of 2006 indicates that 2006 has indeed been a fruitful year for TM’s international business. For the nine months ended September 2006, overseas operations contributed 30 percent to Group Profit After Tax and Minority Interest (PATAMI) and 24 percent to Group revenue, up from 23 percent and 9 percent respectively in the corresponding period last year. The Company also recorded an impressive growth of 63 percent in regional mobile subscriber numbers (including Malaysia) in its third quarter financial results as of end September 2006 to 26.5 million from 16.3 million a year ago.
To give an idea of past performance, TM recorded an average compounded annual growth rate (CAGR) of some 38 percent in its Asian investments in revenue terms over the past five years (2001-2005). This growth has been led by its Bangladesh operations (at CAGR of 60.4 percent), followed closely by its Sri Lankan operations (at 41.2 percent).
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| Q2 |
What are your plans for your overseas ventures, going into 2007? |
| A2 |
We are adopting a two-prong approach. Firstly, we will continue to further establish our position in the existing markets where we already have a strong presence – in Sri Lanka, Bangladesh, Indonesia and Cambodia for instance. We will do so by capturing the huge growth potential through execution of strategies and harnessing cross border synergies within TM’s portfolio of investments. For India, the plan is to strengthen our presence in our current 2 circles of Punjab and Karnataka whilst pursuing license for other circles.
Secondly, we will continue to look for opportunity to enlarge our regional footprint with particular focus on Indo China. This is obviously subject to availability of investment opportunity at reasonable cost.
Our strategy of nurturing strong Asian communication brands across the breadth of the continent is beginning to show good results. We believe we are well-positioned to provide quality products and services to cater to the increasing demand for mobility in Asia.
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| Q3 |
What are your major overseas investments and how are they faring? |
| A3 |
Our top three overseas investments are Dialog (Sri Lanka), XL (Indonesia) and TMIB (Bangladesh).
Dialog, Sri Lanka
Dialog Telekom Limited (Dialog) continued to deliver sterling results with a 54 percent increase in Profit After Tax (PAT), registering SLR2.62 billion (SLR100: RM3.554) in Q3 of 2006 as compared to SLR1.70 billion registered in Q3 2005.
Dialog also maintains its leading position as the number one mobile operator in Sri Lanka with a total customer base of 2.8 million.
XL, Indonesia
PT Excelcomindo Pratama Tbk (XL) registered a PATAMI of Rp142 billion (Rp1000: RM0.40) in Q3 of 2006.
XL registered a strong 43 percent growth in mobile customers, from 5.9 million in the Q3 2005 to 8.4 million by the end of Q3 2006.
TMIB, Bangladesh
TM International Bangladesh Limited (TMIB) turned in a PAT of BDT1.41 billion (BDT100: RM5.67) in Q3 of 2006, a 26 percent increase from BDT1.12 billion recorded in the same period last year. Its total customers stood at 4.3 million, a significant increase of 106 percent from 2.1 million recorded in the corresponding period last year.
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| Q4 |
What are the economic prospects for the countries where your group has presence in? |
| A4 |
The countries where we have presence in especially Indonesia and India are mostly emerging economies with high population and with low penetration rate. The economic prospects for these countries are bright indeed.
In terms of what this means for the communications sector, it is observed that the number of cellular connections in the Asia Pacific increased from 866.4 million (Q1 of 2006) to 921.2 million (Q2 of 2006). Of this, India registered the highest growth at 20 percent.
On a country-by-country basis, this is how the key markets where we are present are expected to perform:
- In Indonesia for instance, its mobile penetration is expected to increase from 22 percent in 2005 to 28 percent in 2006. (63 million customers)
- Meanwhile, the Sri Lankan mobile penetration rate is expected to rise from 17 percent in 2005 to 26 percent in end 2006 (3.5 million customers). The Sri Lankan mobile market penetration is expected to post a 57 percent growth.
- As for Bangladesh, the mobile penetration is expected to increase to 8.6 percent in 2006 from 5.9 percent in 2005. (14.1 million customers).
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| Q5 |
Is your group realizing profits from your overseas ventures? How much of the profits are invested overseas and how much repatriated? |
| A5 |
TM has seen a growing contribution from our overseas operation to the Group’s Earnings. For the YTD Sept 2006, overseas operations contributed 30% to the Group’s PATAMI.
The profits generated from our overseas investments are largely reinvested as those companies are operating in a growing market and able to generate better earnings growth. Nevertheless where possible, any repatriation is in the form of dividends which we currently receive from the likes of M1, Dialog and TMIB.
While commercial considerations are important, TM’s long-term commitment is that it will continue to invest in these markets be it in capital, technology transfer, telecommunications infrastructure development and in the community proper.
In Bangladesh for instance, TM has invested more than USD400 million in TMIB but has repatriated only USD15 million.
Meanwhile in Sri Lanka, the charts below provides for an indication of how much was reinvested in the country. Dialog’s re-investment relative to profit is more than 140 percent, with some USD150 million additional investments in 2006-07.
Title: Dialog’s Reinvestment
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Q6 |
What are some of the interesting lessons and observations gleaned in the course of your venture overseas? |
| A6 |
We have learnt that:
- We need to be patient and have faith in the company and country we have invested in. A good example would be our investment in Sri Lanka which is a “zero to hero” story. When we invested in Sri Lanka more that 10 years ago with some USD45.6 million, the company was the number four player. It is now the number one communications company in Sri Lanka and is currently worth more than USD1.8 billion.
- As much as emerging markets present growth and opportunities, they also present challenges that need to be managed which include unfriendly legal and regulatory regimes, political risk, and from a commercial perspective, low ARPUs coupled with low customer loyalty.
- There are synergies to be realized by leveraging on key strengths of each overseas operation to reduce costs, increase innovation as well as competitiveness. Membership in telecoms alliances also help provide greater bargaining power in terms of costs, traffic and greater interoperability.
- Long-term relationships are only forged by sincere interactions with the local communities.
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| Q7 |
There is apparently feedback from fund managers that only a few Malaysian companies venturing overseas are getting a premium from investors. Do you see the need for these companies to step up their profile or do something to improve on their premium? |
| A7 |
As TM grows towards becoming a regional company, the disclosure of its multi geographical business will have to follow in tandem. The market has seen this through our Quarterly Reporting which discloses the financial and business performance of our key international operation. Furthermore the growing international contribution as highlighted above, continues to be a key part of our Quarterly disclosure.
On a different platform, the Annual Analysts’ Day which we started last year, is most welcomed by the analysts as it provides them with an opportunity to interact with key management from both our overseas and domestic business. For TM, this paves for better disclosure and transparency to the financial market.
This improvement in disclosure and reporting has been attested by key institutional investors and analysts. Nevertheless, we will continue to enhance and improve our reporting and welcome further feedback and comments from fund managers.
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TM’s Growing Contribution by International Operations to Group’s Revenue and Earnings:
Revenue Composition of TM Group (3Q 2006):
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