Telekom Malaysia Bhd. · MYX:TM
Telekom Malaysia Bhd — Merger or Acquisition (December 2007)
37 slides from Telekom Malaysia Bhd's merger presentation, December 2007
Slide 1: Details of proposed demerger - Analyst Presentation
NOT FOR DISTRIBUTION IN THE UNITED STATES Telekom Malaysia Berhad Details of proposed demerger Analyst Presentation December 2007 0
Slide 2: Disclaimer
Disclaimer This presentation is not and does not constitute an offer, invitation, solicitation or recommendation to subscribe for, or purchase, any security and neither this presentation nor anything contained in it shall form the basis of any contract or commitment. This presentation has been prepa
Slide 3: Introduction: merits and rationale of demerger
Introduction TM proposed in September to demerge its fixed and mobile operations into 2 separate listed entities Merits and rationale ♦ Demerger can create shareholder value through accelerated operational improvement and growth ♦ Each company would have the freedom to pursue clearly distinct aspira
Slide 4: Indicative transaction implementation plan
Indicative transaction implementation plan Demerger on track with EGM expected in 1Q08 Overview of timeline and key milestones Finalise demerger Despatch of structure Announcement EGM Complete demerger and of plan to Sign Demerger circular TM Group to become demerge TM Agreement RegionCo and FixedCo
Slide 5: Agenda
Agenda 1 Final demerger structure and arrangements 2 Proforma financials and capital structure 3 RegionCo 4 FixedCo 5 Next steps and conclusion 4
Slide 6: Demerger principles adhered to
Demerger principles adhered to Consistent with the approach outlined in our earlier announcement Structured along existing legal entities Limited restrictions on scope of operations of each entity Management flexibility to maximise value of each business Arm’s length / market based approach to relat
Slide 7: Transaction steps: Proposed internal restructuring
Transaction steps: Proposed internal restructuring Detailed Steps TMB TMB SS TMI 3G TESB TMI TESB RCPS 4 3 51% Celcom 1 SS Fibrecomm 2 Celcom RCPS CTX CTX 3G 51% Fibrecomm All wholly-owned unless otherwise stated 1♦ Fibrecomm1 to be sold by Celcom (Malaysia) Berhad (“Celcom”) to TMB for RM33m (at bo
Slide 8: Summary of transaction value and consideration
Summary of transaction value and consideration Cost of asset transfer and interco settlement to TMI (RegionCo) (RM m) TMI acquisition of Celcom 4,677 TMI acquisition of SunShare RPS 141 Settlement of inter-company balances by TM 3,041 Sale of Fibrecomm by TMI to TMB (33) 7,826 Consideration from TMI
Slide 9: Transaction step: Proposed Distribution / Demerger
Transaction step: Proposed Distribution / Demerger The Demerger will create two distinct telcos with own aspirations and strategies Pre-Demerger Post-Demerger Khazanah MI Khazanah MI Khazanah MI TMB TMB TMI TMI ♦ Proposed Distribution: – Distribution via special dividend on a one share of TMI for ev
Slide 10: Framework agreement and operational linkages
Framework agreement and operational linkages Clear guiding principles governing relationship post Demerger to ensure entities remain focused in their core operations ♦ Arrangements: arm's length commercial basis ♦ Collaboration: – Principle of mutual cooperation in arriving at fair commercial arrang
Slide 11: Agenda
Agenda 1 Final demerger structure and arrangements 2 Proforma financials and capital structure 3 RegionCo 4 FixedCo 5 Next steps and conclusion 10
Slide 12: Capital structure
Capital structure ♦ The respective capital structures arising from the Demerger for RegionCo and FixedCo are underpinned by several key parameters: – FixedCo’s cash requirements, retained earnings levels and ability to raise funding going forward (taking into account dividend policy and capex) to be
Slide 13: 2006 proforma consolidated income statement
2006 proforma consolidated income statement Strong EBITDA generated from profitable businesses TM Group TM Group Audited 31.12.06 Adjusted1 RegionCo FixedCo RM mil RM mil RM mil RM mil Operating revenue 16,399 16,774 8,573 8,201 EBITDA 7,530 7,534 4,002 3,532 PATAMI 2,069 2,054 1,131 923 ROE 10.4% 1
Slide 14: 2006 proforma balance sheet
2006 proforma balance sheet Audited Post FY2006 After Special After Proposed After Proposed TM Group (FixedCo) 31.12.06 adj1 Dividend Option Scheme2 Demerger RM mil RM mil RM mil RM mil RM mil Share capital 3,398 3,440 3,440 3,577 3,577 Share premium 3,942 4,262 4,262 5,626 5,626 Reserves 12,572 12,
Slide 15: RegionCo healthy financial position versus Asian mobile peers
RegionCo will have a healthy financial position in line with Asian high-growth mobile peers 2006 total debt/ total capital (%) 2006 total debt/ EBITDA (x) 2006 EBITDA/ gross interest exp. (x) HTIL 70.5 HTIL 3.9 Bharti 25.3 Idea 66.4 Mobile-8 3.5 Reliance 24.6 RegionCo 50.6 Idea 2.9 RegionCo 7.9 Indo
Slide 16: FixedCo capital structure strong compared to global peers
FixedCo capital structure will be strong compared to global peers 2006 total debt/ total capital (%) 2006 total debt/ EBITDA (x) 2006 EBITDA/gross interest exp. (x) PCCW 98.6 PCCW 3.9 China Unicom 45.2 BT 67.0 FT 3.1 FixedCo 33.4 FT 63.3 DT 2.9 Telkom 26.0 Telstra 53.8 TCNZ 1.5 China Telecom 15.6 DT
Slide 17: FixedCo dividend policy and capital management
FixedCo dividend policy and capital management ♦ In light of FixedCo’s strong balance sheet and expected cash flows, management intends to pursue an active capital management policy aimed at maximising dividends to shareholders FixedCo dividend policy: “ The Board of Directors of FixedCo is pleased
Slide 18: RegionCo listing and dividend policy
RegionCo listing and dividend policy ♦ RegionCo is proposed to be listed on the Main Board of Bursa Securities ♦ RegionCo will be seeking a shareholders’ mandate under section 132D of the Companies Act 1965 in respect of issuance of new shares ♦ In determining the capital structures of FixedCo and R
Slide 19: Announcement of the 2007 Special Cash Dividend
Announcement of the 2007 Special Cash Dividend ♦ As per TM’s commitment to actively manage its capital requirements, TM’s Board has approved to return approximately RM1.63bn to shareholders via a special cash dividend in line with TM’s commitment to return surplus cash back to shareholders ♦ The spe
Slide 20: Agenda
Agenda 1 Final demerger structure and arrangements 2 Proforma financials and capital structure 3 RegionCo 4 FixedCo 5 Next steps and conclusion 19
Slide 21: RegionCo business plan overview
RegionCo business plan overview RegionCo aims to become the leading mobile operator in the region 1 ♦ RegionCo aims to expand its presence in the region by addressing the unfulfilled communication needs of local populations with affordable and innovative products and services ♦ RegionCo will develop
Slide 22: RegionCo aims to become the leading mobile operator in the region
RegionCo aims to become the leading mobile operator in the region Revenue (US$bn, 2006)1 EBITDA margins (%)1 Singtel 3.6 PLDT 63.3 Etisalat 2.9 Telkomsel 60.0 Vodafone 2.7 Maxis 50.2 Telkomsel 2.6 Singtel 50.0 RegionCo 2.5 RegionCo 48.0 Bharti 2.1 AIS 46.4 2 Hutchison 2.1 Orascom 46.0 AIS 2.0 Vodafo
Slide 23: Strong presence in fast growing South / Southeast Asian markets
RegionCo has built a strong presence in the fast growing South / Southeast Asian markets 2006 mobile penetration based on population 140 Italy Greece Portugal 120 Czech Republic Singapore Hong Kong Ireland U.K. Sweden Spain Finland Russia Austria Denmark 100 Germany Ukraine Norway Switzerland Nether
Slide 24: Individual OpCos must continue to focus on existing plans
Individual OpCos must continue to focus on their existing plans OpCo Strategic priority ♦ Accelerated turnaround with capability building in sales & marketing ♦ Investment on coverage and pricing plan to counter competition from #1/ #2 players and the CDMA players ♦ Consolidating the quadruple play
Slide 25: Four key activities of RegionCo corporate centre
Four key activities to be pursued by RegionCo corporate centre to achieve RegionCo aspiration Objectives Key initiatives – Proactively manage OpCo – Develop mobile specific KPIs A Support execution of performance – Actively monitor and program-manage OpCo BPs through – Assist OpCos in addressing bus
Slide 26: Potential synergies / collaboration areas between OpCos
Potential synergies / collaboration areas between OpCos Description Regional offering International ♦ Increase the steering of roaming traffic to the host OpCos within RegionCo geographies roaming ♦ Increase the number of customers through regional roaming offering IDD ♦ Increase in the number of cu
Slide 27: RegionCo investment highlights
RegionCo investment highlights 1 Leading regional mobile operator with unique asset portfolio 2 Strong growth profile with steady cashflow from Celcom 3 Synergies driven from portfolio of operating entities 4 Well positioned to enter new emerging markets 26
Slide 28: Agenda
Agenda 1 Final demerger structure and arrangements 2 Proforma financials and capital structure 3 RegionCo 4 FixedCo 5 Next steps and conclusion 27
Slide 29: FixedCo business plan overview
FixedCo business plan overview FixedCo aspires to be Malaysia’s leading next generation communications provider, embracing customer needs through innovation and execution excellence 1 ♦ Enrich consumer experience and business performances by providing next generation services, high-value solutions,
Slide 30: High broadband potential given low penetration in Malaysia
High broadband potential given relatively low broadband penetration in Malaysia Broadband connections per population Percent, 2006 R2 = 0.79 35 Netherlands Denmark 30 Switzerland South Korea Finland Norway 25 Sweden Hong Kong United Kingdom Canada Israel 20 Taiwan France Australia United States Japa
Slide 31: FixedCo will focus on driving PIP v2.0
FixedCo will focus on driving PIP v2.0 Arrest Next wave: Stabilize and create Dec domestic momentum 2010 decline Key themes Priorities Jan Dec A – Launch broadband revolution to drive growth, while stabilising voice 2007 2007 Drive – Unlock sales and channel management potential commercial – Develop
Slide 32: FixedCo key customer segment priorities
FixedCo key customer segment priorities Business focus Customer segment Key strategic priorities ♦ Consumer – Proceed full-steam on broadband deployment Retail – Continue stabilising voice decline – Improve service quality and channel management ♦ SME – Push broadband growth – Continue maintaining v
Slide 33: FixedCo investment highlights
FixedCo investment highlights 1 Strong market positions in domestic fixed line and broadband 2 Significant potential upside from operational efficiencies 3 Broadband growth engine 4 Strong financial position 5 Capital management strategy with attractive dividend 32
Slide 34: Agenda
Agenda 1 Final demerger structure and arrangements 2 Proforma financials and capital structure 3 RegionCo 4 FixedCo 5 Next steps and conclusion 33
Slide 35: Next steps
Next steps Demerger structure Despatch of shareholders’ Complete demerger finalised circular and EGM and listing of RegionCo Dec 07 1Q08 2Q 08 Next steps: Regulatory approvals and process ♦ Securities Commission and FIC ♦ MOF ♦ Bursa Securities ♦ MCMC / MEWC ♦ Shareholders and others, as required Or
Slide 36: Key takeaways
Key takeaways Demerger on track for completion by 2Q08 with fully-vetted plan approved by the Board 1 ♦ Significant operational and strategic benefits ♦ Value creation for shareholders with upside potential ♦ Limited risks identified ♦ Business as usual Management committed to pursuing an active cap
Slide 37: Thank you
Creating value for shareholders Thank you 36
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