Maxis Communications Berhad of Malaysia and its Indian joint venture company will acquire 100 per cent stake in Aircel Limited, a leading Indian mobile operator.
Maxis and the JV will jointly invest $1.08 billion (RM4.104 billion) to purchase the 100 per cent stake of which $280 million (RM1.064 billion) will be injected into the company as cash. This implies a pre-money equity valuation of $800 million (RM3.040 billion) for Aircel.
On completion of the proposed acquisition, Maxis will hold a 65 per cent equity stake in Aircel directly while the JV will hold the remaining 35 per cent.
The JV 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 telecommunications companies. Maxis' Indian partner in the JV is the Chennai based Reddy family.
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 Limited.
The second transaction will be subject to shareholders' and Malaysian as well as Indian regulatory approvals.
Speaking to reporters at the press conference, Maxis chairman, Megat Zaharuddin said, "We are delighted to make this strategic entry into the Indian telecommunications 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 per annum 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, "This will be a major step towards boosting Maxis' growth and sustaining profitability, and in creating significant value for investors, customers and employees."
Suneeta Reddy, on behalf of the JV said, "Our investment philosophy is to invest in businesses that continuously enhance the lifestyle of our customers. We believe that this telecommunications venture, in partnership with Maxis, would be a perfect fit in our endeavor to grow the telecommunications market".
The acquisition of Aircel will provide Maxis with a strong platform to build on one of the few remaining opportunities to enter India.
Aircel is the No 1 mobile operator in Tamil Nadu. It has 2.2 million subscribers in Tamil Nadu and Chennai 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 which is 2.5x the size of Malaysia, the southern state itself represents a very good growth opportunity for Maxis.
With a total of 12 circles in operation by the end of 2006, Aircel will provide Maxis with a near national platform with access to a market of about 628 million people or 58 per cent of India's total population.
Maxis intends to actively seek synergies between its Malaysian, Indonesian and Indian operations given the potential scale of the combined businesses. Aircel will provide Maxis with access to its expertise in mass marketing, capex optimisation and low cost operations as well as skilled manpower. In turn, Maxis intends to provide expertise in branding, product development and next generation technologies.
The financial advisor to Maxis for the proposed acquisition is Standard Chartered Bank.