Will Telekom Malaysia’s move deter suitors?

Telekom Malaysia, Southeast Asia's second-largest phone company, said it will keep control of its wireless business in any stake sale, dimming the appeal for potential suitors including Orascom Telecom Holding SAE.

“We must be able to actually control its operations,” Telekom Malaysia Chief Executive Officer Abdul Wahid Omar, 44, said in an interview at the company's Kuala Lumpur headquarters after reporting record full-year profit. “Should any decision be made to bring in a partner it will not be a majority, it would be a minority stake.”

Insisting on control may hamper Telekom's ability to reap a premium for the business, which it estimates is worth 28 billion ringgit ($8.7 billion). Orascom, the biggest mobile carrier in the Middle East and North Africa by users, has said it is interested in bidding for joint control of Telekom.

“The issue has always been: who would want to pay that kind of valuation for a minority stake?” said Khair Mirza, an analyst at Aseambankers Malaysia in Kuala Lumpur with a “fully valued” rating on Telekom shares. “Would Telekom cede control, holding 90 percent?”

Orascom Telecom Chief Executive Officer Naguib Sawiris didn't immediately reply to an e-mail seeking comment.

The phone operator is trading at twice its book value, compared with an average of 30 times for telephone companies in the Pacific Rim, Bloomberg data show. Singapore Telecommunications, Southeast Asia's biggest phone company, is trading at more than three times book value.

Telekom may opt for a partner who can help the Malaysian company expand in Vietnam or Pakistan to complement its overseas operations, instead of accepting the highest offer, said Abdul Wahid, who will leave Telekom Malaysia to become chief executive officer of Malayan Banking, the country's largest bank, in July.

The phone carrier, which has mobile-phone operations in nine countries including Indonesia, Singapore and India, might consider a suitor with assets in other Asian nations, he said.

“There are some partners that may be able to add in terms of assets, assets which we couldn't have otherwise gotten,” he said. It's “not just pure money.”

Vodafone Group, Emirates Telecommunications, AT&T, China Mobile Communications and Vivendi SA have expressed interest in bidding for a stake in TM International, the holding company for Telekom's domestic and overseas mobile assets, the Malaysian company said last month. TM International is scheduled to be listed in Malaysia by July.

Greg Brutus, a Hong Kong-based spokesman for AT&T, didn't immediately reply to messages left on his phone. Rainie Lei, a Hong Kong-based spokeswoman for China Mobile, said she wasn't aware of any expression of interest by the company in Telekom Malaysia's mobile-phone unit.

China Mobile bought Pakistan's Paktel last year, while Emirates Telecommunications, based in Abu Dhabi, owns 16 percent of PT Excelcomindo Pratama, Telekom Malaysia's Indonesian mobile unit. Vodafone bought control of Hutchison Essar, India's third-largest wireless operator, in May, and AT&T has operations in Vietnam.

Telekom is separating the faster-growing wireless division from the domestic fixed-line business to increase the appeal of a possible sale. In Malaysia, where at least 70 percent of the population own a mobile phone, the company is relying on demand for Internet connections to sustain earnings as it rolls out a high-speed nationwide network.

Telekom, which reported full-year profit rose 23 percent to a 2.55 billion ringgit, may not need an investor. TM International's listing may raise $700 million, the company has forecast, and Abdul Wahid said the company hasn't decided if a partner is required at all.

“Let's be very clear, we have yet to make that decision,” Abdul Wahid said.

Will this be the right strategic move for Telekom?