SingTel said today it'll pay 649.3 million ringgit (US$170.7 million) to buy 14.5 percent of Time Engineering Bhd, and an undisclosed amount for stakes in the Malaysian company's telecommunications units.
The transaction will give Singapore's biggest phone company access to Malaysia's largest fiber optics network and would move it closer to cobbling together a pan-Asian phone network. Time owns a 5,200 kilometer fiber-optic network in Malaysia, which would link Singapore to Thailand.
"This is a threat to Telekom, it'll erode its international call business," said Michael Greenall, head of research sales at BNP Prime Peregrine.
Telekom shares, the biggest stock on the Kuala Lumpur Stock Exchange, slumped as much as 1 ringgit, or 6.5 percent, to 14.40 ringgit, its lowest level since Jan. 5. Rising competition has been chipping away at Telekom's earnings. Telekom's 1999 profit slid 17 percent to 819.06 million ringgit as losses at its cellular phone unit hurt earnings.
"Competition in the industry is going to get tougher from here. Time now has a strong partner, financially and technically. That means it's a tougher fight going forward, especially for Telekom," said Tye Su Leng, head of research at HLG Securities Sdn Bhd.
"Telekom will have to go on the offensive instead of just taking a defensive stance," she said. "It may have to look more at growing its cellular phone business."
Tye recommends investors sell Telekom shares.
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