Business

Published: Friday October 30, 2009 MYT 2:45:00 PM

Maxis needs to invest further in Internet technology


KUALA LUMPUR: Maxis Bhd, the soon-to-be-relisted mobile operator which is expected to re-ignite the local bourse, must invest further in Internet technology to meet upcoming market demand with better accessibility, new applications and improved broadband speed and capacity.

"Maxis will be able to help grow the local telecommunications industry as investors relook at other mobile operators' strategies in tapping the potential of mobile broadband," James Lau, senior director for equities at Kenanga Investment Bank Bhd, told Bernama.

"Internet is a big medium and telco players need to bring in new applications using the Web. The demand capacity is getting bigger and there is a need to invest in this space," he said in an interview on Monday.

Lau said capital expenditure in the Internet was something which keeps on increasing but Maxis has not fully invested in the technology space.

"The potential is there. It depends on the investment strategy and how the company manages the cost of capital and returns on equity," he said.

Given that Maxis is the market leader and pioneer in many respects, the mobile operator can help the government to achieve 50 per cent broadband penetration next year from 20 per cent currently.

Maxis will also be able to help bridge the digital divide and not let Malaysians miss out on new developments on the technology front.

Lau said Maxis could also help local content creators and device makers, leading to multiplier effects for the telecom industry, via investments in infrastructure.

It is understood that Maxis' licences have been extended for another 10 years, which means it has a new lease of life and can plan new projects and make more investments in the Malaysian market.

Lau said Maxis' listing was set to attract new foreign interest in the local stock market due to the size of its stock and strong track record.

"The listing will increase the market capitalisation of Bursa Malaysia and foreign investors like the increased liquidity. Now players can have a wider choice for investment in the telcos," he said.

Maxis is worth RM39 billion based on the indicative share price of RM5.20 and it can boost Bursa Malaysia's market value by 4.2 per cent when the company is listed on Nov 19.

As the largest ever Malaysian listing in history, the initial public offering (IPO) sees the debut of cornerstone investors in Malaysia and they have committed to buy 28 per cent of the Maxis shares.

The four institutions involved are the Employees Provident Fund (EPF), Kumpulan Wang Persaraan, Permodalan Nasional Bhd (PNB) and Fidelity Investment.

"This should give retail players confidence as the backers are major and solid Malaysian institutions," Lau said.

According to him, it is not unusual for cornerstone investors to participate at the IPO stage because they are looking at long-term potential and Maxis is an established company.

He said investors are also attracted to the decent dividends of at least 75 per cent of net profit and the company's leadership position in the telecommunication market.

On the valuation and price, Lau said it was not just about buying the business but the premium attached to the size as well.

"Any price speculation now is pie in the sky as the price is only just being built by the bookmakers amid roadshows to Hong Kong, Singapore, Europe and the United States," he said, adding that the stock will be priced on Nov 10 and that will set the tone. - BERNAMA

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EPF likely to get discount for Maxis shares

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