Telekom Malaysia Bhd

Level 51, North Wing
Menara Telekom
Off Jalan Pantai Baharu
Kuala Lumpur 50672
Malaysia
Telephone: 60 3 2240 9494
Fax: 60 03 22832415
Web site: http://www.telekom.com.my

Public Company
Incorporated: 1984
Employees: 27,000
Sales: MYR 13.25 billion ($3.2 billion) (2004)
Stock Exchanges: Kuala Lumpur
Ticker Symbol: TLMM.K
NAIC: 517110 Wired Telecommunications Carriers; 423430 Computer and Computer Peripheral Equipment and Software Merchant Wholesalers; 511140 Database and Directory Publishers; 517212 Cellular and Other Wireless Telecommunications; 517910 Other Telecommunications

Telekom Malaysia Bhd (TM), the former telecommunications monopoly in that country, since privatization remains Malaysia's top telecom group and a fast-growing international player in the Asian region. The company continues to hold the de facto monopoly on the country's fixed-line telecom market, with more than 4.6 million access lines. However, the relatively low penetration rate of just 17.2 lines per 100 population (compared with nearly 65 per 100 in the United States) provides room for TM's future growth, as well as a potential entry point for competitors. In addition to its fixed line business, TM is one of Malaysia's leading cellular telephone provider, a position solidified following the company's 2003 acquisition of Technology Resources Industry (TRI) and its Celcom mobile telephone unit. Celcom is a long-time leader in the Malaysian cellular market, with a market share approaching 30 percent. TM also operates the country's leading Internet provider, TMNet, which is also the sole broadband provider in the country. In addition to its operations in Malaysia, TM has developed a network of subsidiaries and investments internationally, with a focus on the Asian region. The company is present in Sri Lanka (where it holds more than 90 percent of Dialog Telekom), Cambodia, Indonesia, Bangladesh, Guinea and Malawi. As part of its future international expansion plans, the company formally adopted a new brand identity, TM, in 2005. The company is listed on the Kuala Lumpur Stock Exchange. In 2004, TM posted revenues of MYR 13.25 billion ($3.2 billion).

A State Telecoms Agency in the 1950s

Malaysia's first telephone line was installed in 1874, linking the British colonial government's Resident's Office in Perak with one of its administrative offices. The colonies, then known as Malaya, remained unconnected. Over the next decade underwater cable was laid linking Perak with the island of Panang. However, the country's first telephone exchange was not installed until 1891 in Kuala Lumpur.

In 1964, Malaysia became a country independent of British rule. The years immediately following were turbulent as Indonesia sought control of the area and Singapore seceded from the new country. Once the government was stable, however, it took control of the country's telephone network, already organized as Jabatan Telekom Malaysia (JTM). Telephone penetration had remained extremely low in the country, and by 1960 had not yet reached 50,000 lines, for a total market penetration of less than 1 per 100.

As a government agency, JTM took a first step toward developing a corporate culture when it received authorization in 1971 to begin operating as an independent, profit-driven enterprise. In 1982, the Malaysian government announced its intention to privatize JTM during the decade, and to deregulate the Malaysian telecommunications market. JTM braced itself for the change, restructuring its operations.

In the meantime, JTM had continued to build up the country's network, topping one million access lines and raising the penetration rate to nearly 7 per 100 by the mid-1980s. The company had also installed a national network of pay telephones, counting more than 60,000 by the end of the decade. In the meantime, JTM launched Malaysia's first cellular telephone service in 1985. That service, called ATUR 450, was based on the NMT analog standard technology. By the end of the decade, the company had developed a new generation of cellular telephone service, based on the ART 900 standard. An important step forward for the country's national telephone backbone came with the installation of a 1,500-kilometer underwater fiber optic cable linking the Malaysian peninsula with the Sabah and Sarawak regions.

The deregulation process of the Malaysian telecommunications market was formally launched in 1987, when JTM was split into two entities. The first, and smaller, retained JTM's industry regulation arm, and remained a government-run department. The second, which took over JTM's fixed-line and mobile telecommunications operations, became Telekom Malaysia (TM).

TM's privatization was slated for 1990. As part of the preparation for that process, the company sold off its ART 900 cellular business in order to create a competitor for the soon-to-be-privatized telephone monopoly. As part of the government's efforts to promote the commercial interests of the ethnic Malay community, which, while politically powerful had long played a secondary role to the economic clout of the country's ethnic Chinese community, the cellular company was sold to Tajudin Ramli for just MYR 250,000 (less than $110,000). Included in the sale was a guarantee of a five-year monopoly for cellular services in Malaysia. Ramli launched the cellular services as a company called Celcom in 1989. As a result, TM was locked out of the cellular market and became one of the few incumbent telecommunications monopolies not to control the fast-growing mobile market in the late 1990s.

International Interests in the 1990s

The Malaysian government moved forward with TM's privatization in 1990, placing 25 percent of the company on the Kuala Lumpur Stock Exchange. As such, TM became one of the first in the region to emerge from under government protection. The government continued to reduce its stake through the decade, selling another 5 percent of the company to private shareholders, and placing a further 5 percent among TM's employees by mid-decade.

The public offering enabled TM to launch a massive investment program in the early 1990s. The company's expansion effort came as part of the Malaysian government's ambitious "Vision 2020," a long-term plan meant to raise the country to developed nation status by 2020. The role of the telecommunications sector in general placed TM at the center of the government's plans, and as such the company received the backing for its own MYR 17 billion ($5.6 billion) investment program, launched in 1994.

By the end of the 1990s, TM had boosted its total number of access lines to four million and its penetration rate to 19 per 100 population. The company had also expanded its exchange capacity, launching a fully digital network with a capacity of nearly six million lines.

The end of Celcom's five-year monopoly allowed TM to enter the cellular market in the mid-1990s, when the company received one of the country's eight new mobile telephone licenses. TM launched its own network, called TM Touch. At the same time, the government issued new licenses allowing entry into the country's fixed-line and international telephone markets. Yet the high cost of entry, especially into the fixed-line local market, meant that TM maintained a de facto monopoly on this market into the mid-2000s.

While building its network at home, TM also turned its attention to the regional telecommunications player. The company's first international effort came in Sri Lanka, where it backed the launch of that country's MTN (later Dialog) Telekom in 1993. By mid-decade, TM had also added a joint venture in India, where it began operating GSM-based cellular phone services in the Calcutta market, as well as paging services in six other cities. The company also expanded into Malawi, formed a 60-40 joint venture with Malawi Telecommunications Ltd. to launch the TNM GSM-based cellular service in 1995. In that year, also, the company acquired 60 percent of Sotelgui SA, the former government-controlled fixed-line and mobile service provider in Guinea. Bangladesh became another target market for the company, and in 1995 TM formed a joint venture with AK Khan & Co. to launch the Aktel GSM cellular service.

In Malaysia, TM responded to the growing interest in internet access with the launch of its own Internet service provider, TMNet. That operation became the country's second, and soon largest ISP. TM's control of the nation's fixed lines also enabled it to capture the broadband market into the 2000s. The company then entered Cambodia acquiring a 19.4 percent stake in Samart in 1997, then acquiring a 51 percent stake (to Samart's 49 percent) in mobile telephone provider Casacom in 1998.

Mobile Leader in the New Century

TM expanded its Malaysian cellular business in 1998, taking control of Mobikom, founded in 1993. Mobikom had built a network based on the AMPS protocol, covering all of the Malaysian peninsula, as well as Sabah and Sarawak. In order to overcome incompatibilities between the two companies' networks (TM's TM Touch network operated on the GSM 1800 standard) TM announced its intention to roll out a dual-band handset. Nonetheless, TM's cellular phone operation remained a small, money-losing operations, lagging far behind leaders Celcom, Maxis, and GiGi.

Company Perspectives:

Our vision is to be the communications company of choice—focused on delivering exceptional value to our customers and other stakeholders. To achieve our vision, we are determined to do the following: be the recognised leader in all markets we serve; be a customer-focused organisation that provides one-stop total solution; build enduring relationships based on trust with our customers and partners; generate shareholder value by seizing opportunities in Asia Pacific and other selected regional markets; be the employer of choice that inspires performance excellence.

Incompatibility was only one of the problems dogging the Malaysian mobile telephone market. The presence of eight cellular providers had proved to be too many for the Malaysian market. Into the early 2000s, therefore, the Malaysian government began encouraging a consolidation of the market. TM played its part in that effort, acquiring a stake in Celcom's parent company, Technology Resources Industry (TRI), in 2002. By 2003, the company had acquired full control of TRI, and of the country's leading cellular service provider. TM then received one of only two licenses for the new "3G" high-speed cellular phone services. By 2004, the company had launched its first 3G service. Because of low initial demand for the service, however, the company's 3G offered remained on a limited scale serving only a few hundred subscribers in the country's so-called "Multimedia Super Corridor."

Elsewhere, TM's regional ambitions hit a setback when it failed to win its 2001 bid for a stake in Indonesian Satellite, thwarting TM's attempt to enter the Indonesian cell phone market. The company had also run into trouble with an attempt to enter Ghana's telecommunications market, where its investment reached some US$ 150 million.

TM bounced back toward mid-decade. In July 2005, the company brought its Sri Lankan operations to the Colombo Stock Exchange, selling a 9.6 percent stake in what became that country's largest-ever initial public offering (IPO). Soon after the company joined with Malaysian state investment agency Khazanah Nasional to acquire a 17.7 percent stake in Singapore's MobileOne, becoming the cellular service provider's largest shareholder. Meanwhile, TM had found its entry into the Indonesian market, buying a 27.3 percent stake in Excelcomindo, owner of that country's third-largest mobile phone provider. In order to consolidate its growing international profile, Telekom Malaysia announced in 2005 that it was adopting TM as its new brand identity. Telekom Malaysia expected to become a major player in the international telecommunications market in the new century

Principal Subsidiaries

Cambodia Samart Communications Co. Ltd.; Celcom (Malaysia) Bhd; Fiberail Sdn Bhd (60%); GITN Sdn Bhd; Intelsec Sdn Bhd; Mediatel (Malaysia) Sdn Bhd; Meganet Communications Sdn Bhd; Menara Kuala Lumpur Sdn Bhd; Mobikom Sdn Bhd; MTN Networks Ltd (Sri Lanka); Parkside Properties Sdn Bhd; Rebung Utama Sdn Bhd; Societe des Telecommunications de Guinee (Papua New Guinea; 60%); Tekad Mercu Bhd; Tekekom Enterprise Sdn Bhd; Telekom Applied Business Sdn Bhd; TM Global Inc. (United States); TM International (Bangladesh) Ltd.; TM International Sdn Bhd; TMI International Lanka Ltd. (Sri Lanka); TMI Mauritius Ltd.

Principal Competitors

V KDDI Corporation; Nippon Telegraph and Telephone Corporation; China Railway Communication Corporation; Hutchison Whampoa Ltd.; PT Elnusa Tbk; China Telecom Corporation Ltd; China Mobile Communications Corporation; China Telecoms Corporation Ltd; Myanma Posts and Telecommunications; PT Astra International Tbk.

Key Dates:

1874:

The first telephone line in Malaysia is installed.

1891:

The first telephone exchange is installed in Kuala Lumpur.

1946:

A state-run telecommunications agency, Jabatan Telekom Malaysia (JTM), is established.

1971:

JTM begins operating as a for-profit corporation.

1985:

JTM launches a cellular phone service.

1987:

Privatization and deregulation begins as JTM is split into two bodies, and Telekom Malaysia (TM) is created as telecommunications provider.

1989:

Cellular service is sold to Tajudin Ramli, who establishes Celcom.

1990:

Government sells a 25 percent stake in TM to the public.

1994:

TM acquires control of cellular service in Sri Lanka (later Dialog Telekom) and launches its own cellular service, TM Touch.

1995:

TM enters a joint venture to provide cellular service and pager services in India

1996:

An Internet access service, TMNet, is launched.

2002:

The company acquires an initial stake in Celcom and gains control the following year.

2004:

Launches 3G high-speed cellular service.

Further Reading

Arnold, Wayne, "Telekom Malaysia Pushes for the Fast Lane," New York Times, February 21, 2003, p. W1.

Colquhoun, Lachlan, "Testing the Waters in KL," Wireless Asia, January-February 2004, p. 9.

Llyod-Smith, Jake, "Khazanah, Telekom Malaysia in M1deal," Financial Times, August 18, 2005, p. 27.

Montagu-Pollock, Matthew, "A Conservative Approach to Telecoms," Asiamoney, December 2000, p. S25.

Tanner, John C., "3G Results Play the Wild Card in Malaysia's Cellco Shuffle," Wireless Asia, August 2002, p. 7.

"Telekom Malaysia: A Leader in Telecommunications," Institutional Investor International Edition, June 2004.

"Telekom Malaysia: Committed to Providing World-Class Service," Institutional Investor, December 1995, p. A16.

"Telekom Malaysia is Seeking a Controlling Share in Excelcomindo," Wireless Asia, January-February 2005, p. 12.