Will DIGI get its own 3G spectrum?

Well if you read the news paper tomorrow morning (26th Jan 2007), you will most likely read about DIGI and TimeDotCom(TDC) signing a partnership deal which will see the transfer of 3G ownership from TDC to DIGI and corporation in various aspect. However this is just the surface of the deal as this deal still require approval from 6 relevant party before it could start the transfer of the 3G spectrum or licence. The deal involved is DIGI issuing of new DIGI share to TDC as payment of the spectrum. The 6 approval needed are:

(a) the approval of the Securities Commission ("SC") for the issue of the Consideration Shares to TDSB or its Nominees and the listing of and quotation for the Consideration Shares on the Main Board of Bursa Securities;

(b) the approval of the SC, under the Guideline on the Acquisition of Interests, Mergers and Take-Overs by Local and Foreign Interests of the Foreign Investment Committee for the issue of the Consideration Shares to TDSB or its Nominees;

(c) the approval-in-principle of Bursa Securities for the listing of and quotation for the Consideration Shares on the Main Board of Bursa Securities;

(d) the approval of the MCMC for the Proposed Transfer, TDSB to be released from its obligations in relation to the Spectrum on DiGi Telecom’s receipt of the Spectrum and the release and return to TDSB the bank guarantee of RM50 million issued in favour of the MCMC in respect of the Spectrum on DiGi Telecom’s receipt of the Spectrum;

(e) the approval of DiGi’s shareholders for the Proposed Transfer;

(f) the approval of TdC’s shareholders for the Proposed Transfer;

Why does DIGI needs it so badly that they are willing to fork out such a huge investment to buy it from a company that is near bankruptcy? The main reason is to compete with existing telco(namely Celcom & Maxis) as well as new telco(UMobile) which owned a 3G spectrum each.

** For your information, UMobile is a newly establish telco company operating the 018 prefix. It's formerly know as MITV, a cable TV company owned by Tan Sri Vincent Tan Chee Yioun.

It has been the talk of the town, especially among investors(both institutional and retail) and analysis that the main reason DIGI was deprived of a 3G Spectrum was because it is a foreign owned company. Yes, in case you do not know, DIGI is owned by Telenor, a Norwegian Telco Company. Even Malaysia's Energy, Water and Communications Minister Datuk Seri Lim Keng Yaik was quoted by the media for making the statement that, the 3G Spectrum is a national asset and local company would be given priority to own and use this valuable national asset.

So do you think DIGI will get the 3G spectrum at the end of the day, considering that DIGI is a foreign company?

If you ask me, I think the likely hood will be very high because TDC is not doing very well financially, it did so badly that TDC had to sell Time Cell(017) to Maxis. TDC will also benefit from the issuing of new DIGI share to TDC as DIGI is making good profit and distributing good dividend. Being a DIGI shareholder with 10% stake after the completion of this deal and also with the purchase of DIGI's share from the open market, TDC's stake in DIGI will be generation a pretty handsome recurring income for TDC in years to come.

However it is still rather early to tell if DIGI will get the licence's for good because the Malaysian government never fail to surprise the Malaysian public by interfering in business deal within Malaysia. A recent example was the rejection of Volkswagen from forging a partnership with Proton(Proton Management and Majoring stakeholder Khazanah were keen on the partnership however our Pak Lah wants to keep his pride and rejected the partnership.). Another good example is the case between Gamuda-MMC and the Malay Chamber of Commerce Malaysia. If you do not know about it, kindly click here to read about it.

So whats your opinion? Will the government intervene and stop the deal from going through because DIGI is owned by a foreign company? Lets hear what you have to say.