KUALA LUMPUR: Temasek Holdings unit Singapore Technologies Telemedia (STT) will buy a 33% stake in U Mobile Sdn Bhd for RM625mil as part of its RM1bil investment commitment to widen its reach into Malaysia’s telecommunications market.

It will use the balance amount to participate in a rights issue that U Mobile will make soon to fund its expansion.

U Mobile chairman Tan Sri Vincent Tan did not disclose the size of the rights issue but said the exercise would have the participation of all shareholders and would be “substantial enough to beat the competition''.

Lee Theng Kiat (left) exchanging documents with Tan Sri Vincent Tan. The event was witnessed by Datuk Seri Dr Rais Yatim (2nd from left) and U Mobile deputy chairman Datuk Rosman Ridzwan.

Upon completion of the rights issue, STT will retain a 33% shareholding in U Mobile – one of the four celcos in the country with a 3G spectrum.

U Mobile has been seeking a strategic investor after Japan's NTT DoCoMo and South Korea's KT Freetal exited U Mobile in September last year.

“STT will be an excellent partner. It is a valuable investment,'' Tan said.

STT is buying the 33% stake from Tan, who has 96.04% equity in U Mobile via U Television Sdn Bhd.

The remaining 3.96% is held by Multi- Purpose Holdings Bhd.

A report from Singapore quoting an STT spokeswoman said the company was paying RM625mil for the 33% stake.

This confirms a StarBiz report on Feb 2 that Tan had struck a deal to sell 33% of U Mobile to STT for RM626mil or RM5 a share.

The two parties signed yesterday a definitive agreement that was witnessed by Information, Communications and Culture Minister Datuk Seri Dr Rais Yatim and via videoconference from London by former prime minister Tun Dr Mahathir Mohamad.

“This is a special partnership that will contribute immensely to the Malaysian communications landscape in the area of mobile and broadband applications,” Rais said.

“It will also benefit Singapore and just like the causeway, both will benefit.''

Many are surprised at STT's choice as U Mobile is a smallish company with less than 4% of the local mobile market.

Said STT president and CEO Lee Theng Kiat: “The robust telecoms market in Malaysia continues to provide potential for future growth and I believe that our investment in U Mobile is the right strategic decision.

“With its strong wireless and data focus, U Mobile will be a valuable addition to STT's mobile footprint and an excellent business fit for us.''

STT's stable of companies includes Asia Mobile Holdings, which has interests in StarHub Ltd (Singapore's second largest celco), Mfone in Cambodia and Lao Telecommunications Co; Global Crossing Ltd; TeleChoice Ltd; and ST Teleport.

For U Mobile, its fortunes are set to change as it can now leverage on STT's expertise to improve its mobile service delivery, accelerate its 3G network rollout and expand the multimedia experience.

Maybank Investment Bank Bhd senior analyst Khair Mirza said the entry of STT into U Mobile “was a positive development for the industry as it introduces a new but established operator and bodes well for foreign direct investments into the country and industry.

"Consumers can expect more choices, innovative and competitive offers coming their way.''

Asked if StarHub would be involved in U Mobile's operations, Tan said: “We are going to sit down on how we will proceed; nothing is firm yet.''

Separately, StarHub said: “We would like to state that StarHub will not be involved with the operations of U Mobile at all.''

Singapore Exchange-listed StarHub is an info-communications company that delivers a full range of information, communications and entertainment services over fixed, cable, mobile and Internet platforms in the republic.

Asked if there was an exit clause for STT, similar to what NTT and KT had whereby these parties sold their stakes back to Tan, he said: “No backto-back agreement; once bitten forever shy.''