TM’s new CEO ‘in conjunction with strategic convergence drive’

KUCHING: Telekom Malaysia Bhd’s (TM) announcement of Datuk Sri Mohammed Shazalli Ramly as the group’s new managing director/group chief executive officer (CEO) is in conjunction with TM’s strategic convergence drive.

AmInvestment Bank Bhd (AmInvestment Bank) noted that Shazalli, 55, is currently the regional chief executive officer (CEO) and corporate executive vice president (EVP) for Axiata Group Bhd (Axiata) after his promotion in August last year from being the CEO of Axiata’s wholly-owned Celcom Axiata Bhd (Celcom) for 11 years.

According to the research firm, speculations have reemerged that Axiata and TM may be in the midst of a re-merger after its 2008 de-merger.

“The driving factors for the potential re-integration stem from TM’s own convergence drive amid a slowdown in the sector’s revenues compounded by the difficulties in monetising rapidly increasing mobile data demand,” it said.

“As Shazalli was formerly with the Axiata group, the changes at top management ease the path to a possible consolidation with TM.”

Given that Axiata was formerly a part of TM back in 2008, AmInvestment Bank viewed that the usual management dysfunctions arising from a text-book merger case can be significantly reduced, as this will simply mean a reintroduction for the bulk of the two companies’ employees and leadership.

Meanwhile, AllianceDBS Research Sdn Bhd (AllianceDBS Research)said the appointment of Shazalli would “surely lend more credibility to the rumour about a potential merger between TM and Axiata.”

“We think the likely scenario is where Celcom will be carved out and merged with TM to become a truly integrated player in Malaysia.

“TM would maintain its listing status and still adopt a generous dividend payout in order to sustain the cashflow to Axiata,” the research house said.

With or without merger, AllianceDBS Research remained optimistic that the rollout of the HighSpeed Broadband Phase 2 (HSBB2) project, SubUrban Broadband (SUBB) project, and Webe mobile services would drive TM’s long-term growth, as the company expands the coverage of the group’s highspeed broadband network to more areas.

AllianceDBS Research thus maintained ‘buy’ on TM with a target price of RM7.10 per share. AmInvestment Bank also maintained its ‘buy’ call on TM and fair value of RM7.90 per share.