Green Packet continues to rise on P1 sale speculation

by **Cals** Thu 03 Oct 2013, 09:02

Published: Thursday October 3, 2013 MYT 12:00:00 AM
Updated: Thursday October 3, 2013 MYT 7:19:53 AM
Green Packet continues to rise on P1 sale speculation

PETALING JAYA: Green Packet Bhd’s share price has been rising since last month on speculation that its mobile broadband unit Packet One Networks Sdn Bhd (P1) has become a takeover target of larger operators looking to acquire valuable spectrum.
Closing at 62 sen yesterday, Green Packet’s share price had almost doubled from 33 sen a month ago.
StarBiz had in September reported that there could be a three-way fight for the acquisition of a controlling stake in P1, with the three possible parties beingDiGi.Com Bhd, the YTL group and Telekom Malaysia Bhd (TM).
Analysts had first raised this possibility in August, when they highlighted in reports that DiGi could be in talks to buy out WiMAX players for their wireless spectrum in order to sustain its growth plans in Malaysia.
DiGi was believed to be the closest to clinching a deal with P1, with negotiations having started more than a year ago.
As for YTL’s interest, industry sources had been quoted as saying that fellow WiMAX operator YTL Communications Sdn Bhd, a unit of YTL Power International Bhd, was also keen on buying a controlling stake in P1. This had been speculated before.
Sources said the YTL group sent a due diligence team to P1 recently. From a technological perspective, they pointed out that YTL was the best fit for P1, as both companies operated on the same type of spectrum, the 4G-LTE (Long Term Evolution) (2.6 gigahertz or GHz), which is time division-based, and WiMAX.
On the contrary,TM clarified that it had not announced any interest to bid for a stake in WiMAX operator P1, or sought any approval to do so.
P1 is a 57% unit of listed Green Packet and owns valuable wireless spectrum. It owns 30 megahertz (MHz) in the 2.3GHz band (that is used for its WiMAX network), and was one of the eight companies to be awarded last year with 20MHz of the 2.6GHz spectrum, which would be suitable for LTE or 4G-LTE type of services in the future.
StarBiz had also highlighted that major telecommunications companies such as Maxis Bhd and Celcom Axiata Bhd had been quick to ink collaboration deals with other recipients of the valuable 2.6GHz wireless spectrum band, leaving DiGi with the least amount of access to that spectrum.
DiGi would need to acquire an additional 30MHz of the 900-band and 20MHz on the 2.6GHz band in order to have the same spectrum position as Maxis and Celcom.
Meanwhile, the shares of REDtone International Bhd and YTL Power International, the owners of the other two WiMAX operators in the country, have also been rising. However, Green Packet’s shares have risen the most amid the merger and acquisition speculation.
A dealer noted that it was not surprising, considering that Green Packet had already declared some time ago its intention to seek possible “strategic alternatives”.
In 2010, South Korea’s SK Telecom acquired 25.8% of P1 for US$100mil (RM322mil) in cash. SK Telecom’s purchase price had then implied a valuation of US$389,000 (RM1.25mil) for P1. Going by this previous valuation, Green Packet’s 57% stake in P1 alone could be worth around RM712mil, almost double the latter’s market capitalisation of RM425mil. P1’s valuation should be worth a fair bit more today, given its cash-flows, customer base and valuable telecommunications spectrum, industry observers said.