OPR Cut Provides Relief to Economy

KUALA LUMPUR: Bank Negara Malaysia’s overnight policy rate (OPR) cut is a necessary move to provide a relief to the economy despite coming in sooner than earlier expected, economists said.

This is especially true in the face of global uncertainties brought about mainly by the trade tension between the two largest economies in the world, they added.

Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid believes the OPR reduction was a pre-emptive measure to ensure the country’s economic growth continues to be sustainable.

“I think we need to view the objective of such policy response that is to provide support to the economy by making monetary condition very accommodative,” he said when contacted by the New Straits Times.

Afzanizam said this essentially would reduce the cost of funds that can help stimulate investment activities.

This will be backed by the revival of mega projects such as the East Coast Rail Link and Bandar Malaysia that would result in higher demand for corporate financing, he added.

Lower OPR would also mean slightly lower monthly commitment for existing mortgages or any financing contracts that have variable rate features, he said.

“Many would ask whether the latest move would impact the ringgit negatively. The OPR cut is part of a very medium-term kind of growth story and that should help the ringgit to appreciate over time,” he added.

Putra Business School business development manager Prof Madya Dr Ahmed Razman Abdul Latiff said analysts had expected the cut to happen in July. But recent developments especially on US-China tariff war had lowered confidence in the market and could slower the growth.

“Hence the reduction in rate is supposed to provide the stimulus by encouraging borrowings and not on savings,” he said.

Socio-Economic Research Centre executive director Lee Heng Guie said the central bank’s OPR cut would provide some relief to the local economy.

“The reduction does not signal that things are getting bad but rather to provide some relief, in light of uncertainties in the external market.

“The cut would also preserve the country’s economic stability that gives some relief to the market and investors,” he said.

Lee believes there will not be another series of rate cut as the government still has the spending to ensure the economy is growing.

Source: New Straits Times

Axiata and Telenor in Talks to Merge Asian Operations

KUALA LUMPUR: Two Asian telco giants — Malaysia-based Axiata Group Bhd and Norwegian Telenor Group — are in talks to merge their operations in Asia.

In terms of geographical presence, Axiata has a wider footprint. While the two mobile service operators both have a presence in Malaysia, Thailand, Myanmar, Bangladesh and Pakistan, Axiata also operates in India, Sri Lanka, Nepal, Cambodia and Indonesia where Telenor is not present.

The negotiation also involves Axiata’s operations in Cambodia, Indonesia and Sri Lanka, apart from countries where both have a presence, according to sources familiar with the merger talks.

However, the value of the merger is not known as of now.

Axiata’s 80% stake in Nepal’s NCell Private Ltd is not on the negotiating table. The reason could be concerns over the tax issue it faces in Nepal after the recent RM1.45 billion capital gains tax bill that Axiata was required to stomach, said the sources. However, it is not sure if Telenor is keen on Axiata’s Indian operation.

In Malaysia, Axiata wholly owns Celcom Axiata Bhd while Telenor controls a 49% stake in DiGi.com Bhd.

The substantial shareholders of Axiata are Khazanah Nasional Bhd — the single largest shareholder with a 37.16% stake — Permodalan Nasional Bhd with 18.42%, and the Employees Provident Fund with 16.16%, according to its annual report 2018.

The two telcos have already hired foreign investment banks to advise on the merger and acquisition exercise, the sources said. Should the merger talk materialise, it would be a mega merger in Asia that involves at least 300 million mobile subscribers.

Other major telcos, which have regional presence here, include Veon Ltd, Singapore Telecommunications Ltd, Vodafone Group Plc. and Bharti Airtel Ltd.

Mergers in the telco industry are not that surprising, according to analysts, given the tough operating landscape that features cut-throat competition, razor-thin profit margin and heavy capital expenditures that eat into shareholders’ dividends. Mergers will improve economies of scale and help to share investment burden and high fixed costs.

It is learnt that post-merger, Axiata will be a shareholder of the merged entity, which is expected to be an investment holding company that owns the enlarged regional mobile service operation. Axiata will also continue holding the 80% stake in NCell and its equity interest in Axiata Digital Services Sdn Bhd, in which Mitsui & Co Ltd has taken up a minority stake.

When Axiata announced last Friday that Mitsui had taken up the stake in Axiata Digital, it did not reveal the value of its stake. What it did reveal was that the investment establishes a pre-money enterprise value of US$500 million (RM2.07 billion) for the core digital business of Axiata Digital.

The core digital business includes Boost, the e-wallet service; analytics.data.advertising (ada), the largest independent digital agency in the region; and Apigate, an emerging global application programme interface platform provider.

In an interview with The Edge Malaysia weekly in February, Khazanah managing director Datuk Shahril Ridza Ridzuan said Khazanah’s portfolio will have a 70:30 split, with 70% of its assets falling under the “commercial” basket that is used to fulfil its long-term asset growth target.

Axiata Group Bhd, CIMB Group Holdings Bhd, UEM Sunrise Bhd and its remaining 26% stake in IHH Healthcare Bhd are in the “commercial” pool that it will monetise, if the right value exists.

The remaining 30% will be its “strategic” basket, which, he said, fulfills a strategic role in the country’s development and encompasses Telekom Malaysia Bhd, Tenaga Nasional Bhd, Malaysia Airports Holdings Bhd, Malaysia Airlines Bhd as well as Iskandar Investment Bhd.

Source: The Edge Malaysia