Announcement Details :
We are pleased to announce that Indocel Holding Sdn Bhd ("Indocel"), a wholly owned subsidiary company of TM International Berhad ("TMI"), had on 19 November 2008 entered into a Consortium Agreement with Fanavari Moudj Khavar, JSC ("Fanamoj") and Sarmayegozarie Atiyeh Saba, JSC ("Atiyeh Saba") in relation to the bid for the grant of a Third Public Mobile Network licence ("Licence") in Iran.
The Communications Regulatory Authority of Iran ("CRA") had in September 2008 issued an invitation for tender for the award of the Licence ("Tender") and published certain qualification criterion for the qualification and bidding process pursuant to the Regulations for Tender ("Regulations"). Under the Regulations, applicants are invited to submit a pre-qualification application ("Pre-Qualification Application") in order to qualify and submit a bid for the Tender ("Bid").Only pre-qualified applicants will be allowed to proceed with the Bid. CRA will then award the Licence from amongst the pre-qualified bidders. The Licence will be for a duration of 15 years.
TMI, together with 2 Iranian organisations, namely, Fanamoj and Retirement Organisation ("RO") (collectively "Iranian Partners"), have agreed to establish an unincorporated consortium ("Consortium") through Indocel, Fanamoj and Atiyeh Saba for purposes of participating in the Tender.
2. THE CONSORTIUM PARTNERS
Indocel was incorporated in Malaysia under the Companies Act, 1965 as a private limited company on 25 October 1995. The principal activity of Indocel is an investment company. The authorised share capital of Indocel is RM100,000 divided into 100,000 ordinary shares of RM1.00 each. The issued share capital of Indocel is 100,000 ordinary shares of RM1.00 each. As of to-date, Indocel holds 83.8% of PT Excelcomindo Pratama Tbk ("XL"), a company listed on the Indonesia Stock Exchange (previously known as the Jakarta Stock Exchange) since 2005. XL operates a GSM mobile network and provides services in Indonesia in two allocated bandwidths of GSM 900 and GSM 1800.
Fanamoj is a high technology systems and solutions provider. Fanamoj was incorporated in Iran on 21 February 2001 and its main activities are design and production of Digital Video Broadcast equipments and also microwave radio links, and providing full end-to-end solutions for both broadcast and telecom sectors. The issued and paid-up share capital of Fanamoj is IRR1.1 million (RM391) comprising 1,100,000 shares of IRR1 each.
Atiyeh Saba was incorporated in Iran under the name: ‘Sarmayegozarie Atiyeh Saba' as a private Joint Stock Company on 13 June 2006. The principal activity of Atiyeh Saba is an investment holding company. The issued and paid-up share capital of Atiyeh Saba is IRR100,000,000 (RM35,500) comprising 100,000 shares of IRR1,000 each. The shareholders of Atiyeh Saba are RO, which holds 96% of Atiyeh Saba, and Tarahi Mohandesi Behvar Company, Melli's Group Investment Company, Azad Rah Amir Kabir Company and Taraz Pey Civil Company, all of which are subsidiaries of RO, each holding 1% of of Atiyeh Saba. Atiyeh Saba has no relationship with Fanamoj.
RO was established after the approval of civil employment law in 1966 as an independent office under the supervision of the Civil Employment and Administration Organisation. In 1975, under an amendment to 1966 law, the constitution of civil servants retirement organisation was approved by the Parliament. According to this law, the administration of pension fund was transferred to this RO which has recently changed its name to Civil Servants Pension Fund ("CSPF").This organisation receives contributions from about 1.5 million civil servants and covering some 580,000 retirees. CSPF has investments in several companies active in manufacturing and services as well as commercial companies. These investments include investments in companies which are involved in manufacturing, provision of technical services, investment in shares or properties, management, financial and/or legal consultancy services.
3. SALIENT FEATURES OF THE CONSORTIUM AGREEMENT
The Consortium Agreement regulates the relationship of TMI and the Iranian Parties during the Tender and sets out the basis on which Indocel, Fanamoj and Atiyeh Saba will jointly bid for the Licence.
The salient terms of the Consortium Agreement are as follows:-
- In such an event that the Consortium is awarded the Licence, the terms of the Consortium Agreement provides that:-
- the Parties will establish an operating company ("Prospective Company") in the Iran within 45 working days from the date on which the CRA announces the award of the Licence to the Consortium;
- the Prospective Company will have to be created with a paid-up capital of at least 50% of the upfront licence fee which is at least the IRR equivalent of €150,000,000 (RM684,000,000); and
- as required by the Regulations, the Iranian Partners, through Fanamoj and Atiyeh Saba, will hold a combined 51% equity interest in the Prospective Company, and TMI, through Indocel, will hold a 49% equity interest in the Prospective Company.
- Without the approval of the other parties to the Consortium Agreement ("Parties"), neither of the Parties shall enter into discussions with the Government of Iran, the CRA or any regulatory body in respect of the Regulations, the Tender, the Licence and the regulatory environment in Iran and proceeding with the submission of the Tender.
- If at any time, prior to the Licence being granted to the Prospective Company and there is a material change in the attractiveness in the Tender to any of the Parties, that party shall be entitled to withdraw from the Consortium Agreement.
- The Consortium Agreement shall automatically terminate in circumstances in which a third party is granted the Licence, CRA abandons the Tender process or the Parties enter into the shareholders agreement in relation to the Prospective Company in the event that the Licence is granted to the Prospective Company.
4. SOURCE OF FUNDS
TMI shall pay its costs and expenses incurred in connection with the entering into the Consortium Agreement and during the Tender (including payment to third parties) from internal funds. No other costs, expenses and/or capital outlay are expected to be incurred during the Pre-Qualification Application.
The decision of the CRA on the Pre-Qualification Application and announcement on the qualified bidders who have a right to proceed with a Bid is expected to be made on 22 November 2008.
9. DIRECTORS' STATEMENT
The Board of Directors of TMI, having considered all aspects, is of the view that the entry by Indocel into the Consortium Agreement and involvement in the Pre-Qualification Application are in the best interest of TMI.
10. APPROVALS REQUIRED
The entry by Indocel into the Consortium Agreement is not subject to approval of the shareholders and/or other regulatory authorities, where applicable.
11. SHAREHOLDERS' AND DIRECTORS' INTERESTS
None of TMI's Directors, major shareholders and/or persons connected to TMI's Directors or major shareholders has any direct or indirect interest in the entry by Indocel into the Consortium Agreement.
12. DOCUMENT FOR INSPECTION
The Consortium Agreement dated 19 November 2008 may be inspected during normal office hours from Monday to Friday (excluding public holidays) at the registered office of TMI from the date of this announcement.
This announcement is dated 19 November 2008.
5. FINANCIAL EFFECTS
The entry by Indocel into the Consortium Agreement will not have any effect on the share capital or shareholding of major shareholders of TMI.
Net Tangible Assets(‘NTA').
The entry by Indocel into the Consortium Agreement will not have any material effect on the NTA of TMI Group for the financial year ending 31 December 2008.
Earning per Share
The entry by Indocel into the Consortium Agreement will not have any material effect on the earnings of TMI Group for the financial year ending 31 December 2008.
6. RATIONALE FOR THE ENTRY INTO THE CONSORTIUM AGREEMENT
The entry into the Consortium Agreement, inter alia, formalises the terms of co-operation of the Parties during the Tender including exclusivity in relation to the Tender and the basis on which the Parties will submit the Bid.
7. PROSPECTS AND RISKS
TMI already has operations in Iran through its 49% stake in Mobile Telecommunications Company of Esfahan ("MTCE"), a private company incorporated in Iran. MTCE has a licence to provide mobile telecommunications services in the Esfahan province of Iranonly but this licence has a condition which limits MTCE's total number of subscribers to 35,000.
The cellular licence to be issued under the Tender is a national 2G and 3G cellular mobile licence which includes exclusivity for 3G. Such a licence would enable TMI, together with its Iranian partners, to become a national mobile operator with a bigger addressable market to provide services to.
Iran is a country with 73 million population and with approximately 56% mobile penetration as of September 2008. Given its per capita income of approximately USD3,800 (World Bank report 2007)and over 50% of the population is below 25 years of age, the mobile communication market in Iran carries the potential to grow significantly in the next 5 - 10 years. The mobile subscriber base in Iran has already surpassed the number of fixed line customers and this is likely to accelerate further. According to a report from Business Monitor International research, the overall mobile penetration in Iran is expected to reach 140% by 2012.
There are currently only 2 national mobile operators in Iran, MCI and MTN IranCell. Both operators do not have a 3G mobile licence. The average revenue per user ("ARPU") is approximately USD9. The introduction of 3G to the market is expected to increase data usage in selected segments and further bolster the ARPU. The successful bidder of the Licence will have exclusivity for a period of 2 years. This would provide the successful bidder with an unique advantage in leveraging the data users and to target high-end customers.
The risk of this venture is the Consortium may not be successful in the Bid.
8. ESTIMATED TIMEFRAME FOR PRE-QUALIFICATION APPLICATION