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Memorandum Of Understanding

Back 03 Jun 2011
Date Announced
:
03/06/2011  



Type
:
Announcement
Subject
:
MEMORANDUM OF UNDERSTANDING

Description
:
MEMORANDUM OF UNDERSTANDING BETWEEN CELCOM AXIATA BERHAD AND TELEKOM MALAYSIA BERHAD

Announcement Details/Table Section :

1.0 INTRODUCTION

We refer to our announcements on the Memorandum of Understanding between Celcom Axiata Berhad (“Celcom”) and Telekom Malaysia Berhad (“TM”) on strategic collaboration in providing fixed and mobile solutions (“MOU”) dated 22 February 2011, 22 April 2011 and 31 May 2011.

We are pleased to announce that Celcom Mobile Sdn Bhd (“Celcom Mobile”), a wholly-owned subsidiary of Axiata Group Berhad (“Axiata” or “Company”) via Celcom, had today entered into a HSBB Service Agreement with TM for the supply, delivery, installation and commissioning of access services related to high speed broadband services (“HSBB Services”) for Celcom Mobile’s utilisation (“HSBB Agreement”).

In general the HSBB Agreement is a frame agreement which sets out the general terms and conditions that govern the provision of HSBB Services which consists of HSBB (Access) Services, HSBB (Transmission) Services and/or HSBB (Connection) Services. The specific terms and conditions of the HSBB Services are stated in the respective Schedule, which forms an integral part of the HSBB Agreement.


2.0 SALIENT POINTS OF THE HSBB AGREEMENT

The salient points of the HSBB Agreement are as follows:-

2.1 Scope of the HSBB Agreement    

    (a) TM shall supply, deliver, install and commission the HSBB Services so as to enable Celcom Mobile to utilize the HSBB Services.
    (b) In further consideration of the provision by TM to Celcom Mobile of the HSBB Services, Celcom Mobile shall grant to TM its mobile virtual network operator services ("MVNO Services") which shall cover all segments including but not limited to consumer, small medium enterprise and large enterprise. The details of the terms and conditions of the MVNO Services shall be elaborated in a separate agreement.      

 

2.2 Terms
 

    (a) Effective Date               
     Effective from the date of the HSBB Agreement and continue to be in full force and binding unless terminated earlier by either party 
           
     (b) Term of the HSBB (Access) Services  
    The Minimum Subscription Period for the HSBB (Access) Services are as follows:

    (i) Minimum Subscription Period at the Service Gateway (SG)      
    Three (3) years from the first SG Commencement Date.
     
    (ii) Minimum Subscription Period at the Broadband Termination Unit (BTU) Port
    Two (2) years from the BTU Commencement Date.         



3.0 RATIONALE FOR ENTERING INTO THE HSBB AGREEMENT

The HSBB (Access) Services which is one of the collaboration areas contemplated under the MOU provides Celcom access to the last-mile and end user premises covered by the national HSBB Project; thus, enabling Celcom Mobile to increase its appeal of its HSBB services portfolio. With the HSBB (Access) Services provided by TM, Celcom will now provide differentiated IP-based high speed broadband services to more than 855,000 premises (to-date) and eventually to 1.3 million premises by the end of 2012. This coverage is in accordance with the completion of the first phase of the Public-Private-Partnership (PPP) of the national HSBB project between TM and the Government of Malaysia.


4.0 BRIEF INFORMATION ON PARTIES

4.1 TM

TM, a public listed company duly incorporated in Malaysia on 12 October 1984, has an authorised share capital of RM5,040,003,021 divided into 5,000,000,020 ordinary shares of RM1.00 each, 1 Special Rights Redeemable Preference Share of RM1.00, 2,000 Class C Non-Convertible Redeemable Preference Shares (“NCRPS”) of RM1.00 each, 1,000 Class D NCRPS of RM1.00 each and 4,000,000,000 Class F Redeemable Preference Shares of RM0.01 each. The issued and paid up share capital of the Company is RM3,577,404,906 divided into 3,577,401,980 ordinary shares of RM1.00 each, 1 Special Rights Redeemable Preference Share of RM1.00, 2,000 Class C NCRPS of RM1.00 each and 925 Class D NCRPS of RM1.00 each. The principal activity of TM is the establishment, maintenance and provision of telecommunication and related services.

4.2 Celcom

Celcom was incorporated in Malaysia on 5 January 1988. The issued and paid-up share capital of Celcom stands at RM1,237,534,681 comprising 1,237,534,681 Ordinary shares of RM1.00 each. Celcom was the first privately owned company in Malaysia to offer mobile services when it launched its “Art 900” analogue mobile system in 1989. In 1989, Celcom was one of the first operators in Malaysia to provide digital services through its GSM 900 network. Celcom currently operates 2G (GSM900 and GSM1800) and 3G cellular services and provides mobile telecommunication services in Malaysia under the brand name ‘Celcom’.

4.3 Celcom Mobile

Celcom Mobile was incorporated in Malaysia on 15 July 1976 under the name of Jareen Sendirian Berhad. On 20 April 1993, it changed its name to MRCB Telecommunication Sdn Bhd and following that to Telekom Cellular Sdn Bhd and TM Cellular Sdn Bhd on 19 September 1996 and 23 August 2001 respectively before assuming its present name on 23 March 2005. The issued and paid-up share capital of Celcom Mobile stands at RM313,000,000 comprising 313,000,000 ordinary shares of RM1.00 each. The principal activity of Celcom Mobile is provision of mobile communication services, network services, application services and content.


5.0 EFFECTS OF THE ENTRY INTO THE HSBB AGREEMENT ON THE ISSUED AND PAID-UP SHARE CAPITAL, EARNINGS AND NET ASSETS

The entry by Celcom Mobile into the HSBB Agreement does not have any effect on the issued and paid-up share capital of Axiata and is not expected to have any material effect on the earnings and net assets of the Axiata Group for the financial year ending 31 December 2011.


6.0 DIRECTORS' AND MAJOR SHAREHOLDERS’ INTEREST

Khazanah Nasional Berhad (“
Khazanah”), a major shareholder of Axiata is deemed to have an interest in the HSBB Agreement by virtue of Khazanah also being a major shareholder of TM. Tan Sri Dato’ Azman Hj. Mokhtar and Dr. Farid Mohamed Sani are Khazanah’s representatives on the Board of Directors of Axiata (“Representative Directors”). Dr Farid is also a Member of the Board of Directors of both Celcom and TM (Alternate Director). Tan Sri Dato’ Azman and Dr. Farid have abstained and will continue to abstain from all deliberation and voting in relation to the HSBB Agreement and other definitive agreement(s) arising from the MOU.

Save as disclosed above, none of the major shareholder and/or Directors of Axiata and/or persons connected to them have any direct or indirect interest in the HSBB Agreement.


7.0 AUDIT COMMITTEE AND BOARD OF DIRECTORS’ STATEMENT

The estimated value of the proposed transactions under the HSBB Agreement (“HSBB Transactions”) have been incorporated in the Shareholders’ Mandate for Recurrent Related Party Transactions (“RRPT Mandate”) which was approved by the shareholders of Axiata at the 19th Annual General Meeting held on 1 June 2011. 

As disclosed in the circular to shareholders on the RRPT Mandate dated 10 May 2011, the Board Audit Committee of Axiata, (save for Dr Farid), is of the view that the transactions under the RRPT Mandate (“Mandated RRPT Transactions”) are in the best interest of Axiata and having reviewed the procedures and guidelines for review and approval of RRPT, is of the opinion that the Mandated RRPT Transactions will be undertaken on terms not more favourable to the related parties than those generally available to the public and are not detrimental to the interest of the minority shareholders of Axiata.

The Board of Axiata (save for the Representative Directors) after having considered all aspects, is of the opinion that the HSBB Transactions are in the best interest of Axiata.

This announcement is dated 3 June 2011.