Daily Chennai - Tamilnadu, India

Maxis is excited about the prospects in India, and it will be busy growing its business there over the next five years.

INDIA-BASED mobile operator Aircel Ltd would need US$3bil to spread its reach into 23 circles (territories) over a five-year period beginning this year, and part of the funding would have to come from Maxis Communications Bhd’s Malaysian operations.

Maxis group chief executive officer Datuk Jamaludin Ibrahim said other sources of funding would include debts to be undertaken by Aircel and the potential listing of the company. 

But for Aircel’s expansion into the nine existing circles for which the company needs US$450mil, Jamaludin said Aircel had the capabilities to raise “significant funds” without injection of cash from Malaysia.

Maxis has a 74% equity stake in Aircel.

“India is a big portion of our future. We need to grow in India, and that would keep us busy over the next five years,’’ he said.

Jamaludin declined to give the percentage of debt that would be taken by Aircel over the five-year period nor tell when a flotation exercise may take place, but it is an option worth considering.

The value of Maxis’ investment in Aircel has not been fully factored in and the growth in the seven circles has not been fully reflected in the results.

It would not make sense to float a company without decent valuation. Jamaludin said there was no time pressure to float the company.

There is no denying the growth potential for Aircel is enormous, given that the company has licences to operate in 23 circles, having added 14 new licences at the end of last year.

India is a huge market that has a population of 1.1 billion and even though the growth in mobile sector is robust, there are only 142 million mobile subscribers and the penetration rate is a mere 12.7%.

Experts predict that the market by the turn of the decade to grow to 340 million subscribers, so the future for Aircel is bright.

This is because Maxis has licences for 23 circles in India, each with an average population of 40 to 50 million. The addressable cellular market could easily be 50% to 60% over the next few years.

“What would keep us busy for the next five years is that we have to grow the nine circles and launch new services in the 14 circles. Over the next five years, we would be adding 20,000 to 25,000 telecommunication towers in India. In comparison, for 10 years in Malaysia, we have only added 5,000 sites? that is the magnitude of work we are talking about in India,’’ he said. 
That is why Maxis is so excited about the prospects of its investment in India and not unduly worried about the funding requirement for the future as there would be enough sources of funding when the need arises.

But Jamaludin did say that “Maxis Malaysia would have to fund part of the US$3bil portion in the future.’’

Maxis bought into Aircel at the end of 2005, and for the last financial year ended Dec 31, 2006, Aircel’s contributions to Maxis’ revenue and net profit were 10% and 8% respectively.

Aircel is an incumbent player in Tamil Nadu and Chennai where it increased its market share from 1.4% to 9.3% last year, and those were the two circles that Aircel had when Maxis took over the company.

Over the past one year, Aircel managed to add 21 new circles, bringing the number to 23, of which seven are “full blown circles’’ where services are being offered (The contribution towards earnings was from the seven). 

Since taking over, Maxis has seen its Indian subscribers double from 2.4 to 4.4 million (5 million as at end-March 2007) and market share increase by 0.2% from 3% previously. This may appear small, but it is huge in a market where there are 142 million mobile subscribers.

“We are generally happy with our investments in India but never too happy as we still want to improve,’’ he said.

Categories: Business