Telekom Malaysia plans to launch a US$390m solo bid for a 48 per cent stake in Idea Cellular, India's fifth largest mobile operator, after Indian authorities objected to its partnership with Singapore's ST Telemedia for the acquisition on competition grounds, said people close to the deal.
Telekom was informed on Monday by Indian regulators that a joint bid for Idea was ?unacceptable? because Temasek Holdings, the Singapore state investment company that wholly owns ST Telemedia, also controls Singapore Telecommunications, which has a 28 per cent stake in Bharti Tele-Ventures, India's leading mobile phone operator.
India's competition rules ban a shareholder from holding stakes in two separate companies in the strategic telecommunications sector.
The move had attracted attention because it was the first joint bid by state-owned companies in Malaysia and Singapore to acquire overseas assets. It was hailed as a sign of closer business ties between the two neighbours after years of bickering stemming from the break-up of their brief union in1965.
The ouster of ST Telemedia from the deal is likely to renew questions about obstacles that Temasek could face in its ambitious overseas expansion strategy because of its role as dominant shareholder in Singapore's leading companies.
It also represents a setback to Temasek's acquisition strategy in India, where it has become a leading foreign investor, including buying stakes in banks and pharmaceutical companies among other assets.
Temasek told Indian authorities that the Idea deal should not be blocked because it was not investing directly in Idea and Bharti, but rather through two subsidiaries that were independently managed.
Telekom Malaysia issued a statement earlier yesterday saying the deal had lapsed because Indian regulators had failed to approve the transaction by June 11, a deadline set in its agreement with ST Telemedia. ST Telemedia could not be reached for comment.
ST Telemedia has emerged as a regional rival to SingTel in spite of their common ownership, having bought a stake in Indonesia's Indosat mobile operator to compete against Telkomsel, in which SingTel has an interest.
Last year Temasek bought a 5 per cent stake in Telekom Malaysia and its partnership with ST Telemedia was seen as the start of wider co-operation between the two countries in acquiring overseas assets.
As a state-owned company, Temasek has encountered opposition in several previous foreign acquisitions on nationalist or security grounds, including SingTel's purchase of Australia's Optus mobile operator, Temasek's acquisition of two Indonesian banks and ST Telemedia's investment in Global Crossing. These deals were eventually concluded.