CAMBODIA’S Royal Group met Wednesday with representatives of France Telecom in Phnom Penh in what sources say are advanced negotiations on terms for a joint purchase of Millicom International’s 58 percent stake in mobile-phone operator Mobitel.
A source with knowledge of the situation said France Telecom, which operates under the Orange brand, was meeting with the Cambodian holding group to do “due diligence” on the deal.
The Royal Group holds the remaining stake in Cambodia’s leading domestic operator by users, which operates under the Cellcard brand.
Millicom International Cellular SA announced in August it had reached an agreement to sell its Cambodian partner its stake for US$346 million in cash.
The money was to be payable on completion of the deal, which was expected to take place before the end of the year, subject to financing and regulatory approvals.
Sources within the industry say the price, which values Mobitel at $605 million, is a good deal, but the announcement immediately raised questions as to where the Royal Group would find the necessary capital given tight credit lines in the wake of the global economic downturn.
Royal Group Chief Financial Officer Mark Hanna refused to comment on the reported meeting Wednesday. He said only that the group was talking to “lots of interested parties” about the Mobitel purchase.
“We are having a number of discussions,” he said. “Everybody wants to talk to us. There’s a lot of interest.”
Mobitel CEO Jeffrey Noble also refused to comment Wednesday, saying he was “not interested in talking to the press today” before hanging up the phone.
Royal Group representatives also declined to comment when approached at the Hotel Cambodiana on Wednesday as the two groups adjourned for lunch.
A spokesman for France Telecom said by phone from Paris that the group “could not comment on market rumours or confirm that any specific meetings are being held in Cambodia.
“However, as part of our published mergers and acquisitions policy, France Telecom regularly looks for strategic investments in growth markets,”
he said. In this context, the Group hold regular reviews and discussions with potential partners in Southeast Asian countries.”
The company has a “fairly minor” presence in Vietnam, he added.
Giles Vernet, a French embassy economic counsellor who, according to sources with knowledge of the situation, is set to meet the delegation today, initially denied the company was in Cambodia.
When told representatives had been seen at the Hotel Cambodiana with the Royal Group, he refused to comment and directed questions to Laurence Bernardi, the press attache at the French embassy.
She said the embassy did not comment on commercial matters.
Royal Group has also been linked to talks with Axiata Group Berhad, the Malaysian owner of Cambodian mobile phone operator Hello, on a joint purchase of the stake, according to a source close to the situation. It is understood that the Royal Group offered the company a majority stake in Mobitel after its initial offer of a minority holding was declined.
CEO Simon Perkins declined Wednesday to confirm or deny specifics as to the discussions between the two groups, though he confirmed the parties were in communication.
“We keep the dialogue open with the Royal Group, so any options are always going to be evaluated and looked at,” he said.
He also did not rule out Axiata making a second bid for the operator in the event that the Royal Group was unable to raise the money needed to complete the sale.
“Our interest hasn’t waned from the first time we got in the process. We weren’t a successful bidder for whatever reason, so that process is over for us. But if it comes back on, then for sure, we’ll be there. I would never say never, but it just depends on the price point.”
An Axiata spokesperson said by email from Malaysia that the company did “not comment on rumours or stories which are speculative in nature”.
He had previously confirmed the group had bid for the stake when it was first put up for sale, but declined to confirm a July 7 Bloomberg report that it offered $500 million.
Royal Group has also been linked to talks with NTT DoCoMo of Japan. Media reports have confirmed that DoCoMo are interested as they look to overseas markets for expansion. However, the outcome of these discussions – and whether they are still taking place at all – is not known.
Royal Group’s Hanna travelled to China last month, though it was not clear whether it was related to the Mobitel sale.
The Royal Group also met last month with fund managers from Jersey, a tax haven in the British Channel Islands, to raise capital for the acquisition, according to a source with knowledge of the situation. The source said the group was seeking to raise $270 million but could not come to an agreement on the terms of any investment. Investors from Hong Kong were also at the meeting, the source said.
The Mobitel sale is being organised through Goldman Sachs. A spokesperson for the investment bank in Hong Kong declined to say when the deadline was for The Royal Group to deliver the cash to complete the purchase, directing all enquiries to the companies concerned, although Hanna said the group had until the end of the year.
ADDITIONAL REPORTING BY STEVE FINCH