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TRI's Loose Connections
A Malaysian cellular phone player falters

Tajudin Ramli is a name that opens doors in Malaysian business and politics. The tycoon's stable of companies includes Malaysia Airlines. His flagship Technology Resources Industries (TRI) controls Celcom, once Southeast Asia's largest cellphone operator. These days, however, the Tajudin name has lost some of its magic. He wants to bail out of the airline, but may not get the government to pay the price he wants for his stake. And after competition ravaged its market share and profits, TRI is struggling with debt, with no official relief in sight.

"TRI is considered a private-sector operation and will not get much help," says a source close to the government. In the early 1990s its share price shot up 190-fold over 25 months. But now the company owes $842 million, has defaulted on $150 million in bond payments, and has seen its stock plummet. To some analysts, the company's travails demonstrate what is in store for some leading Malaysian companies if state support evaporates.

TRI has not received the kind of help that Time Engineering, another well-connected group with telecom interests, has. A unit of the Renong Group once owned by the dominant UMNO party, Time recently got new capital from the Khazanah state-run investment fund. Creditors also agreed to defer bond payments to next year. Time's fiber-optic cable network is cited as a key strategic resource, which is why the company got special attention. Another reason: an attractive offer from Singapore Telecom to inject capital and expertise without demanding management control. Time declined SingTel's bid, but only when Khazanah pledged to come in.

TRI doesn't have such compelling reasons to command Kuala Lumpur's help. Its stock price is down on rumors that it may not get enough support for its plan to restructure bonds falling due, including the $150 million in default. There is also talk that its 21% partner, Deutsche Telecom, was pulling out. Industry insiders say barely 40% of bondholders have accepted the restructuring proposal, far below the 90% needed. Though TRI insists it will get enough nods, few analysts expect a deal before mid-November.

Even with debt relief, TRI still needs to raise a lot of cash. "They would have to sell Celcom or part of it," predicts an analyst at a foreign brokerage house. TRI is also hoping an economic turnaround will boost earnings and its market value, which is far below its debt load. Deutsche Telecom could increase its stake, but insiders think the Germans won't throw more money in.

Could Time help TRI? Some analysts see possibilities in the coming awarding of 3G high-capacity cellular Internet franchises. "The government will dangle the carrot of Third-Generation licensing to force consolidation," says Yeoh Keat Seng of Shamsul Shamsudin of Jardine Fleming in K.L. expects the government to issue just three of the coveted licenses. One may be offered as an incentive for Time and TRI to set up a joint-venture 3G operation. In the end, connections may still save the day.

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