ON December 29, Telekom Malaysia Bhd (TM) issued a statement on its decision to exit Menara KL concession.

In the statement, TM stated that it had decided in October 2021 not to renew the Menara KL concession. It said the selection process for the new concessionaire was handled by the government. It referenced the subsequent changes to shareholding in its 3Q 2022 financial announcement to Bursa Malaysia.

In the announcement, on Page 9, item 8 (b) it stated: Following the group’s plan to exit from the concession agreement awarded to Menara Kuala Lumpur for the rights to the operation, management and maintenance of Menara Kuala Lumpur and Tower land as disclosed in note 23(b)(iii) to the group’s audited financial statements for 2021, the group has subsequently secured the relevant approvals accordingly.

The group did on October 31 complete a share purchase agreement to dispose its 100% interest in the tower for RM3.8 million, comprising of cash and the acquirer’s commitment to make good obligations associated to the concession.

As the announcement also made reference to TM’s Annual Report & CG Report filed on April 25, 2022, in Page 96 of the ‘Notes to the Financial Statements for the Financial Year Ended  December 31, 2021’ under item 23 of the heading property, plant and equipment, it states:

“During the current financial year, the group recognised an impairment of the RM22.9 million worth of property, plant and equipment of a wholly owned subsidiary following plans to exit from an existing concession that is due to end on April 30, 2022.

“The recoverable amount has been assessed based on the expected cash flows from the four months of activities following the financial year end as well as assessment of repurposing such assets for other portions of the group’s related business, which remain active subsequent to the cessation.”

According to Chapter 10.05 of the Bursa Malaysia main market listing requirement, no announcement of any transaction to the exchange is required where all the percentage ratios of a transaction are less than 5% and the consideration is satisfied in cash or unquoted securities.

However, if the listed issuer wishes to voluntarily announce the transaction, it must include the details of the consideration, particulars of the transaction, and a statement that the directors, major shareholders or person connected with them have no interest, direct or indirect, in the transaction.

As the concession transaction is less than 5% and the consideration was satisfied by cash, it is presumed that it is not necessary for TM to announce the change of ownership to Bursa.

However, the December 29 statement appears to confirm that TM “did make an announcement voluntarily” on November 22, where it was part of the Q3 results.

Except that the voluntarily announcement disclosed only the details of the consideration but not the particulars of the transaction, nor was there a statement that the directors, major shareholders or person connected with them have no interests, direct or indirect, in the transaction.

For a company that is a constituent on the FTSE Bursa Malaysia KLCI index, the investing public would have expect greater transparency and governance, where TM should also have disclosed the following as best practices in its reporting:

• justification for the RM3.8 million;

• expected gains or losses to the group; and 

• statement by the board of directors stating whether the transaction is in the best interests of the issuer.

The Q3 report made reference to Note 23(b)(iii) to the group’s audited financial statements, which it claimed announced TM’s plan to exit from the concession agreement awarded to MKLSB.

Note 23(b) (iii) does not appear to reveal in detail which subsidiary.

The note only described “a wholly owned subsidiary”.

Thus, investors will be asking which wholly owned subsidiary?

Was the omission of the subsidiary’s name deliberate in the disclosure?

Yes, since the tower and the land on which it is sited on belongs to the government and TM has informed the government that it no longer wishes to continue with the concession, the government can award the concession with its terms and conditions to whichever company it deems fit.

Why and what are the benefits for the new concession holder, Hydroshoppe Sdn Bhd?

Is it because it is easier for the holder to continue the concession?

Otherwise, if it is awarded to a new company, the government has to publicly tender out and evaluate new offerors other than Hydroshoppe Sdn Bhd?

In the above, Bursa needs to come forward and explained whether TM breached any rules under Chapter 10 of the main market listing requirements.

Separately, the TM board of should explain to the investing public how it arrived at RM3.8 million and whether it was in the best interests of TM and the shareholders.

In the December 20 statement, TM said it informed the government.

TM should also reveal who and which ministry which minister and ministry was privy to this information, and which ministry selected TM’s successor to the concession.

Until then the mystery continues. Hopefully, it is not buried forever as one of those unresolved issues in corporate Malaysia. – December 31, 2022.

* FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.