SACOFA's Key Objective To Provide Networking Telecommunication Infrastructures

SACOFA Sdn Bhd's key objective is to build and expand the provision of network telecommunication infrastructures in both the urban and rural areas in the state as well as building submarine cable network between Sarawak and Peninsular Malaysia. 

Minister of Finance II Dato' Sri Wong Soon Koh said that, the company, incorporated on 11th July 2001 is envisaged to be a full-fledged telecommunication service provider for the wholesale and retail telecommunication services.

"The company’s initial task was the to control unregulated proliferation of communication towers in the state and to facilitate communication growth in order to bridge the digital divide in the state through proper planning."

"SACOFA has been performing well within these parameters. However, in order to move towards achieving its long term strategic business objectives, SACOFA needs to re-look and strengthen its strategic positioning in the telecommunication industry," he said,

Wong said this during his winding-up speech for his Ministry during the State Legislative Assembly Siiting at Petra Jaya, Kuching here today.

"Strategic positioning of SACOFA in the telecommunication industry is becoming imperative and critical in order for SACOFA."

He pointed out that, SACOFA needs to re-strategize its business model and thus, to re-assess its technical, management and financial capacities adn in moving forward, SACOFA would require significant capital investment and funding in order to achieve its long-term strategic business objectives.

"Taking into account of all these strategic plan and business considerations, the state has made a decision to identify a Sarawak bumiputra based listed company, to participate in meeting the challenge of enhancing the business efficiency and competitiveness of SACOFA and in improving the infrastructure connectivity within the state and other parts of the Asia Pacific region."

"The Sarawak bumiputra based listed company ought to be an established, dynamic and progressive entity with good corporate governance, good management and professional track records," he said adding that most importantly, a company that has the technical, management and financial capacities to drive and open up SACOFA for bigger opportunities so as to achieve the aspiration of the state for SACOFA to become a Telecommunication and Technology flagship of the State.

"Strategically, the disposal of shares in SACOFA to an established private entity is part of Public-Private Partnership initiatives where SACOFA can leverage on the private sector expertise to expand its business reach which is currently only limited to wholesale business; and to enhance its ability to tap on regional expertise as well as regional growth opportunities."

"In this way, SACOFA can further expand its T&T business beyond the shore of the state of Sarawak and into the ASEAN and Asia Pacific Region."

He said that, the participation of this established private entity in the company will allow SACOFA to tap into, among other, enlarging and diversifying equity base; attracting and retaining better management team and employees; enabling cheaper access to capital and creating multiple financing opportunities.

"After taking all these consideration, the state the invited the Sarawak bumiputra based listed company, namely Cahya Mata Sarawak Group to the challenges and task of leading and managing SACOFA and to bring the company to the next level in meeting the tough challenges of the fast-moving new digital era, which will require significant capital investments and resources."

"At the same time, the state will still maintain significant equity stake with substantial remaining collective interest of 34% to participate in any future upsides potential; and has sufficient control in the company to provide the necessary “check and balance”."

"The CMS Group with strong track record in creating value, has market capitalization of around RM5 billion and net cash position of more than RM800 million," he said adding that, there is no issue of securing funding and incurring more CAPEX to enhance the business model for SACOFA.

"State government is to leverage on the expertise of this private sector on commercial part of the operations."

"The state will continue to focus on developing other prioritized and critical projects especially the rural transformation programmes which require huge funding," said Wong adding that, the state would continue with its efforts in providing water, electricity and infrastructure in the rural areas with the aim of reducing the development gap between the urban and rural areas.

"The pricing for the disposal is based on NET ASSET Value for the financial year ended 31 December 2013 and represent price-to-earning multiple of 7.23 times and price-to-book multiple of 1.08 times."

"In short, disposal price based on a consideration of 7.23 times of SACOFA earning and about 1.1 times profits per NAV and the disposal price is reasonable and in line with the market comparable for divestment of unlisted entities."

"To compare value of SACOFA versus the other telecommunication companies e.g Telekom, Maxis, Digi using price-earning ratios is a misleading facts as these companies are all listed entities while SACOFA with different spectrum of core business, is unlisted and does not warrant market pricing as market reach is not there."

"Its is a common market practice to adopt 30 to 50 percent discount over market pricing fir unlisted entity versus market pricing for listed entity."

"Notwithstanding all this, it is important to stress that the divestment transaction is conducted strictly in a professional and commercial manner where the state is to reap the benefit of its investment in SACOFA with price consideration above its investment cost," said Wong. - Sarawakiana