INCJ, Khazanah back SE Asian telecom spin-out

While much of the activity in telecom infrastructure sharing is focused on the rapidly growing mobile markets of South and Southeast Asia, but investors such as Innovation Network Corporation of Japan (INCJ) recognize there is no shortage of upside back home. Bringing expertise from Southeast Asia to Japan has therefore become a priority for the government-backed GP, with its latest investment targeting one of the region's largest operators.

INCJ is teaming up with Malaysian state fund Khazanah Nasional to invest a combined $600 million in Kuala Lumpur-based telecom infrastructure company Edotco. It will buy $400 million in primary shares with Khazanah acquiring $200 million in secondary shares. Axiata, a communications group operating across 10 Asian countries, will remain the majority shareholder.

For INCJ, the deal is part of a long-range plan to increase Japanese companies' exposure to telecom infrastructure sharing while opening doors for more Japan-Southeast Asia cross-border activity. This emphasis on an extended internationalization process - along with the good sentiment among Southeast Asian governments for Japanese investment - appealed to the Edotco as it shortlisted a pool of sovereign-like investors.

"What's interesting about INCJ is their strategic outlook as a much more patient, long-term investor," says Suresh Sidhu, CEO of Edotco. "They are also a party that have access to other technologies and partnerships that we might find useful. Secondly, in the footprint we operate in, Japanese capital has always been seen very positively, with Japan being a highly regarded provider of aid."

Founded as Asia's first regional tower company in 2012, Edotco operates across Malaysia, Cambodia, Myanmar, Sri Lanka, Bangladesh and Pakistan, with some 800 employees and a portfolio of more than 25,000 towers. It provides tower leasing, co-location, energy, transmission and maintenance services.

The deal represents the company's first equity raising and comes at a time when more tower assets are expected to come up for sale but Axiata is not in a position to leverage debt for the growth of its subsidiaries. Securing private capital in this scenario, however, was not merely a matter of identifying investors with a patient vision of frontier markets. Edotco says that by committing to tidy back-end management and presenting more transparent value, it was able to set up the global tower industry's largest equity private placement of 2016.

"It's a milestone for Edotco because it proves the business model is real, valid and progressing," adds Sidhu. "More importantly, although we're a private company and we'll stay private for a while, we're going to follow listing requirements in Malaysia on how we govern the company. We want to ensure investors and customers that we're running a well governed business that people can have faith in."

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• Topics
• Southeast Asia
• Expansion
• Technology
• Infrastructure
• Khazanah Nasional
• Innovation Network Corp. of Japan (INCJ)
• Malaysia
• Growth capital