Bloomberg  reported that Axiata is planning to raise at least USD500m in an  IPO  of  its  tower  assets  by  2014.  While  the  plans  are  not  new,  the amount of new funds to be raised is. We are generally  positive on this news, as it suggests that there is still momentum in the monetisation of Axiata’s tower assets. Also, new funds will help the tower spin-off grow further as this business is quite capital intensive.  
 
- Axiata  tower  IPO  by  2014?  Axiata  is  reportedly  planning  to  raise  at least  USD500m  in  an  IPO  of  its  tower  assets,  according  to  Bloomberg. CIMB,  Goldman  Sachs  and  JP  Morgan  Chase  are  said  to  be  working with Axiata to list its tower assets next year.  

- Building  up  war  chest  for  acquisition?  Axiata’s plan  to  list  its  tower assets  is  not  new.  Focus  Malaysia  had  in  February  reported  that  the tower IPO may have a market value of MYR8bn-10bn. But the new funds to  be  raised  from  the  IPO  is  a  new  development,  which  suggests  that Axiata  may  position  its  tower  assets  with  a  growth  angle  via  possible M&A of other mobile operators’ tower portfolio or outright acquisitions of smaller  independent  tower  companies.  This  is  positive  as  the  tower business can be quite capital intensive.

- Still unclear how minorities will get a slice of the tower spin-off. It is still unclear how existing Axiata shareholders will get a slice of the tower spin-off.  On  one  hand,  existing  shareholders  may  possibly  receive shares in the tower spin-off via a distribution in-specie exercise. On the other  hand,  existing  shareholders  may  be  given  limited  preferential allocation of only a certain number of shares in the tower spin-off. In any case, we gather that Axiata would like to position the tower company as an independent entity yet retain some degree of control.  

- Investment  case.  Maintain  NEUTRAL  on  Axiata  with  unchanged  sum-of-parts  (SOP)  FV of MYR6.55. Axiata’s FY13 growth outlook remains challenging due to underperformance at XL Axiata (EXCL IJ; NEUTRAL, FV:  IDR4,600),  but  growing  dividends  will  likely  support  the  stock. Monetisation of its tower assets is a longer term catalyst. 

Source: RHB