KINIBIZ’ list of those who will make an especial mark in the new year.
Arul Kanda, 1MDB president and group executive director
By Khairie Hisyam
Tasked with fixing the mess that is 1MDB, Arul has quickly become the face of a burning controversy. His restructuring plan is underway but what will be the next step?
Between January and December 2015, Arul Kanda Kandasamy went from a relative unknown to becoming the face of the long-brewing controversy that is 1Malaysia Development Bhd (1MDB).
Essentially, all eyes remain on Arul Kanda’s next moves as the man in charge of what seems to be a rogue government-linked company trying desperately to salvage its position after years of mismanagement and questionable dealings.
The issues surrounding 1MDB are not new and began with its very first joint venture in 2009, which raised numerous questions. Over the years the company had undertaken various questionable deals and it went into 2015 having bled cash every year despite boasting nett profits on paper for all except financial year 2014 ended March 31, 2014.
A former banker and debt restructuring specialist, Arul Kanda’s appointment as president and group executive director on Jan 5, 2015 was clearly into the role of a firefighter, considering 1MDB got into the current mess over the stewardships of his two predecessors.
Despite that last distinction, however, none of his predecessors had ever been so publicly associated with the 1MDB saga, which was only catching public attention at large in 2015. As questions abound on who should ultimately take responsibility over 1MDB’s shenanigans before he came into the picture, it would be remiss to ignore the ongoing state of affairs at the company.
While past CEOs of 1MDB had lain low, an approach reflected in the stone wall of silence staring back at the media covering 1MDB for years before 2015, Arul took a drastically different tack.
Arul, a former debating champion, strategically employed his charisma in various media interviews to explain the company’s position on various criticism, though critics maintain that he keeps sidestepping pressing questions on vital specifics throughout.
Similarly the 1MDB media team seemed to have come awake with a start, at various points of the year even issuing press statements on a daily basis compared to past years during which such press statements from the company were as rare as a wild-range unicorn.
On the operational part, Arul’s professional track record as a debt restructuring expert showed. A little over a month into the job, he rolled out a debt rationalisation plan to turn the ailing company around. Among others it involves a halt on all new deals, and monetising 1MDB’s power assets as well as its real estate development projects.
By end-2015, various aspects of the rationalisation plan were coming into fruition. On Nov 23, 1MDB signed a share sale agreement to dispose of its entire power assets to state-owned China General Nuclear for RM9.83 billion, a deal which includes the takeover of associated debts and cash balances held by the power companies.
Meanwhile 1MDB is also close to selling off a 60% stake in its Bandar Malaysia development project, which boasts a gross development value (GDV) of as high as RM40 billion, according to past news reports.
It remains to be seen how 1MDB will proceed with the Tun Razak Exchange development, its only other core business left, going forward. While it had not stated any intention of selling a majority stake as it did with Bandar Malaysia, the company had been selling off parcels from the development site, which also carries an estimated GDV of RM40 billion.
Coming back to Arul, he remains the man to watch in 2016 for his now-central role amid the entire 1MDB controversy, which by now has spread beyond the company’s debt issues into the realm of power plays and political stability of the nation itself.
Recall that on July 2, 2015 the Wall Street Journal reported some US$700 million in funds found its way into bank accounts controlled by the prime minister in 2013, allegedly through companies linked with 1MDB along the way. The prime minister has denied wrongdoing while 1MDB has denied transferring money to the prime minister.
However, investigations into the matter had stalled following a cabinet reshuffle and administrative actions by the government involving transfers and appointments at the institutions conducting the investigation.
As far as 1MDB’s debts are concerned, however, the sale of 1MDB’s power assets itself raises concerns. While the deal essentially takes off RM18 billion from its RM42 billion in borrowings, it also takes away a core business that contributes roughly 80% of 1MDB’s annual revenue.
How will 1MDB manage its remaining RM24 billion in borrowings or so going forward, given it only has so many assets to sell in order to raise cash?
These are among the questions that must be hanging in the air for Arul in his attempts to repair the situation. How far does his mandate go and what will be his next move in trying to put out the fires started by his two predecessors? Malaysians at large will likely find out in 2016.
Wan Zulkiflee Wan Ariffin – Steering Petronas through oil crisis
By Khairul Khalid
With plunging oil prices and profits, 2015 has been a baptism of fire for new Petronas chief Wan Zulkiflee Wan Ariffin. Can he steer the state oil giant safely through the market upheaval?
When Wan Zulkiflee Wan Ariffin took over the helm of Malaysia’s only Fortune 500 company last April, the global oil and gas (O&G) landscape was undergoing its most dramatic change in more than a decade.
At the heart of the problem was the extraordinary collapse of crude oil prices from around US$115 in June last year to between US$40-US$50 currently. The supply of oil had overtaken demand. There was a glut in oil supply, causing the steep drop of prices. This forced O&G companies worldwide to rethink their strategies and prioritise their long-term plans. Petronas was not exempt.
Last January, it announced a 25%-30% cutback on operating expenditure and a 25% reduction on capital expenditure.
Last February, just before the exit of Wan Zul’s predecessor Shamsul Azhar Abbas, Petronas posted an unprecedented RM7.3 billion in losses and wrote down a massive RM22 billion in impairments for the fourth quarter of financial year 2014 (4Q14).
It was a shock to the system that the industry seemed ill-prepared for. In its previous 11 quarters prior to 4Q14, Petronas had accumulated RM177 billion in earnings, averaging more than RM16 billion in quarterly profits.
In May, Wan Zul presented Petronas’ first results under his watch. Revenue and profit after tax (PAT) fell 21% to RM66.2 billion and 39% to RM11.4 billion respectively year-on-year (y-o-y) for 1Q15.
The downward trend continued in 2Q15. Petronas posted RM11.1 billion in PAT, down 47% y-o-y, as revenue for the quarter fell 28% y-o-y to RM61.3 billion.
Last November, things got even worse. Petronas’ PAT for 3Q15 fell a shocking 91% y-o-y to RM1.4 billion as revenue dropped 25% y-o-y to RM60 billion.
For the first nine months of 2015, Petronas’ revenue plummeted 25% y-o-y to RM187 billion, while PAT was down 57% y-o-y to RM24 billion, with RM5.4 billion written down as impairments.
Wan Zul even admitted that Petronas was having cash flow problems that would force it to dip into its RM126 billion cash reserves.
“I do not expect our cash flow from operations this year to meet our capital expenditure and dividend commitments. We will have to draw on our cash reserves,” said Wan Zulkiflee at the 2Q15 results.
In October, he reaffirmed three of Petronas’ massive investments, despite prevailing market uncertainties: its US$30 billion (RM130 billion) liquefied natural gas (LNG) project in Canada; the RM60 billion Refinery and Petrochemical Integrated Development project in Pengerang, Johor; and two floating LNG vessels being constructed in South Korea for US$4.5 billion.
But perhaps it is in Wan Zul’s handling of Petronas’ controversial Canadian project that will be under most scrutiny next year. The project was delayed several times due to protracted negotiations with the British Columbia government for better financial incentives.
Petronas also encountered resistance from a band of natives in British Columbia claiming that the project would pose grave dangers to marine habitat in the area.
Pacific NorthWest LNG, the Canadian joint-venture company that is majority owned by Petronas, has given the green light for this mammoth project to go ahead, pending an environmental assessment approval by the British Columbia government.
But falling LNG volume and prices were blamed for its falling profits in 2015. Many analysts are seriously questioning the viability of Canadian ventures – not just Petronas’, but others as well.
Would Canadian LNG projects still make financial sense under current economic conditions?
Petronas had started the Canadian project when prospects were rosier. In 2012, Petronas purchased Canadian-based O&G company Progress Energy for US$5 billion, giving it shale gas assets in northeastern British Columbia.
Wan Zulkiflee said that Petronas will go ahead with its Canadian venture, citing that it is a long-term play that could last 20 to 25 years.
There are also wider implications of a weaker Petronas on Malaysia’s economy. Wan Zulkiflee stated there aren’t enough Petronas jobs currently to support the local O&G industry and urged companies to consolidate fast to survive.
Petronas contributes an estimated 30% to the Malaysian government’s total revenue. In 2013, it contributed RM73.4 billion to the federal and state governments. It has contributed more than RM800 billion to government coffers since its inception.
The government has been trying to reduce Malaysia’s dependence on oil revenue in recent years. Petronas has announced a lower dividend of RM16 billion to the government in 2016, compared with RM26 billion in 2015.
“The outlook is not very rosy. A return to US$100 oil is far away… We need to adjust to the ‘new normal’ of low oil prices,” said Wan Zul at a conference in May.
Wan Zulkiflee’s credentials aren’t in doubt. He is a well respected 33-year veteran of Petronas. Prior to his ascension, he was the company’s chief operating officer and executive director.
In 2016, all eyes will be on what is probably the hottest corporate seat in Malaysia and how Wan Zulkiflee steers Petronas through the new normal.
Zeti Akhtar Aziz – Ringgit and governance guardian
By G. Sharmila
Although she has been governor of BNM for more than a decade, it is only recently that Zeti Akhtar Aziz has been in the limelight for her somewhat controversial actions concerning 1MDB.
The 68-year-old Zeti Akhtar Aziz has been governor of Bank Negara Malaysia (BNM) for 15 years during which she has faced many tests. This year the tests started when things began to unravel at the self-styled, government-backed strategic investment fund 1Malaysia Development Bhd (1MDB).
She remained silent as various parties launched criticisms at her for not saying much more than “domestic issues” when asked why the ringgit continued to fall.
Even more criticised her for not making a stand on the 1MDB issue and its impact, including on the ringgit which was weakening faster than any other currency in the world and saw levels lower than those seen during the Asian financial crisis of 1997/1998.
However, even Zeti’s patience hit its limit when news repeatedly surfaced of problems at 1MDB (believed by many to be the main reason behind the depreciating ringgit), causing her to break her silence on the subject in September.
The governor caused a stir when she said during an event in Putrajaya in September that the ringgit would recover once 1MDB’s issues had been resolved, which predictably led to the fund responding with a statement expressing its disappointment with her remarks.
However, Zeti refused to let the matter rest. On Oct 9, BNM said in a statement it had revoked three permissions granted to 1MDB under the Exchange Control Act 1953 for its US$1.83 billion investments abroad.
It said it had also issued a directive under the Financial Services Act to 1MDB to repatriate the amount back to Malaysia and submit a plan to the central bank for this purpose. The central bank said it had concluded after investigations that 1MDB had obtained permission for its investments with inaccurate information or incomplete disclosure of material information.
Ten days later, BNM released another statement, further suggesting that Zeti would not let up on investigations into 1MDB. The statement said that the central bank is empowered to take enforcement action on parties that are found to have transgressed or have not complied with the Financial Services Act. This was after the Attorney-General’s Chambers cleared 1MDB of any criminal wrongdoing.
At the time of writing, there have been no further statements by the central bank on 1MDB. However, given the governor’s strong opinions on the subject, she may just go ahead and have the central bank take civil action against 1MDB for alleged mismanagement of its funds.
The big question now is whether Zeti will pursue the matter further into 2016, seeing that she is due to retire in April next year. At this juncture, all indications are that she will.
What is clear is that while the 1MDB issue remains unresolved, the country still needs Zeti as the central bank governor to persuade the government-backed fund to be accountable for its alleged wrongdoings and to impart some measure of confidence to the ringgit.
The even bigger question remains, however, if Zeti will be reappointed as governor by Prime Minister Najib Abdul Razak if she does indeed decide to defer her retirement. Zeti hinted at retirement in August when her term as governor ends in April next year.
Next year will mark 16 years she has been governor of BNM and 35 years with the central bank itself. When asked during a press conference in August if she planned to stay on next year as governor in the interest of national service, Zeti had said then “we will cross the bridge when we come to it”.
If Zeti decides to stay in the interest of national service, it won’t be the first time she has been asked to serve her country. Although she has won numerous awards in her role as BNM governor, most people remember her for her efforts in “saving” the ringgit during the Asian financial crisis in 1997/1998. To recap, in September 1998, she was appointed the acting governor of BNM to lead the team on exchange controls and was later appointed governor in May 2000.
Zeti has come a long way since starting out as deputy manager in the central bank’s economics department in 1985. It will be interesting to see if Zeti continues to pursue the 1MDB matter in the interests of again “saving” our weak currency and restoring investor confidence.
Abdul Wahid Omar, Minister in the Prime Minister’s Department in charge of economic planning
By G. Sharmila
Seasoned banker and corporate figure Abdul Wahid Omar’s name is being bandied about as the most worthy replacement for current central bank governor Zeti Akhtar Aziz. If the predictions come true, he could become one of the few technocrats in a powerful position.
Appointed to his position in June 2013, Abdul Wahid is no stranger to finance, having extensive experience in the banking sector. His name has cropped up more than once in banking circles recently as the one tipped to be the next Bank Negara Malaysia governor once current governor Zeti Akhtar Aziz retires in April 2016.
Talk is that the technocrat, one of the few in the cabinet, is extremely loyal to current Prime Minister Najib Abdul Razak. This quality, coupled with his experience in finance and economics, makes him the ideal candidate to take Zeti’s place, some say.
Zeti, on the other hand, has indirectly challenged the administration’s governance, through her pursuit of investigations into government-backed strategic investment fund 1Malaysia Development Bhd, which has made her “unpopular” of late.
It is no wonder then that Abdul Wahid is seen as a worthy successor to Zeti, given that in his current position he oversees several important government agencies such as the Economic Planning Unit, Public-Private Partnership Unit, Department of Statistics, Ekuiti Nasional Bhd and Talent Corp Malaysia Bhd, to name a few.
His other roles as minister include chairing the prime minister’s Special Economic Committee, which was formed in August this year to address specific issues such as the declining ringgit, maintaining the stability of the financial industry and improving investor confidence in the capital markets.
Prior to his appointment to the cabinet, he was the president and chief executive officer (CEO) of Maybank, a position he had held since May 2008. While at Maybank, he was also conferred with the Asian Banker 2013 Leadership Achievement Award for Malaysia for his outstanding work at the bank. He is also a former chairman of The Association of Banks in Malaysia.
Other awards he has won in recognition of his exemplary leadership in the corporate sector are Malaysia’s CEO of the Year Award from Business Times/American Express in 2006 and The Edge Value Creator Award 2013.
Prior to joining Maybank, Abdul Wahid was the group CEO of Telekom Malaysia Bhd from July 2004 until its demerger with Axiata Group Bhd in April 2008. He was also formerly the managing director and CEO of UEM Group Bhd and executive vice-chairman of PLUS Expressways Bhd.
Maybank wasn’t his first foray into the banking sector, however. Abdul Wahid actually joined the banking sector in 1988 when he joined Bumiputra Merchant Bankers Bhd’s corporate banking department. He subsequently took on senior management positions at the Amanah Capital Group, becoming chairman of Amanah Short Deposits Bhd and also a director of Amanah Merchant Bank Bhd.
Despite his unassuming demeanour, Abdul Wahid is a strong contender for the central bank governor’s position given his various economic-related roles and involvements. It will be interesting to see how he runs the central bank after current governor Zeti retires in April 2016.
Salim Fateh Din – New kid on the PDP block
By Khairul Khalid
MRCB’s win in the RM9 billion LRT3 project was one of the year’s biggest corporate surprises. Will Salim Fateh Din, the company’s driving force, have more aces up his sleeve in 2016?
This year Salim Fateh Din, group managing director of MRCB, took the property developer into the big leagues of transportation infrastructure.
In September, the property developer was jointly awarded the project delivery partner (PDP) of the RM9 billion Light Rail Transit Line 3 (LRT3) project. It is a first for the company in a sector that is usually dominated by local construction and engineering giants such as MMC and Gamuda.
Could it be a major breakthrough for Salim who took over the helm of MRCB just over two years ago? It may open doors for the company to undertake more large-scale infrastructure projects and diversify its revenue streams.
The LRT3 win raised eyebrows, not least because MRCB’s 50:50 joint-venture partner in the project was George Kent, a company better known for manufacturing water meters than infrastructure construction. Many are still sceptical of George Kent’s capabilities and scant track record in such a huge undertaking.
Regardless, the MRCB-George Kent partnership stands to earn PDP management fees of 6% on the RM9 billion total job value (or approximately RM540 million), assuming that the PDP is not directly undertaking any construction packages for the project.
LRT3 is expected to be completed by August 2020 and was just one in a slew of big wins for MRCB in the second half of 2015.
After the LRT3 award, MRCB announced three more major property and infrastructure deals in October. These included a RM1.6 billion land swap contract for the National Sports Centre (NSC) in Bukit Jalil, a RM270 million joint venture to acquire land in Cyberjaya for development, and a RM3.2 billion project management and turnkey contract for Kwasa Land.
The NSC deal is a privatisation agreement between MRCB’s 85%-owned subsidiary Rukun Juang Sdn Bhd and the Ministry of Youth and Sports, for the refurbishment of the NSC. The project is seen as a fast-track job for the 29th SEA Games in 2017.
The project includes the upgrading of facilities at NSC for RM499 million and the construction of new sports complex, sports mall, convention centre, multi-storey car park, hostel, sports museum, library and youth park for RM1.1 billion.
The RM3.2 billion deal signed with Kwasa Utama Sdn Bhd is for MRCB to provide management services for the development and construction of a commercial development named Kwasa Utama measuring 29.8 acres on the Kwasa Damansara development. The contract duration is for 12 years from 2016 to 2027.
The Cyberjaya deal is a 70:30 joint venture between MRCB and Cyberview Sdn Bhd (a wholly-owned subsidiary of the Finance Ministry) to acquire several parcels of land under Area 1 in Cyberjaya measuring around 53 acres. The purchase price is estimated to be RM348.75 million (RM150 psf) with a RM5.3 billion gross development value for the land.
Investors have responded positively to MRCB’s big wins in the second half of 2015. Its long-suffering share price has been revitalised.
Up to early December, MRCB’s stock has spiked almost 40% since the LRT3 win and subsequent triple deals. If Salim can keep up MRCB’s momentum going into the new year, he will be one of the corporate figures to watch in 2016.
Christoph Mueller, CEO of Malaysia Airlines Bhd
By Stephanie Jacob
Christoph Mueller is the man tasked with saving Malaysia Airlines. Since May, he has overseen staff cuts and route rationalisation. In 2016, he will have to focus on rebuilding the brand and righting the airline’s yield levels.
By the end of 2014, Malaysia Airlines Bhd was in the doldrums. The country’s flagship carrier and the pride of the nation had seen two tragedies which resulted in the loss of 537 lives overall. And its woes were compounded by the fact that it was a financial mess.
It was clear that the then chief executive officer Ahmad Jauhari Yahya’s time was up and Malaysia Airlines needed a paradigm shift to get it soaring again. Khazanah Nasional Bhd came to the carrier’s aid with a RM6 billion rescue package and among its moves was to identify and appoint a new man to oversee the revival and what some were calling the hardest job in the airline industry.
Khazanah ultimately settled on Christoph Mueller who at that time was heading up Aer Lingus, an Irish airline. The German has a reputation for turning around legacy airline lost causes such as Lufthansa and Aer Lingus, which is likely why he got the job. It could also possibly be that no one else wanted to take on such a project.
Mueller took up the post on May 1, 2015 and since then has set about executing his plan to get Malaysia Airlines working well again.
In line with Khazanah’s rescue plan, among Mueller’s first orders of business were to reduce the employee headcount and to rationalise the carrier’s expansive route network. These issues were seen by analysts as the “low-hanging fruit” which Mueller could tackle quickly to help cut costs.
Over the first six months of Mueller’s administration, Malaysia Airlines has cut 6,000 jobs and either dropped entirely or reduce frequency to its less profitable routes.
With the easy, or perhaps the more obvious, cost-cutting measures taken, the real challenge starts now. In 2016, Mueller will have to address two big issues: regaining the confidence of air travellers and fixing Malaysia Airlines’ yield problem.
The impact of MH370 and MH17 on travellers who would normally fly Malaysia Airlines has been substantial. While in Malaysia support for the national carrier spiked after the two tragedies, elsewhere, especially in places like Australia and China, sentiment is so poor that many say they will not even use the airline as a last resort.
Gaining back some of this confidence will simply take time and a return to the stellar safety record Malaysia Airlines once boasted. But it will also require an excellent marketing campaign to repair a brand which is in crisis.
Mueller has suggested that a total rebranding might be necessary and more details are expected before the end of the year. Going forward it is imperative that he has the best people handling this. Malaysia Airlines cannot afford marketing gaffes like the “bucket list promotion” one it had last year in the aftermath of MH370.
Malaysia Airlines’ product is also in need of improvement and upgrade. Prior to the tragedies in 2014, the carrier was very much living on past glories and its market share was being chipped away by airlines offering not just cheaper but also better products.
Mueller has identified this and has plans to address it. Malaysia Airlines recently announced that it was refurbishing its A330-300 business class seats to be in place by April 2016. Mueller has also indicated that he wants to improve catering and the airline’s lounges. His challenge here will be upgrading the product while managing the cost, given that the latter has been identified as a key problem area.
The other, possibly larger, problem area that a succession of Malaysia Airlines’ bosses have not been able to fix is the yield issue.
Under Ahmad Jauhari, the airline experimented with a “load active, yield passive” strategy. It basically meant the airline dropped its fares in order to fill up its planes, in the hope that the larger number of passengers would make up the loss in fares. For it to work, costs also had to be very low. But as a full-service carrier, Malaysia Airlines ended up charging too little, could not cover its costs and the strategy failed badly.
Managing yield will be the make-or-break factor for Mueller in 2016. The question is whether he can succeed where his predecessors have failed. At stake is more than just his reputation as a turnaround man. The fate of a much loved national carrier and an important economic asset also hangs in the balance.
Syed Mokhtar Al-Bukhary – The king of everything
By Sherilyn Goh
In 2015, Syed Mokhtar Al-Bukhary finally laid his hands on NCB Holdings Bhd, which owns one of the two main container ports in Port Klang. This adds to the list of his port assets, controlling all ports in the peninsula but one. With an estimated wealth of RM5.23 billion, what does Malaysia’s eighth richest man have up his sleeve in 2016?
On Oct 19, 2015, MMC Corp Bhd has proposed to acquire 53.42% of NCB Holdings Bhd’s shares from Permodalan Nasional Bhd and Amanahraya Trustees Bhd for RM4.40 per share, in a deal valued at RM1.1 billion.
Should the deal materialise, MMC – which has been aggressively accumulating the country’s port assets – will see its stake in NCB raised to 83.55% from 15.73% previously, triggering a mandatory general offer to acquire the remaining shares it does not own, effectively bringing the port operator private under the MMC flagship.
Talks of his ambition to take over NCB have, in fact, been surfacing from as early as March 2013. Syed Mokhtar subsequently staked his claim on NCB for the first time, after MMC announced its intention to acquire from MISC Bhd a 15.73% stake for RM221.98 million cash in November 2014.
NCB Holdings controls one of the two container port operators in Port Klang, competing with Bursa-listed Westports Holdings Bhd helmed by the Gnanalingam family as both ports share the same hinterlands.
Companies linked to Syed Mokhtar already controlled three other ports in Peninsular Malaysia, namely MMC’s wholly-owned Johor Port, 70%-owned Port of Tanjung Pelepas in Johor, and Penang port which he has taken private from the Ministry of Finance in December 2010.
What will Syed Mokhtar do with all his maritime logistics business is something to look out for in 2016. Analysts are of the view that Syed Mokhtar will list his port holdings under a new entity, thus creating the largest listed port operator on Bursa Malaysia.
Syed Mokhtar may be media-shy on the surface, but the tycoon is nonetheless aggressive in his seemingly endless pursuit of expanding his corporate empire.
Well known for his penchant towards monopoly business, the reclusive tycoon however does not sit on the board of the companies that he owns but rather accumulates strategic assets through a number of his private vehicles.
Looking back the past year, the re-listing of Malakoff, the biggest Southeast Asian independent power producer, has definitely added sparks to the local IPO scene. Malakoff was first taken private by Syed Mokhtar in 2007 under the flagship of his 51.76%-owned MMC Corp Bhd, in a deal which valued the company at RM16.8 billion at that time.
On another note, a wholly-owned subsidiary of MMC Corp Bhd is also set to take over the RM1.5 billion Langat sewage plant project, previously awarded to MMC-Sumitomo Consortium.
In the property sector, Tradewinds Corp Bhd is also looking at turning the 12.2 acre land area in Jalan Belfield, which it acquired for RM258 million into a RM3.8 billion high-end residence development.
In addition to that are a slew of proposed real estate projects including Tradewinds Square in Jalan Sultan Ismail, Menara Tun Razak in Jalan Raja Laut, and Perdana Quay in Langkawi. The company is also engaging potential partners to develop its existing land banks in excess of 4,000 acres across the country.
Syed Mokhtar, who owns the MPH Group and business newspaper The Malaysian Reserve, is also battling Utusan Melayu to buy Finance Ministry-owned Percetakan Nasional Malaysia Bhd (PNMB) for an undisclosed sum.
PNMB has contracts worth nearly RM500 million from government ministries and departments. It is the security printer for passports and other government documents, with a contract to supply MyKad to the Home Ministry and the Royal Malaysian Customs Department.
Come April 2016, it will mark the second year since Padiberas Nasional Bhd (Bernas), which controls the importation of rice in the country, was taken private. It was mounted with backlash due to a sole individual allegedly reaping profits of a controlled sector at the expense of the nation.
Bernas was subsequently de-listed with the government’s support in April 2014 with the promise that it would be re-listed after a restructuring exercise. More than one year since, little has been heard about the prospects of a relisting, with no timeline given on Bernas’ restructuring exercise.
Can one Syed Mokhtar own too many things? Apparently not, as whenever the resourceful and well-connected businessman sets his eyes on something, reality has proven time and again that he will most likely get what he wants. Looks like detractors can only continue to ask the same question into 2016.
Morten Lundal – The ‘serial transformer’
By G. Sharmila
Under Morten Lundal’s leadership, DiGi.Com Bhd grew from one of the smallest telcos to become a leader in the prepaid segment. He then left DiGi for UK-based telco Vodafone Group Plc, and returned to Malaysia in mid-2013 to Maxis Bhd, where he has been instrumental in the telco’s comeback.
Maxis Bhd chief executive officer (CEO) Morten Lundal is an old hand at transformation, bringing with him 16 years of telecommunications company (telco) industry experience when he joined Maxis in 2013.
Many in the telecommunications industry remember him for the work he did at DiGi when he was its CEO from 2004 to 2008. Under his leadership, the telco’s mobile revenue market share, earnings and share price increased significantly, ultimately making DiGi a leader in the mobile prepaid segment.
Before DiGi, Morten joined Nordic mobile operator Telenor Group in 1997 and had held several CEO positions including for the Internet Division and Telenor Business Solutions as well as the position of executive vice-president for Corporate Strategy with the company.
The Norwegian surprised many when he left DiGi to join UK-based mobile operator Vodafone Group Plc, where he became regional CEO responsible for eight operating companies in Central Europe and Africa. He was then appointed as group chief commercial officer for the Vodafone Group, a member of the executive committee responsible for commercial activities at the group level.
Locally, rumours began circulating that Lundal was being courted by Maxis to become its CEO in June 2013, shortly after fellow former DiGi executive Johan Dennelind declined the CEO position in May that year, citing personal circumstances.
Lundal’s appointment as Maxis CEO was announced formally in mid-July that year, and shortly after he joined Maxis in October 2013, he was tasked with the transformation programme of the telecom giant, which had been losing market share to its rivals.
At the time, Lundal was quoted by the media saying that although Maxis was not in trouble, it was “stuck in negative momentum”. Reports further quoted Lundal acknowledging that the company had lost its touch with customers and that he wanted to make it appealing to customers again.
After a relatively lukewarm 2014, Maxis’ transformation programme began to bear fruit. Its first quarter results ended March 31 this year showed a growth in its subscriber base despite the intense competition in the sector.
Its third quarter results showed a particularly strong quarter, driven by solid prepaid growth and stable core postpaid, driven by higher data usage among its customers. The company said at the time that its capital expenditure would be between RM1.2 billion and RM1.3 billion for this year to cater for higher data traffic growth.
It is clear also that Lundal wants Maxis to be in the limelight as much as possible, as evidenced by the telco’s Nov 11 invitation to Celcom Axiata Bhd and DiGi.Com to join its chief technology officer Morten Bangsgaard at an open forum on 4G on Nov 23 to discuss adopting common technical standards for 4G. In a statement on Nov 11, Maxis said it would reveal its 4G definitions and performance statistics as well, proving that the telco wants to be as transparent as possible regarding its 4G coverage.
Clearly, Lundal’s methods seem to be working at Maxis, where once scepticism was rife that he wouldn’t be able to effect any real and lasting change. It will be interesting to see in the coming year if he will successfully manage to take Maxis to new heights via its transformation programme.
Azran-Osman Rani – The disruptor
By G. Sharmila
After Azran Osman-Rani’s messy exit from AirAsia X Bhd in January this year, he surprised the media industry when he resurfaced as iflix Malaysia’s CEO in mid-April. iflix is up against established brands such as Media Prima, Astro and Telekom Malaysia in the TV space. Azran however has shown that he is unafraid.
iflix Malaysia is setting the pace for a change in the domestic TV scene, by catering to the burgeoning cry for on-demand TV and movie viewing among TV viewers.
It offers access to thousands of movies and TV shows on multiple devices at a mere RM100 a year, which is threatening to fragment a TV market long dominated by pay-TV operators such as Astro Malaysia Holdings Bhd (Astro) and to some extent HyppTV, which is owned by Telekom Malaysia Bhd.
Leading the charge in disrupting Malaysia’s TV landscape via iflix Malaysia is its chief executive officer (CEO) Azran Osman-Rani, formerly CEO of public-listed AirAsia X Bhd. Despite a messy exit from AirAsia X in January this year, Azran has showen that he has moved on by returning to his roots – the media industry.
Prior to joining AirAsia X, Azran was the senior director of business development at iflix’ current competitor Astro, where he led media, creative content and technology investments and joint ventures across Southeast Asia, India and China.
Azran has said in previous media interviews that he plans to use the skills he learned from AirAsia X and revolutionise the TV industry. He appears to be doing that already in Malaysia, where iflix launched in May 2015, shortly after Azran joined the company.
In October, when asked how iflix competes with traditional TV players, Azran told KINIBIZ that iflix looks at pain points from traditional players, and uses the Internet to create offerings that are simpler, more affordable and much easier to consume. “We change the basis of competition, instead of trying to compete with traditional incumbents on their turf with ‘channels’ and ‘set-top boxes’,” he said at the time.
From a price perspective, iflix does seem to have an advantage, as its yearly subscription fee is priced much lower than what Astro or HyppTV currently offer on a yearly basis. The basic Astro package for instance is about RM42 a month and a Jumbo Pack HyppTV package is about RM63 a month and is only available to Unifi subscribers.
iflix’ detractors have said that the service is somewhat constrained by bandwidth limitations. However, this does not seem to have stopped Malaysians from using the service.
Azran told KINIBIZ he is excited about the rapid initial take-up rate in Malaysia and other markets since its launch and that iflix has over 500,000 accounts activated across the Asean region. He mentioned also that he is expecting even bigger adoption next year.
Standing in his way is pay-TV operator Astro, which has been aggressively marketing its own on-demand service called OD, launched in October. However, we think that under Azran’s leadership, iflix will give players like Astro a run for their money, given his past track record with AirAsia X.
Recall that Azran joined AirAsia X as its founding CEO at age 36 in 2007, when the company was “the underdog” of the airlines industry with just a dozen employees. By the time he left the company, it had become a formidable competitor to Malaysia Airlines, with 2,500 employees and over US$1 billion in revenue in 2014. AirAsia X was also the first long-haul low-cost carrier to be listed in 2013.
In his current capacity as iflix Malaysia CEO and the iflix Group chief commercial officer, it will be interesting to see how far and how fast he takes iflix in the Southeast Asian region (iflix is already available in Malaysia, Thailand and the Philippines).
Given that global on-demand provider Netflix has pledged to enter the Singapore market in 2016, this will be no easy feat. However, with his track record as a disruptive entrepreneur, he might just succeed in the increasingly fragmented and highly competitive TV industry.
Mustapa Mohamed – Minister of International Trade and Industry
By Stephanie Jacob
Mustapa Mohamed has become the face of TPP in Malaysia. Now that the participating nations have reached an agreement, Mustapa’s job in 2016 is to convince Malaysians that on balance, the deal is a good one.
On Oct 5, 2015, five years of negotiations over the Trans-Pacific Partnership (TPP) finally came to a conclusion with the 12 participating nations announcing that they had reached an agreement. The official statement from the Malaysian government came via the Minister of International Trade and Industry (MITI) Mustapa Mohamed.
Parliament will debate whether or not Malaysia becomes a signatory to the TPP agreement, probably in January or February 2016. And whatever the outcome, for Mustapa, it will be a legacy-defining year.
Mustapa has been at the helm of MITI since 2009, and in his time he has overseen the negotiation and conclusion of several free-trade agreements, but none has been as comprehensive and significant, or has drawn as much criticism, as the TPP.
The minister is a strong proponent of the deal and he has faced feisty opposition from parties who oppose the deal for many reasons and wanted Malaysia to play no part in it. Mustapa has always stood firm in his belief that the potential benefit of the deal makes Malaysia’s participation necessary.
His stance has always been that Malaysia should negotiate to the best of its ability and once a deal or consensus is reached, Parliament should make a final decision on whether to become a signatory or not.
Critics of the TPP oppose the deal for various reasons which differ from country to country. In Malaysia many are worried that the TPP will affect the privileged position of bumiputera companies, state-owned enterprises and small and medium enterprises. There are also concerns that longer intellectual property exclusivity periods would result in the increase of medicine prices, and that Malaysia’s sovereignty will be threatened by the investor-state dispute settlement mechanism.
The TPP negotiation process has come with a steep learning curve particularly for Mustapa and his ministry. The initial lack of engagement with stakeholders lost them a lot of sympathy, caused unnecessary apprehension and made their job of selling the deal to the public a much harder task. All this was compounded by the fact that the deal was being negotiated in secret, which naturally fuelled a lot of distrust and scepticism.
But no one can accuse the ministry of not learning from its mistakes and trying to make amends. Mustapa is fond of saying that the days of “government knows best” have passed, and the ministry conducts regular briefing sessions for stakeholders and the media. Moreover, Mustapa often is present at these meetings.
Mustapa also took the unusual step of forming a bi-partisan parliamentary caucus on the TPP and agreeing to present the agreement for debate and discussion in Parliament. The minister has also emphasised that Parliament will finally decide if Malaysia becomes a signatory to TPP.
Technically this is not necessary by law, but Mustapa seems to understand that such a significant deal should only be decided after a robust debate, and arguably this makes him more in touch with public sentiment than most of his peers.
By agreeing to present the deal to Parliament, he has left himself nowhere to hide. It does seem more likely than not that Malaysia will sign on to the TPP agreement.
But if it is signed with the majority of Malaysians against it, Mustapa as its public champion will have to bear the brunt of a fallout. Yet presenting the deal to the public is the right move and the minister deserves credit for having the courage to do it despite the potential adverse effect it might have on his own political career.
MITI has already spent a lot of time and effort on the deal, but in many ways the hard work is just beginning. Now that the agreement text is available for public scrutiny, the ministry will be at the forefront of convincing the country that it is in our best interest to sign on.
It will also fall on him to convince those who stand to “lose” that the government will help them get back on their feet again. However, in this task he will need the support of the other ministries, something that has not always seemed forthcoming.
Mustapa has been honest in saying that a trade deal is a negotiation and, as in any negotiation, there will be winners and losers. He has said that he believes the pros outweigh the cons for Malaysia, and his job in 2016 is to convince the Malaysian public of this.