Celcom Malaysia said today its German partner Deutsche Telekom has filed for arbitration in a row over its planned merger with dominant fixed-line operator Telekom Malaysia.

DeTe Asia, a unit of Deutsche Telekom, holds around eight percent of shares in Celcom, the country's second biggest mobile phone operator.

Under the deal, Telekom is to buy out all other Celcom investors at RM2.75 a share but Deutsche Telekom, which bought the shares in 1996 at nine ringgit each, has been holding out for higher price.

Celcom said it received a fax from Deutsche Telekom late Monday after the German company filed a request for arbitration with the Secretariat of the International Court of Arbitration of the International Chamber of Commerce in Paris.

The German firm is seeking damages, Celcom said in a statement to the stock exchange.

The move comes ahead of a March 20 extraordinary shareholders meeting by Celcom and o­n March 31 by state-owned Telekom to seek approval to merge TM Cellular and Celcom.

Sticking to plans

Celcom said it was studying the documents served o­n it by Deutshe Telekom but pledged to stick to plans to hold its meeting o­n March 20.

"Based o­n legal advice, the company believes and is confident that it is in a strong position to resist (Deutsche Telekom's) claims in the arbitration proceedings," the statement added.

Celcom and Telekom counters were suspended in afternoon trade today, with a last traded price of RM2.58 and RM7.30 respectively.

Telekom has already spent some RM1.5 billion for its existing Celcom stake, and said last week it planned to issue around four billion ringgit in bonds to finance the acquisition of Celcom.

It said it expected the integration of TM Cellular and Celcom to be completed within 18 months.

The merger would create the country's biggest mobile phone firm, surpassing Maxis Communications, with a subscriber base of more than three million and a 40 percent market share. AFP