KUALA LUMPUR: The merger and acquisition (M&A) between PT XL Axiata Tbk. (XL), a 66.5%-owned subsidiary of Axiata Group Bhd, and PT Axis Telekom Indonesia has been approved by Indonesia’s Ministry of Communications and Informatics (MoCI).

“We are delighted and thank the government for this strategic decision on the part of the regulator, which has given its blessing to our M&A plan with Axis,” XL president-director Hasnul Suhaimi said in a statement yesterday.

Axiata noted that MoCI’s approval affirms the Indonesian government’s support for the consolidation of the industry in the market there and allows XL to overcome the spectrum constraints it currently faces, as well as provide additional capacity for service growth that will benefit XL and Axis customers.

“This is a milestone in our consolidation journey and we believe we remain on track to finalise this process. The regulator’s approval is a highly positive step in the continued development of our company’s business, the industry and consumers”, Hasnul said.

Axiata said, a key purpose of the merger is to acquire spectrum, especially to support the expansion and quality of voice and data services.

Under the terms agreed for the merger, XL will retain all Axis’ 15MHz spectrum in 1800MHz. However, XL will return the 10MHz of the 2100MHz (3G) spectrum licence range to the Indonesian government.

This decision takes into account XL’s additional tranche of 2 x 5MHz in 2100MHz, bringing its total spectrum to 15MHz for 3G services.

Following the merger, both XL and Axis customers will be able to enjoy better telecommunication services and a wider network reach, benefiting some 65 million users.

The merger will also improve XL’s asset utilisation, especially for XL BTS towers and network equipment — with a significant reduction in future capital expenditure and operational expenditure through the re-use or redeployment of Axis’ assets. 

Axiata said the proposed acquisition is expected to contribute positively to the future earnings of the group in the medium to long term. However, the actual impact will depend on the successful integration of Axis’ operations and the realisation of synergies from the proposed acquisition.

Axiata president and group chief executive officer Datuk Seri Sri Jamaludin Ibrahim said: “With the approval we can now move on to the next important task, that of a successful integration between XL and Axis.”

XL said it will finalise all the necessary steps to meet the regulatory requirements, which include obtaining approvals from the relevant regulatory bodies as well as XL shareholders through an extraordinary general meeting.

On Sept 26, XL entered into a conditional sale and purchase agreement with Saudi Telecom Co to purchase the entire issued share capital of Axis for a cash consideration of US$100. It will also settle debt incurred by Axis worth about US$865 million (RM2.8 billion)

Upon the completion of the proposed acquisition, 95% of Axis’ issued share capital will be held by XL.

This article first appeared in The Edge Financial Daily, on December 3, 2013.