Axiata-Telenor mega merger talks to create global champion, confirms The Edge Financial Daily report

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KUALA LUMPUR (May 6): Axiata Group Bhd said today it is in discussions with Telenor ASA to establish a new merged global entity to create a global champion comprising their diverse market-leading portfolio of telecommunication, digital and infrastructure assets. This confirmed The Edge Financial Daily report today that the two telecommunications companies are in talks to merge their operations in Asia.

In a filing with Bursa Malaysia today, Axiata said the proposal involves combining Axiata's and Telenor's Asian operations within their Asean and South Asian markets.

"The proposed transaction aims to enable the new merged entity (MergedCo) to bring together Axiata and Telenor's Asian operations unique combination of scale, competencies and vast experiences in leading and managing emerging and frontier markets. The parties have also stated their stipulated intention to list the MergedCo on Bursa Malaysia and another major international exchange within the next few years. As a global champion, the MergedCo will now include a Malaysian champion, a global tower company (TowerCo), and the largest innovation center in this region, all to be headquartered in Malaysia.

"While the shareholding will reflect the relative asset valuation, resulting in Telenor being the majority shareholder of the global MergedCo anticipated to own 56.5% and Axiata will own 43.5%, both parties acknowledge that this is preliminary subject to adjustments and due diligence. This proposed transaction will be based on the principle of merger of equals between Axiata and Telenor. The intention is to create a commercial board governed company, combining the best-in-class talents, capabilities and culture of Axiata and Telenor in the MergedCo group," Axiata said.

According to Axiata, the international MergedCo will have pro forma revenue of more than RM50 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) of more than RM20 billion and controlled operating subsidiaries in nine countries with a combined total population of more than one billion people and 300 million customers.

Axiata said the MergedCo will be one of the largest telecommunications groups in the region in terms of value, revenue and profit, and with a strengthened balance sheet to support aggressive growth and expansion in the consumer, home, enterprise and Internet of things (IoT) and artificial intelligence (AI) market segments.

Axiata said that in addition to the pan-Asia presence, the proposed transaction is intended to create a true Malaysian champion by merging Celcom Axiata Bhd and Digi.Com Bhd to become the largest mobile telecommunication network operator in Malaysia.

"The proposed transaction will also potentially lead to the formation of a global top five mobile infrastructure player, by combining edotco Group Sdn Bhd (edotco), the existing Axiata TowerCo which is currently the 13th largest TowerCo globally, and Telenor's Asian tower assets. Lastly, the opportunity will establish the largest innovation center in the region to include IoT and 5G, as well as a global talent factory.

"Telenor and Axiata will work in good faith towards a binding agreement in relation to the proposed transaction by end of quarter three, 2019 following the due diligence exercise. Should the parties agree to sign an agreement, the eventual transaction will be subject to approvals by shareholders and regulatory bodies, amongst others," Axiata said.