Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily on May 7, 2019

KUALA LUMPUR: Axiata Group Bhd announced yesterday that it is in talks with Norway’s Telenor Group to merge their operations in Asia.

Assets that have been put on the negotiating table are both parties’ mobile service operations and telco towers that spread across Asean and Southern Asia.

The merged entity (MergedCo) will be the largest operator in Asean, with a pro forma revenue of RM50 billion and a net profit of RM4 billion, said Axiata president and group chief executive officer (CEO) Tan Sri Jamaludin Ibrahim at the media briefing announcing the merger yesterday.

MergedCo will have its operations in Malaysia, Thailand, Sri Lanka, Pakistan, Indonesia, Cambodia, Myanmar, Bangladesh and Nepal. It will be headquartered in Malaysia, including the Tower Co and innovation centre, said Jamaludin.

The news confirms yesterday’s report by The Edge Financial Daily titled “Axiata and Telenor in talks to merge Asian operations”.

On the home front, in a nutshell, Axiata’s wholly-owned Celcom Axiata Sdn Bhd will be injected into DiGi.Com Bhd, which is currently listed on Bursa Malaysia. This will put MergedCo into the market leader position with a combined subscriber base of 20.8 million in Malaysia.

He revealed that Telenor and Axiata are working towards finalising the agreements in relation to the proposed transaction by September following related due diligence, and he expected to complete the regulatory approvals in the next six to nine months after the completion of the proposed transaction.

The establishment of MergedCo is to happen by the third quarter of next year, according to him.

Jamaludin noted that MergedCo will not be a monopoly in the industry, despite having more than half of the domestic mobile service market.

“This industry is a converged industry. We are only one-third of the pie,” said Jamaludin, explaining that the whole industry now not only comprises the mobile network, but also data, fixed line and others.

 

Dual listing in pipeline

Eventually, MergedCo will seek dual listing on two stock exchanges, including Bursa Malaysia. However, there is no timeline for the initial public offering (IPO) yet.

Jamaludin claimed that the IPO listing will be one of the largest in the Asean region without revealing the expected value of the IPO.

Based on equity value, it is anticipated that Telenor will own 56.5% of MergeCo while Axiata will own 43.5%, with both parties acknowledging that this is preliminary subject to adjustments and due diligence, said Jamaludin.

“The potential non-cash combination of telecom and infrastructure assets aims to create a leading, well-diversified Pan-Asian telco with operations in nine countries with a population of close to one billion people and 300 million customers, and to become one of Asia’s largest mobile infrastructure companies operating approximately 60,000 towers across Asia,” said Telenor in a statement to the Oslo Stock Exchange yesterday.

Telenor will be appointing the CEO of MergedCo, while Axiata will be appointing the chairman.

 

Khazanah gives blessing

Jamaludin said that Axiata’s largest shareholder Khazanah Nasional Bhd has given its “blessings” on the proposed merger.

Khazanah holds a 37.14% stake in Axiata.

“Khazanah welcomes the proposal to create further value for all Axiata shareholders as announced by the company,” Khazanah managing director Datuk Shahril Ridza Ridzuan told The Edge Financial Daily.

“In addition, there are potentially significant benefits to the economy, consumers, and the country as a whole, especially from having the operational headquarters based in Kuala Lumpur and the establishment of a proposed regional innovation centre.”

“It is a positive development for Malaysia as it shows that we have companies that are globally competitive, and that foreign investors have confidence in Malaysia and the economy,” he added.

Focusing on 5G, Internet of things, artificial intelligence, robotics and others, explained Jamaludin that the regional innovation centre will create more than 100 jobs and is expected to see RM100 million investments annually.

Jamaludin stressed that there will be no job cuts with the proposed MergedCo. He, however, noted that they will be looking to implement a voluntary separation scheme for its employees, adding that the company will also retrain the employees into other areas, including for the regional innovation centre.

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