Axiata's merger plan gets Bangladesh court's nod, but is the price too high?

epa03655118 A cyclist rides in front of closed shops advertising telecommunications services company Bharati Airtel, in Mumbai, India, 09 April 2013. According to reports, the Delhi high court allowed Bharti Airtel to continue with its 3G Intra-circle roaming facilities till its final order. EPA/DIVYAKANT SOLANKI

KUALA LUMPUR: Axiata Group Bhd and Bharti Airtel Ltd have received the approval of Bangladesh’s High Court to merge their operations in the country. However, the merger fee and spectrum charge will come to almost RM320mil in total.

In a filing with Bursa Malaysia on Thursday, Axiata said the High Court division of Bangladesh’s Supreme Court had fixed the merger fee at 100 crore taka (RM52mil).

The merged entity is also required to pay the Bangladesh Telecommunications Regulatory Commission (BTRC) an additional 507 crore taka (RM264.6mil). This is the difference between the Robi Axiata spectrum price paid in 2011 and the price paid by Airtel Bangladesh for spectrum in 2005.

The Bangladesh government had in July decided to charge this 607 crore taka as the merger and spectrum fees.

Higher charges recommended by the BTRC earlier to the Bangladesh government had threatened to derail the proposed merger between Axiata’s and Bharti’s operations (Robi Axiata Ltd and Airtel Bangladesh Ltd, respectively). The commission, according to various reports, had eyed 750 to 900 crore taka (RM390mil to RM472mil) in fees and charges.

At Axiata’s AGM in May, its president and group chief executive officer Datuk Seri Jamaludin Ibrahim told the media that the company would not be in a position to proceed with the merger if the fees imposed exceeded a certain threshold. “We will not proceed with the whole merger based on the earlier asked (amount),” he said.

In its statement to the exchange on Thursday, Axiata did not say whether it would appeal, or consider to appeal, for a lower amount.

The court in Bangladesh also ruled that spectrums assigned to Robi Axiata and to Airtel Bangladesh respectively prior to the proposed merger would continue to be used by the amalgamated company for the time period stipulated in the letter of assignment or license.

The merged company -- referred to by Axiata as “MergeCo” in its statement -- may renew these spectrums in accordance with applicable rules and regulations at the time of the renewal, the court said.

If Robi decides to return any spectrum to the BTRC, the court has fixed the value of the returned spectrum at 10 crore taka (RM5.2mil) per MHz per year.  

Apart from the court’s conditions, the proposed merger is subject to the fulfilment of conditions stipulated in the Axiata-Bharti agreement signed in January.

Axiata had originally targeted to complete the merger transaction, with the government approval, in the first half of 2016. In the latest announcement to Bursa Malaysia, it gave the fourth quarter of 2016 as the new deadline.

Robi Axiata and Airtel Bangladesh have also agreed to further extend their agreement (for the second time) from Sept 26 to Dec 31, 2016, or such other date as the parties may agree.

On completion of the merger, Axiata will hold a controlling 68.7% stake in the combined entity, while Bharti will own 25%. The remaining 6.3% will be held by existing shareholder NTT Docomo of Japan.

Robi will be the surviving corporation post-merger.
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