Bigger is deemed better

FOR a company that was carved out of Telekom Malaysia Bhd (TM), much was expected from Axiata Group Bhd .

Its operating companies (opcos) offered growth to its investors and a regional footprint most companies would crave for. But that did not turn out the way it was envisaged. The reality is that the cellular communications business has taken a U-turn from its initial optimism.

Axiata has had a very patchy financial performance of late, thanks also to the fast saturating and competitive pressures that have cut into it.

For Norwegian-Telenor ASA, its business model was built on Asia. It has focused on Asia, unlike most European cellular companies, for two decades now with half of its revenue coming from Asia.

When the opportunity came to add a business that would turn the combined Axiata-Telenor Asia operations into a regional powerhouse, it was hard to pass, given the changing dynamics within the cellular business.

On its home ground, Telenor is also facing a campaign by Constructive Capital, a little-known activist investor from Norway. The state-owned telecoms operator has hinted it may bow to some of the activist’s demands, such as increasing its debt levels and looking at options for its mobile infrastructure assets, reports the Financial Times.

But is it a done deal?

“Not so,’’ says Axiata president and CEO Tan Sri Jamaludin Ibrahim.

He is determined to make sure that Axiata does not get the short end of the stick.

To realise the value and benefits of the merger, he cites three major components that will be ironed out before the deal is signed – the commercial aspect, including valuations, share ratios and financials; the people aspect; and details of the implementation of the merger.

“There are many things that I as CEO must take care of before we sign. My assurance to everyone is that, if they don’t agree with what we want, we don’t sign.

“At the point of signing, we will announce the line-up of the board and management of the units and merged company, and not at the point of completion of the merger,’’ Jamaludin says in an interview.

Both parties have given themselves till the third quarter of the year to hammer out a definitive agreement. A due diligence will be done to determine the final valuations. After the signing, the entire completion will be one year later, ie, the third quarter of 2020.

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