Parties agree on mega telco merger


PETALING JAYA: Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.com Bhd have finalised the proposed merger between Celcom Axiata Bhd and Digi, a union that will see the telco giants generating synergies ranging from cost savings to financial flexibility for future capital expenditure (capex) rollout.

Rakuten Trade Sdn Bhd head of equity sales Vincent Lau said the finalisation of the deal is indeed “good news” for the market, considering the uncertain economic environment currently.

“It’s finally happened and that’s a good thing, considering all that’s happening right now as the country is tackling the Covid-19 pandemic.

“The merger will create synergies for the parties to cut down on costs and allow them to leverage each other’s brands for long-term growth,” he told StarBiz.

Following the completion of a due diligence exercise, Axiata, Telenor and Digi announced yesterday they had signed transaction agreements for the merger.

The proposed merger is expected to be completed by the second quarter of 2022, subject to the relevant approvals.

In a joint statement yesterday, Axiata and Telenor said the signing signified a confirmation of intent to establish a commercially stronger and more resilient digital converged service provider.

The parties said the merged entity (MergeCo) will serve an estimated 19 million customers with revenue of RM12.4bil, earnings before interest, taxes, depreciation and amortisation of RM5.7bil, net profit of RM1.9bil and free cash flow of RM4bil.

“Axiata and Telenor will be equal partners with a 33.1% ownership stake each in MergeCo,” the parties said, adding that MergeCo will continue to be listed on Bursa Malaysia.

“Targeted to be among the five largest companies listed on Bursa Malaysia in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50bil.”

The parties said the integration planning phase will include further detailed work on synergies and business plan of MergeCo, adding that initial estimates indicate potential value accretion through cost and capex synergies of around RM8bil on a net present value basis.

“MergeCo will see the combination of the scale, experience, competencies and financial strength of both global telecom groups with the market knowledge of two well-established local companies.

“Uniquely positioned to address Malaysia’s increasing digital service adoption and expectations of better connectivity, MergeCo will have the capabilities to leverage on technology advancements and attract global internet-based partnerships to deliver a wider range of innovative solutions to its customers.”

The parties added that MergeCo will be well-placed to fuel the implementation of digital technologies at a time when 5G, Internet-of-Things, artificial intelligence and cloud computing are coming together to accelerate digitalisation across all reaches of society.

“MergeCo will also aim to make an investment of up to RM250mil over five years in building a world-class innovation centre to be established in Kuala Lumpur with the aim to catalyse the 4IR digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution.”

In the same statement, Axiata president and group chief executive officer Datuk Izzaddin Idris said he looked forward to delivering better value and choices to benefit society, especially in bridging the divide in rural areas and assisting the home and enterprise businesses take advantage of new opportunities within a digitally accelerated environment.

“We are charting good progress in the ongoing merger exercise with Telenor and Digi and remain aligned in our intentions to deliver a strong value proposition that will enable our customers to participate more confidently as the nation transitions towards a digital economy.

In a separate statement, Digi said the merger will result in Axiata receiving newly issued shares in Digi and a cash consideration of RM1.7bil from Digi as new debt in MergeCo.

“As part of an ownership equalisation in Digi under the terms of the merger, Axiata will also receive close to RM300mil from Digi’s largest shareholder, Telenor.”

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