Telco sector in M&A mode

WITH 2026 touted to be a big year for mergers and acquisitions (M&As) in Malaysia, the telecommunications sector is not to be left out.

While it may not match the 2022 mega merger between Celcom and DiGi, there still could be some notable action.

In fact, it is this very merged giant that is again likely to be part of the telecommunication company M&A scene.

One reason is Telenor.

Having earlier indicated its intention to exit Asia to focus more on its Nordic core markets, the Norwegian telco giant followed that up with its sale of its Pakistan business last December.

Then just weeks ago, it said it inked an agreement to divest its remaining stake in Thailand’s True Corp.

Telenor officials have said that it would not rule out selling its stake in CelcomDigi if the opportunity arises.

Recall that following the Celcom and Digi merger, Telenor and Axiata Group Bhd each own 33.1% in CelcomDigi and had joint management control.

Today CelcomDigi is largely board run by a professional board and management team, although both Telenor and Axiata have equal representation on the board.

But who would buy Telenor’s block in CelcomDigi, which costs around RM12.8bil based on CelcomDigi’s current share price.

The cost of funding that, say at a 5% per annum, would work out to an interest payment of RM640mil every year.

CelcomDigi should report a net profit of RM1.7bil for financial year 2025 (FY25) (going by consensus forecast).

Moreover, 33.1% of that is equivalent to RM562mil, slightly less than the interest payments.

But CelcomDigi’s earnings before interest, tax and depreciation and amortisation, an indication of its cash flows, is projected to hit RM5.8bil this year.

CelcomDigi paid out RM1.65bil in total dividends in FY24.

Both Axiata and Telenor should have received RM546mil each, another indication of the value of Telenor’s stake.

Those basic numbers aside, there could be strategic reasons why a party would want to buy Telenor’s stake in CelcomDigi.

Here’s a speculative idea: what if one interested party was Charoen Pokphand (CP) Group?

A CP-linked company is the one forking out US$3.9bil to buy Telenor’s stake in True Corp, making the CP group the single largest shareholder in True Corp.

(CP Group was already the second largest shareholder in True Corp prior to this sale).

CP Group, Thailand’s largest conglomerate, is no stranger to the Malaysian market.

In 2020, it bought Tesco’s operations in Malaysia and rebranded it as Lotus’s Malaysia, which is today a major supermarket chain.

It also has agro‑industry and food production businesses, like poultry farming, feed mills, and aquaculture in Malaysia.

Interestingly, last March, True Corp appointed long-time Telenor stalwart Sigve Brekke as group CEO. Brekke, who ran Telenor’s Asian operations and then became global head, is very familiar with the Malaysian telco market, even serving on the board of DiGi in the past. While there are no new public pronouncements by True Corp about any intention of venturing into Malaysia’s telco scene, True’s data centre arm (True IDC) has publicly stated intentions to be a regional hub for South-East Asia, aiming to serve customers from across Asean and expand cloud and digital infrastructure services beyond Thailand.

And with Malaysia already claiming that data centre hub space, could this spur True Corp’s interest to venture into Malaysia via the leading mobile operator CelcomDigi?

Additionally, going back some 10 years, True Corp boss Suphachai Chearavanont told the media about plans to make True a regional mobile player.

(Suphachai is the son of Dhanin Chearavanont, the longtime patriarch of the Chearavanont family and main figure behind CP Group.

(It is Suphachai’s company which is acquiring Telenor’s stake in True Corp).

Another suitor for Telenor’s block in CelcomDigi could be Axiata itself.

Axiata is in the midst of disposing of its 63% in Edotco Group Sdn Bhd, which could fetch it some RM4 to 6bil (in pro‑forma net cash after debt) going by some analysts estimates.

Analysts are positive about this sale, which is in line with Axiata’s “value illumination” idea, where it hopes to divest its infrastructure and digital businesses and focus on high‑yield telco assets and technology businesses.

Furthermore, Axiata explains that it sees CelcomDigi Bhd, XLSmart, Robi, Dialog and Smart as long‑term strategic businesses, while it looks at Edotco, Link Net, Boost and ADA as monetisable assets.

Going by that, would it make sense for Axiata to gain a strong hold on CelcomDigi by buying out Telenor, which is now presumably a willing seller?

In its replies to StarBiz 7, Axiata had this to say about this prospect: “CelcomDigi is already a long‑term strategic business for Axiata, jointly controlled and integral to our connectivity leadership in Malaysia.

“As one of the region’s largest and strongest operators, it anchors our Malaysian market presence and remains a key driver of resilient cash flow.

“With the 5G wholesale arrangement expected to be finalised soon, the asset will benefit from greater clarity and long‑term stability.”

While that doesn’t really answer the question, nothing is to be ruled out.

But actually speculating about Axiata buying Telenor’s stake in CelcomDigi is premature as the edotco sale has yet to be completed.

It is understood that while the sale process has been whittled down to two players, namely Macquarie Group and Squared Capital (with the Employees Provident Fund potentially partnering them), pricing continues to be a challenge for this deal.

However, it may not only be the CP Group and Axiata who could be interested in Telenor’s stake in CelcomDigi.

Japan’s NTT has been expanding into Asia although the acquisitions have been more tech-focused.

There’s always Singapore Telecommunications Ltd (Singtel) but its parent Temasek is already invested in U Mobile Sdn Bhd. And never rule out China-based parties. China Mobile is a major shareholder in True Corp today, with a 7.8% stake.

All said, perhaps the biggest stumbling block for any interested party buying into Malaysia’s telco scene must be the overhang on the sector brought about by the 5G fiasco created by Digital Nasional Bhd (DNB).

As one analyst puts it: “A key prerequisite for Telenor’s exit would be greater clarity around CelcomDigi’s exposure to DNB”.