Axiata Group Bhd and Norway’s Telenor Group are in advanced discussions to merge their Malaysian telecom operations to create the largest mobile operator in the country.
The companies seek to combine Celcom Axiata Bhd and Digi.com to form Celcom Digi, in which they will have equal ownership of 33.1% each, Axiata said in a statement on Thursday. The combined entity will continue to be listed on Bursa Malaysia.
As part of the proposed transaction, Axiata will receive newly issued shares in Digi and a cash consideration of around 2 billion ringgit ($483.56 million), of which 1.7 billion ringgit will come from Digi as new debt and the rest from Telenor, the Malaysian firm said.
“As a commercially stronger and more resilient entity, Celcom Digi Berhad will help restore long-term growth and capacity to the industry, especially in terms of improved profitability. We will be well placed to further invest in research and innovation, and to improve our customer experience,” said Axiata president and group chief executive officer Izzaddin Idris in a statement.
The companies expect to complete the merger by year-end. Axiata and Malaysian institutional shareholders will own more than 51% of the merged entity.
Celcom Digi will have proforma revenue of about 12.4 billion ringgit ($3 billion), pre-merger EBITDA of approximately 5.7 billion ringgit ($1.38 billion), and an estimated 19 million subscribers.
“The proposed merger represents an important milestone in Telenor Group’s strategy to strengthen its Asian presence and create value in the region. The new entity will have size and financial capabilities to support Malaysia’s digital aspirations and lead industry development in a connected society,” Telenor Asia head and executive vice president Jørgen C. Arentz Rostrup said in a separate statement.
The merger announcement came after Axiata and Digi.com suspended trading in their shares on the local stock exchange. The pair had previously abandoned plans to merge their Asian operations in 2019 after several months of negotiation.
The then-proposed merger, which was called off by mutual agreement in September 2019 with both companies citing unnamed “complexities,” would have created the biggest telecom operator in Southeast Asia with 300 million customers across nine countries and $13 billion in annual revenue, according to a Nikkei Asia report.
The latest transaction will be subject to approval by Celcom and Digi shareholders, receipt of regulatory approvals and other customary terms and conditions.
Customers of the telco units will be able to maintain their choice of mobile operator brand, as both Celcom and Digi brands will continue as is after the merger.
As part of the transaction, Axiata and Telenor will also create an innovation centre.
Celcom is wholly owned by Axiata, one of Malaysia’s largest telecommunications providers with a market capitalisation of over $8 billion. Axiata is 37% owned by Malaysian state fund Khazanah Nasional. The company operates mobile services in Malaysia, Indonesia, Sri Lanka, Bangladesh, Cambodia and Nepal.
Telenor operates in Thailand, Malaysia, Myanmar, Bangladesh and Pakistan. It owns a 49% stake in Digi.com. Other substantial shareholders in Digi.com include EPF (14.9%), PNB (10.5%) and KWAP (3.7%).
After the merger, EPF will own a 9.8% stake in Celcom Digi. PNB (7%), KWAP (2.4%) and public market investors (14.6%) will be its other shareholders.