Axiata, Telenor sign $15b deal to merge Malaysian telecoms units

FILE PHOTO: A general view of the Axiata headquarters building in Kuala Lumpur, Malaysia, October 1, 2019. REUTERS/Lim Huey Teng/File Photo

Malaysian telecoms firm Axiata Group Bhd and Norway’s Telenor ASA sealed an agreement to merge their mobile operations in Malaysia in a $15 billion deal, forming a new market leader in the competitive Southeast Asian nation.

The companies had said in April that they were in advanced talks to merge Celcom Axiata Bhd and DiGi.Com Bhd, and both parties would each own 33.1% of the merged firm.

The combination of the country’s second and third largest mobile services providers will create a company estimated to have annual revenue of $3 billion, with core profitability of $1.4 billion from a subscriber base of about 19 million, Axiata and Telenor said in a statement.

Celcom Digi Berhad will remain listed in Kuala Lumpur, in line with a preliminary agreement announced in April.

The implied enterprise deal value is based on Digi’s share price of 4.18 ringgit as of Friday, a source familiar with the deal said.

The deal comes at a time when mobile operators are facing pressure on profits in a challenging industry environment. Celcom Digi’s main competitor would be the largest telecoms operator in the country, Maxis Bhd.

“The merged entity will be commercially stronger and more resilient with greater scale to invest in improved network coverage and quality,” Axiata and Telenor said.

“(It) will also have greater scale which will allow it to drive 5G implementation in the consumer segment in the future,” Axiata said in a stock exchange filing.

The transaction, which is subject to regulatory and other approvals, is expected to be completed by the second quarter of 2022.

As a result of the deal, the companies plan cost cuts and savings on capital expenditure with a net present value amounting to about $2 billion, Telenor said in a statement.

Axiata said it entered into the agreement with Digi, where 100% equity interest of Celcom Axiata, would be transferred to Digi for a total consideration of 17.76 billion ringgit ($4.3 billion).

Digi said the merger would result in Axiata receiving newly issued shares in Digi and a cash consideration of 1.7 billion ringgit from Digi as new debt in the merged company.

“As part of an ownership equalisation in Digi under the terms of the merger, Axiata will also receive close to 300 million ringgit from Digi’s largest shareholder Telenor,” it said in a statement.

Axiata said last Tuesday it hoped to seal the merger deal within days or a week having completed due diligence.

Morgan Stanley was the sole international advisor to Axiata on the deal, while Citi advised Telenor.

Reuters

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.