Axiata Group Berhad plans to acquire a 75 per cent stake in Digicel Asian Holdings Pte Ltd (DAH), a unit of Irish group Digicel Group Ltd (Digicel), to gain a controlling stake in Digicel Myanmar Tower Company Ltd.
The transaction will be settled via cash after adjusting for external borrowing and other working capital requirements, of which, based on the expected closing date of November 30, 2015, is expected to be approximately $125 million (MYR551.3 million), the company said in a stock exchange filing.
For the acquisition, Axiata’s tower company edotco Group Sdn Bhd entered into a conditional share purchase agreement with Digicel on Friday. The deal, subject to the relevant regulatory approvals, will be financed by edotco’s and/or Axiata’s internally generated funds and/or external borrowings.
Ireland-based news site Independent.ie noted that media and telecoms group Digicel stands to gain $60 million on the sale of its Myanmar unit, according to papers filed with the US stock markets regulator.
The Myanmar tower market is expected to be one of Southeast Asia’s largest and fastest growing telecommunication infrastructure service markets and the transaction pegs Digicel Myanmar at an enterprise value of $221 million (approximately MYR974.7 million), in line with market benchmarks for similar assets, said Axiata.
The acquisition will give edotco strategic majority control providing a platform in the tower industry within its geographic area of focus, and further solidify edotco as a leading infrastructure provider to the greater Southeast Asian telecom industry. It will also expand edotco’s footprint beyond Axiata’s existing operations, the statement read.
“This acquisition is a unique and exciting opportunity for edotco to establish a leading platform in the largely untapped Myanmar market,” it said.
“The Myanmar telecommunications industry, with its low mobile penetration, favourable regulatory conditions and high reliance on tower and infrastructure sharing, presents significant potential for the edotco business as it expands into the new market,” said edotco chief executive officer Suresh Sidhu in a statement.
edotco believes Myanmar to be a critical part of its long-term strategy and expects to invest further into the country, said Axiata.
It plans to bring innovative products and end-to-end managed services that it offers in the Asian region, from towers and transmission to operations and maintenance and potentially energy, into Myanmar, the Malaysia-based telecommunications group added.
Axiata president and group chief executive officer Jamaludin Ibrahim said the deal was in line with its long-term strategy to create new revenue streams apart from the core mobile business.
The transaction does not have any material effect on the earnings and gearing of Axiata Group for the financial year ending December 31, 2015, except for the material effect to the net assets.
edotco was set up in 2012 to unlock the value of Axiata’s tower and infrastructure assets by driving new levels of operational efficiency in passive infrastructure management and diversifying its revenue streams. The subsidiary manages over 14,000 towers across its countries of operations including Malaysia, Bangladesh, Cambodia, Sri Lanka and Pakistan.