Malaysian telecoms firm Axiata Group and Norway’s Telenor ASA are in advanced discussions to merge their Malaysian mobile operations. The firms announced this information on Thursday. They will call the new company Celcom Digi.
Both companies said they were discussing the merger of Celcom Axiata Berhad and Digi.Com’s telco operations. The parties would have equal ownership, estimated at 33.1 per cent each.
Malaysian institutional investors would own at least 17.9 per cent of the new company’s shares. Thus, ensuring that the overall local ownership exceeded 51 per cent, Axiata said.
As part of the transaction, Axiata would firstly receive newly issued shares in Digi. Secondly, a cash consideration from new debt in the merged company of about US$400 million. And finally, a further US$70 million from Telenor Group, Telenor said.
“A transaction will realise synergies and provide value for shareholders in line with our strategy of further developing Telenor’s Asian portfolio,” Telenor said in a statement.
The Norwegian company, which is the largest shareholder in Digi, has other Asian operations in Thailand, Bangladesh, Myanmar and Pakistan.
Axiata said the merged company aimed to be “a leading telecommunications service provider in Malaysia in terms of value, revenue and profit”. Both Axiata and Telenor expect the company to have proforma revenue of about RM12.4 billion (S$4.02 billion).
It was expected to have earnings before interest, taxes, depreciation and amortisation of about RM5.7 billion. The company will have an estimated 19 million customers.
Telenor and Axiata had a previous deal.
Trading in shares of Digi and Axiata was suspended earlier in the day, pending the announcement.
In September 2019, Telenor and Axiata called off a proposed deal to create a telecoms joint venture with nearly 300 million customers across South and South-east Asia. Both companies blamed “complexities” for the deal not going further.
Last year, Telenor said it was combining its Asian operations into a single entity under new leadership. This action would better place them to pursue deals in the region.
Digi is Malaysia’s second-largest mobile services provider by subscribers. Axiata’s domestic unit Celcom is the third-largest. Above all, both entities are facing intense competition in their sector.
In conclusion, the mobile telecoms sector has seen massive changes within the region. We can expect to see more changes coming.