Shareholders could derail Axiata-Telenor merger

All shareholders including Khazanah, the EPF and PNB have the right to vote for this, says president

by NG MIN SHEN / pic by MUHD AMIN NAHARUL

AXIATA Group Bhd’s main shareholders could still kill the proposed merger with Telenor ASA’s Asian operations even if both telecommunication giants ink a binding agreement, which is expected by the end of the third quarter of this year (3Q19).

Axiata president and group CEO Tan Sri Jamaludin Ibrahim does not anticipate much difficulty prior to the signing of the binding agreement unless the parties unearth something upsetting during the due diligence exercise.

“For now, we’re conducting due diligence on them (Telenor) and them on us. I do not expect any surprises, but you never know, we might notice a big liability that hasn’t been captured earlier or vice versa, or there could be some major event along the way that could derail the merger.

“I don’t see much derailers before we sign. After we sign, there are approvals required from all the countries we operate in. We also have to go through an EGM, where all shareholders including Khazanah Nasional Bhd, the Employees Provident Fund (EPF) and Permodalan Nasional Bhd (PNB) have the right to vote for this. So, the government of Malaysia, through these companies, will also have a say.

“That could be a potential derailer, but we have to be positive about it,” he said at a press briefing after the group’s AGM in Kuala Lumpur yesteday.

Axiata and Telenor announced earlier this month their plans to combine their Asian operations in a new merged global entity, under which local telecommunications companies (telcos) Celcom Axiata Bhd and Digi.Com Bhd will also be merged into the country’s largest mobile operator.

Axiata, which is the sole parent of Celcom, is mainly owned by sovereign wealth fund Khazanah with a 36.93% stake. The EPF, PNB and Retirement Fund Inc (KWAP) hold 15.93%, 12% and 4.07% in Axiata respectively.

Norway-based Telenor controls 49% of Digi, while the EPF owns a 13.74% stake. PNB and KWAP also hold 7.61% and 3.4% respectively in Digi, according to Bloomberg data.

However, Jamaludin said he is “optimistic” on the success of the proposed merger, given that Khazanah has given its approval.

Following the expected signing of a binding agreement within the next three to six months, Axiata and Telenor will require another six to nine months to procure the respective approvals from all the countries they operate in, thus placing the birth of the merged global entity sometime around 3Q20.

Jamaludin said both parties have met with Malaysian Communications and Multimedia Commission (MCMC) chairman Al-Ishsal Ishak and Communications and Multimedia Minister Gobind Singh Deo over the matter.

He declined to reveal whether the initial meeting indicated approval from the regulator and the minister.

“All I can say is that they understood why we’re doing this. The MCMC chairman has encouraged us to come up with an early proposal, even before we sign the deal, so that if there are issues, they’ll give us feedback.

“It’ll be more like an industry consultation. We’ll present it within the next one to two months, informally. The formal (proposal) will happen only after we sign the (binding) agreement,” he said.

He added that the “national aspiration of the merged company will continue” in response to queries on whether the merger would result in a dilution of national interest, given that Telenor is anticipated to hold 56.5% of the merged global entity, while Axiata will control 43.5%.

Meanwhile, the US’ latest sanctions on Chinese giant Huawei Technologies Co Ltd is not expected to affect Axiata’s 5G rollout plans in Malaysia.