Axiata, Telenor, Digi edge closer to a merger deal


AXIATA Group Bhd, Telenor Asia Pte Ltd and Digi.Com Bhd have concluded the legality of the proposed merger between Celcom Axiata Bhd and Digi, potentially forming the country’s largest mobile operator.

The merged entity, known as MergeCo, will serve an estimated 19 million customers with revenue of RM12.4 billion, Ebitda (RM5.7 billion), profit after taxation (RM1.9 billion) and free cashflow (RM4 billion).

“Axiata, Telenor and Digi have successfully concluded the due diligence exercise and signed the transaction agreements for the proposed merger between Celcom and Digi.

“Following the announcement on April 8, 2021, that Axiata and Telenor were in advanced discussions on the proposed merger, the signing today signifies a confirmation of the intent to establish a commercially stronger and more resilient digital converged service provider and leading Malaysian telecom operator positioned to drive Malaysia’s digital ambitions,” Axiata and Telenor said in a joint statement yesterday.

Axiata president and group CEO Datuk Mohd Izzaddin Idris (picture) said that should be a smooth transition following the integration between the mobile operators, Axiata is expecting improvement in Ebitda and cashflow margins in the combined firm which will be beneficial to its ongoing commitment of maximising dividend payout to shareholders.

“We are charting good progress in the ongoing merger exercise with Telenor and Digi and we will remain aligned in our intentions to deliver a strong value proposition that will enable our customers to participate more confidently as the nation transitions towards a digital economy.

“We look forward to delivering better value and choices to benefit society, especially in bridging the divide in rural areas and assisting the home and enterprise businesses, taking advantage of new opportunities in this digitally accelerated environment,” he said.

Upon completion, Axiata and Telenor will be equal partners with a 33.1% ownership stake each in MergeCo and that the entity will continue to be listed on the local bourse.

With a target to be among the five largest firms listed on Bursa Malaysia in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50 billion, taking into account the issuance of new ordinary shares in Digi.

Initial estimates have indicated a potential value accretion through cost and capital expenditure synergies of around RM8 billion on a net present value basis.

“MergeCo will see the combination of the scale, experience, competencies and financial strength of both global telecom groups with the market knowledge of two well-established local companies.

“Uniquely positioned to address Malaysia’s increasing digital service adoption and expectations of better connectivity, MergeCo will have the capabilities to leverage on technology advancements and attract global Internet-based partnerships to deliver a wider range of innovative solutions to its customers.

“It will be well-placed to fuel the implementation of digital technologies at a time when 5G, the Internet of Things, artificial intelligence and cloud computing are coming together to accelerate digitalisation across all reaches of society,” the firms said.

MergeCo is also planning to invest up to RM250 million over five years in building a world-class innovation centre, planned to be established in Kuala Lumpur to catalyse IR4.0 and digital transformation as well as strengthening the local ecosystem.

In the initial agreement, Axiata and Telenor have agreed to nominate Mohd Izzaddin as chair of the combined entity and Jørgen C Arentz Rostrup the executive VP and head of Asia for Telenor as deputy chair. Idham Nawawi will be appointed as CEO and Albern Murty as deputy CEO.

Barring unforeseen circumstances, the proposed merger is expected to be completed by the second quarter of 2022.