An historic moment in Malaysia’s telecommunication landscape indeed as Axiata Group Berhad and Telenor Asia have successfully concluded the due diligence and signed on the agreement paving the way for Celcom and Digi to merge and become the country’s largest mobile service operator.
This comes after announcements were made that both parent companies were in advanced discussions on the proposed merger, this intent was initially proposed last year however was shelved due to some concerns. However in April, the proposal was reintroduced and this time all parties were more optimistic leading to the signing of the agreements.
Based on figures released by Axiata, the new MergeCo will serve an estimated 19 million customers with revenue of RM12.4 billion, on valuation in terms of market capitalisation they will be close to a whopping RM50 billion. To give some perspective Telekom Malaysia is at RM22 billion while Tenaga Nasional is RM57 billion.
Both Axiata and Telenor will be equal partners with 33.1 percent ownership stake each in the new entity, and the said entity will continue to be listed on Bursa Malaysia Securities. This will evidently make it among the five largest companies listed on the stock exchange in terms of market capitalisation.
The integration planning phase will include further detailed work on synergies and business plans, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.
While mobile penetration is at saturation point, there is value in the future especially on Malaysia’s 2030 vision for digitalisation, the increasing digital service adoption and expectations of better connectivity, will place the yet to be named merged entity 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, IoT, AI and cloud computing are coming together to accelerate digitalisation across all reaches of society.
Axiata and Telenor have agreed to investment of up to RM250 million over five years in building a world-class Innovation Center to be established in Kuala Lumpur with the aim to catalyse the 4IR digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution. In taking advantage of new opportunities in the digital economy, the Innovation Center will conduct extensive research and development, develop 5G use cases, support local digital startups, and provide a platform to nurture the creation of a knowledge-based workforce in line with the MyDIGITAL aspirations.
Dato’ Izzaddin Idris, President & Group Chief Executive Officer of Axiata said, “We are charting good progress in the ongoing merger exercise with Telenor and Digi and 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 partner with Axiata to realize the potential of the proposed merged company. The telecom industry is at the beginning of an exciting digital shift, and new technologies are going to change how we develop and deliver services for both the private and public sector” says Jørgen A. Rostrup, Executive Vice President and Head of Asia in Telenor Group.
Leadership roles at the new entity has already been decided, with Dato’ Izzaddin Idris as Chair, Jørgen C. Arentz Rostrup as Deputy Chair, Idham Nawawi as CEO and Albern Murty as deputy CEO.
From the aspect of Malaysia’s national interests, Axiata and key Malaysian institutional shareholders are expected to own more than 51 percent. Axiata and Telenor also reiterated their commitment to protect employee welfare with no forced retrenchments.
