RHB Research said that the Statement Of Issues (SOI) raised by the regulator could potentially delay the timeline for completion of the proposed merger between Axiata Group and DIGI.Com (Digi). The merger was initially set for end 2Q22,” it said.
RHB sees the risk of a dissenting view as low following the Statement of Issues (SOI) raised by the regulator on the proposed merger of Axiata Group and DIGI.Com (Digi)
According to the regulator’s Guidelines on Mergers & Acquisition or GMA, the SOI sets out the preliminary findings from Phase 2 of the assessment process (Phase 1 was completed earlier) and will specify grounds on which it believes the merger may contravene or has contravened Section 133 of the Communications & Multimedia Act or CMA.
The SOI essentially means the regulator reached a view that it is likely to issue an unfavourable decision but reserves its final decision pending the feedback and inputs from the telcos on points raised. Both Celcom and Digi will continue to engage closely with the regulator and are required to respond to their SOIs within 30 days.
It said that the risk of a dissenting view is low in our view, as the regulator previously maintained an accommodative stance on market consolidations and the merger construct.
The research house said that the sell-down on Axiata Group and DiGi.Com (Digi) shares was a knee-jerk reaction following the Statement of Issues (SOI) raised by the regulator on the proposed merger.
RHB said that the regulator may issue a notice of no objection if it is satisfied that the merger does not have, or does not have, or is not likely to have the effect of substantially lessening competition in the market nor result in a dominant position.
While there is a possibility that a dissenting view may be issued (notice of objection), it said that it thinks the risk is low, as the regulator had previously maintained an accommodative stance on market consolidation and the merger construct.
RHB Research has maintained a “Neutral’ recommendation on the telecommunication sector with Telekom Malaysia, Timedotcom and OCK group as the preferred picks.
