Axiata Denies $13B Telenor Merger Is Faltering

Robert Clark
News Analysis
Robert Clark
8/30/2019

Axiata CEO Tan Sri Jamaludin Ibrahim has denied the company's planned $13 billion merger with Telenor is in trouble.

Responding to reports that the negotiations were struggling, he said the two operators expect the merger, which if completed will create an Asian telecoms powerhouse, will conclude in November.

When it was announced in May, the deal to create a new entity with nearly 300 million customers in nine markets was anticipated to close during the third quarter.

But Ibrahim told reporters during a results briefing in Kuala Lumpur on Thursday that it was a complex transaction, the biggest in the region for 20 years, reported Malaysia's The Edge Markets.

"I want to put it into perspective that almost all M&As globally or within Malaysia involve only one big entity. But this time around, it involves 14 large entities across nine countries. So, imagine how big and complex this is," he said.

He said the commercial aspects of the deal were 90% agreed upon, but national interests and personnel issues were yet to be settled.

With Axiata 37%-owned by the sovereign wealth fund Khazanah Nacional, the national interests mostly relate to Malaysian sensitivities. The partners have provisionally agreed that Norway-based Telenor will own 56.5% of the merged company and Axiata 43.5%.

Headquarters will be in Kuala Lumpur, and both the chairman and CEO will be Malaysian nationals. The combined venture, which will bring together Malaysia's second- and third-largest operators -- Axiata's Celcom and Telenor's DiGi -- will list on the Malaysian stock exchange as well as an international exchange.


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Telenor owns five operators in the region: Including DiGi, it has approximately 180 million customers in Malaysia, Thailand, Bangladesh, Pakistan and Myanmar. Axiata brings to the table around 110 million customers in Malaysia, Indonesia, Cambodia, Sri Lanka and Nepal, as well as its tower business edotco.

Under the terms of the merger, its Bangladesh subsidiary, Robi, will continue to be managed by Axiata: However, Telenor's operation in Bangladesh, Grameenphone, will become part of the new merged player.

The companies say the combination of the two will generate synergies of around $5 billion.

But analysts say the biggest advantage could be the reduction in the number of competitors, especially true in a saturated market like Malaysia, where DiGi and Celcom account for nearly half the subs.

Both Telenor and Axiata, despite their size and the positive subscriber growth, are struggling to break out of the low-growth trap that has ensnared most of the industry. Telenor in particular has little to show for its efforts in selling off its central European assets and axing a third of its workforce.

Axiata at least is buoyed by its strong presence in Indonesia and the contribution from its tower company, with more than 60,000 sites. Its second-quarter financials, announced Thursday, show a 4.8% lift in topline revenue and a healthy 26% improvement in free cash flow from operations.

— Robert Clark, contributing editor, special to Light Reading

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