Telenor and Axiata planning merger of Asian operations

7 May 2019

Norway’s Telenor Group and Malaysia’s Axiata Group have revealed that they are in talks over a potential non-cash combination of their telecom and infrastructure assets in Asia, in which the former would take a majority stake. In press releases regarding the matter, the two companies noted that under the terms of the proposed transaction Telenor Group would, based on equity value, own 56.5% of the new merged entity – which the parties are referring to as MergeCo – with Axiata holding the other 43.5%. Both parties have acknowledged, however, that these figures are preliminary, subject to adjustments and due diligence, while noting there is no certainty that the discussions will result in any transaction agreement.

Outlining their reasoning for a potential tie-up, Telenor and Axiata said they seek to create a ‘leading, well diversified pan-Asian telco with operations in nine countries with a total population of close to one billion people’. MergeCo will reportedly have around 300 million customers on its books and will be one of Asia’s largest mobile infrastructure companies, operating approximately 60,000 towers across the continent. As per the plans, MergeCo would have its operational headquarters in Kuala Lumpur and there are plans to list it at an international stock exchange as well as on Bursa Malaysia.

Both groups have operations in Malaysia, Thailand, Bangladesh, Pakistan and Myanmar. Axiata is also present in India, Indonesia, Sri Lanka, Cambodia and Nepal. With specific reference to Malaysia, it was noted that it is the companies’ intention to merge Celcom and Digi, their respective units in the country, with MergeCo as the majority owner in the combined business. Also of note, Axiata confirmed that it will continue to manage its mobile operations in Bangladesh ‘separately and independently managed’ upon completion of the proposed merger.

Telenor and Axiata will work towards finalising agreements in relation to the proposed transaction in the third quarter of 2019, following due diligence. The transaction will be subject to approval by shareholders, receipt of regulatory approvals and other customary terms and conditions.

Commenting, Sigve Brekke, president and CEO of Telenor Group, said: ‘By creating one of Asia’s leading telecom players, with strong regional operations in nine countries and close to 300 million customers, we will combine scale and competence, thereby unlocking considerable synergies.’ Meanwhile, Axiata President and Group Chief Executive Officer, Tan Sri Jamaludin Ibrahim noted: ‘With the dynamic combination of breadth, experience and knowledge of Asia’s two regional champions – Axiata and Telenor Asia – we bring the best of Asian and European cultures. Leveraging on the synergies of our combined assets, organisations, talents, best practices, scale and financial firepower, we would create the largest telecom operator in the region. Additionally, we would also intend to create the largest mobile operator in Malaysia, one of the largest TowerCos in the world and the largest Innovation centre in the region.’