Malaysia-based Axiata Group and Norway’s Telenor Group have announced that they are in ‘advanced discussions’ on the merger of their respective Malaysian units, Celcom Axiata and Digi Telecommunications. In a press release regarding the development, Axiata said that both parties would have equal ownership – estimated at 33.1% each – in the combined entity, currently dubbed ‘MergeCo’, although the Malaysian group did note that, together with Malaysian institutional funds, it would own over 51% of the enlarged operator. As part of the merger transaction, Axiata will reportedly receive newly issued shares in Digi representing a 33.1% post-transaction shareholding and cash equalisation amount of around MYR2 billion (USD484 million), of which MYR1.7 billion would come from Digi as new debt, with the balance of MYR300 million to come from Telenor.
Meanwhile, it has been confirmed that MergeCo will formally be named as Celcom Digi Berhad upon completion of the merger, and will continue to be listed on Bursa Malaysia. In terms of customer-facing operations, however, both the Celcom and Digi brands are set to remain in use after the tie-up is concluded, and it has been claimed that subscribers will benefit ‘significantly’, as the enlarged company will have the capacity to invest even more to provide better quality of service and at competitive rates. According to Axiata, MergeCo will be considered ‘a leading telecommunications service provider in Malaysia in terms of value, revenue and profit’, with it having pro forma revenue of around MYR12.4 billion, pre-synergy EBITDA of approximately MYR5.7 billion, and an estimated 19 million customers.
With the parties involved saying they will work towards finalising agreements in relation to the proposed transaction within the second quarter of 2021 following due diligence, it has been noted that the merger will be subject to approval by both Celcom and Digi shareholders, receipt of regulatory approvals and other customary terms and conditions.
Commenting, Axiata chairman Tan Sri Ghazzali Sheikh Abdul Khalid, said: ‘We are exceedingly pleased to have come this far in discussing the potential merger of our Malaysian operations. The joint creation of a true Malaysian Champion, this merger of Celcom and Digi will see the coming together of the largest mobile operator with the firepower to trigger tremendous opportunities in helping Malaysia leapfrog into the Fourth Industrial Revolution and fulfil our vision of a digitised nation.’ Jorgen C Arentz Rostrup, Executive Vice President and Head of Telenor Asia, added: ‘The proposed merger represents an important milestone in Telenor Group’s strategy to strengthen its Asian presence and create value in the region. The new entity will have size and financial capabilities to support Malaysia’s digital aspirations and lead industry development in a connected society. We look forward to partner with Axiata to realise the potential of the new company.’