Axiata denies selling Malaysian interests to Telenor in merger move

KUALA LUMPUR, May 28 ― Telecommunications firm Axiata Group Bhd dismissed claims that its merger with Norway-based Telenor ASA's Asian operations is akin to selling Malaysian interests to a foreign company.

One of Malaysia’s largest telecommunications companies, Axiata described its plan with Telenor as a “merger of equals”, saying the process is based on the relative valuation of both their assets, local business paper The Edge reported on its website today.

However, under the plan ownership ratio of the merged entity which is known as MergeCo, Telenor will have a 56.6 per cent stake while Axiata will have 43.5 per cent.

“Despite Telenor having a majority stake, on matters of governance of the new MergedCo, the concept of merger of equals is fundamental to this proposed merger. Although Axiata does not own a majority stake in the MergedCo, we would own a significant share of a much larger group and value, as the value of our assets would increase due to the synergy benefits of the merger between RM15 billion to RM20 billion, of which our portion [works out to] RM7 billion to RM9 billion. Capex savings would be approximately two-thirds of that, of which close to 40% would be the savings in Malaysia alone or RM4 to RM5 billion,” Axiata was quoted saying.

Axiata said the valuations are based on operating profits, analyst estimates, forecast and market valuations however it does not include the companies revenue and the number of subscribers each service has.

The merger will also see Axiata’s Celcom and Telenor’s Digi.com owned by MergedCo, which will have roughly 67 per cent stake.

Axiata said the Celcom and Digi merger would be known as MalaysiaCo, adding that the national interest will hold the bigger stake of 46 per cent through direct and indirect shares with potential market capitalisation exceeding RM41 billion.

In comparison, it said Telenor’s indirect ownership will only be around 38 per cent.

Axiata also said the majority of MalaysiaCo board members and its chief executive officer will be Malaysians.

MergedCo is also expected to see proforma revenue of RM50 billion and a net profit fo RM4 billion, with operating subsidiaries in nine countries with a total 300 million customers, making it the largest telecommunications companies in the South Asian and South-east Asian regions.

“Given the scale that the merger brings, consumers are expected to benefit from affordable prices, better network quality and coverage, and more innovative products, due to a much stronger Malaysian entity and the regional innovation centre. With a stronger balance sheet and the enhanced profitability of MalaysiaCo, we will have the ability to offer affordable 5G and broadband services while increasing network coverage and quality, much better and earlier than Celcom or Digi could do (in their individual capacities), to support the Malaysian Digital Agenda,” said Axiata.

The group also assures that the merger will not see any job losses instead assure new jobs will be created due to the scale of the union of the two companies.

“Whatever we do will be from the position of strength and therefore, we would have the luxury to manage any reduction of workforce, if required, through voluntary means. Our people plan includes the retraining or reskilling of employees to new areas,” said Axiata.