Celcom Axiata Bhd, a unit of Axiata Group Bhd, is merging with Digi.Com Bhd to create the biggest mobile service provider in Malaysia, according to sources familiar with the telcos.
This time round, it is the merger of their operations in Malaysia, unlike the previous mega-merger plan in which Axiata and Digi.Com’s Norwegian parent Telenor ASA tried to merge their operations in the Asian region.
“The merger will bring in financial benefits, although each party will not hold a controlling stake in the merged entity … the merger should be evaluated in [terms of] the financial benefits,” said a source.
As the high-growth era is over in the mobile service industry that requires large capital expenditure (capex), a merger to achieve economies of scale is seen to be a logical move going forward, said analysts.
Furthermore, analysts noted that the mega-merger of the regional operations would be far more complicated as regulatory approvals are required.
Trading in the shares of Axiata and Digi.Com was suspended this morning pending an announcement.
In separate filings with the stock exchange this morning, the companies said that accordingly, all structured warrants relating to Digi.Com would also be suspended at the same time.
Axiata will hold a media briefing this afternoon.
The suspension of trading sparked fresh speculation in the market given that Axiata and Digi.Com’s parent Telenor were in merger talks before but the negotiations fell through.
To recap, Axiata and Digi.Com’s parent Telenor mutually agreed to terminate their mega-merger to consolidate both telecommunications giants’ operations in Asia after about four months of negotiations in 2019.
In May 2019, Axiata announced that it was in talks with Telenor to merge their operations in Asia, which would have resulted in Telenor being the majority shareholder of the global merged entity and anticipated to own 56.5%, with Axiata holding the other 43.5% stake.
The proposed merger would have resulted in the emergence of ASEAN’s largest telecommunications company, with a pro forma revenue of RM50 billion and a net profit of RM4 billion.
Axiata’s stock jumped 2.7% or 10 sen in the last 20 minutes of trading yesterday prior to closing at RM3.80 from RM3.70.
There was also a noticeable uptick in Digi.Com’s share price in the last 20 minutes of trading yesterday, rising 2% in that short time frame to RM3.75 from RM3.68.
Source: The Edge Markets