Telenor Group and Axiata Group Berhad are in advanced discussions regarding a potential merger of its Malaysian mobile operations Digi and Celcom, in which the parties will have an equal ownership of 33.1 percent each.
The merged company will have a proforma revenue of about RM12.4 billion, pre-synergy EBITDA at approximately RM5.7 billion, and an estimated 19 million customers – a market share comprising 67 percent of Malaysia’s mobile phone users.
The companies have claimed that the merger will result in “competence and scale to meet increasing expectations and demand from a digitally connected society.”
As part of the merger transaction, Axiata will receive newly issued shares in Digi representing 33.1 percent post-transaction shareholding and cash equalisation amount of around RM2 billion, of which RM1.7 billion to come from Digi as new debt, balance of RM300 million from Telenor.
“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 realize the potential of the new company”, says Jørgen C. Arentz Rostrup, Executive Vice President and Head of Telenor Asia.
Axiata’s President & Group Chief Executive Officer, Dato’ Izzaddin Idris, said: “It is no secret that the telecommunications industry continues to face long-term structural headwinds of slower growth, increased operating costs and lower profits. On one hand, we see prices of products and services continue to slide while capital expenditure especially on network, quality coverage and advanced technology continue to rise. Against that, data traffic has doubled every year pre-COVID and expected to accelerate even faster in the new norm. Digital aspirations and the ever-increasing demand for connectivity call for significant investments. In order to stay ahead of the curve, we must strengthen the foundation to offer continuous high-quality broadband, improve 4G connectivity and subsequently, support the acceleration of 5G rollout.”
Both parties have agreed to nominate Dato’ Izzaddin Idris as Chair, Jørgen C. Arentz Rostrup as Deputy Chair, Idham Nawawi as CEO and Albern Murty as deputy CEO of the merged company, which will be named Celcom Digi Berhad.
Celcom Digi will continue to be listed on Bursa Malaysia and will be amongst the top stocks in terms of market capitalisation.
Telenor Group and Axiata will work towards finalizing agreements in relation to the proposed transaction within the second quarter of 2021 following due diligence.
The transaction will still be subject to approval by Digi board and Axiata shareholders, receipt of regulatory approvals and other customary terms and conditions.