KUALA LUMPUR: Axiata Group Bhd and Norway's Telenor ASA are in merger talks again, but this time it will be at a reduced scale involving units Celcom Axiata Bhd and Digi.com Bhd.
Still the merged entity, to be called Celcom Digi Bhd, is set to be Malaysia's largest cellular operator.
The combination of the country's second and third largest mobile services providers will create a company that is estimated to have annual revenue of RM12.4 billion, RM5.7 billion in core profit and 19 million subscribers.
Maxis Bhd is Malaysia's top mobile services provider with about 9.4 million subscribers.
Axiata and Telenor will each own 33.1 per cent of Celcom Digi.
With national interests firmly in place, Axiata and several Malaysian institutional funds will collectively control more than 51 per cent stake in the merged company (MergeCo).
"(Axiata and Telenor) are in advanced discussions on the merger of the telco operations of Celcom Axiata Bhd and Digi.com Bhd," the companies said in a joint statement today.
The MergeCo would remain listed on Bursa Malaysia, they added.
"MergeCo is expected to improve the liquidity and profile of Bursa Malaysia as one of the largest technology company in Malaysia and among the largest market capitalisation companies of the exchange," it said.
Axiata and Telenor had previously talked about merging their Asian operations in 2019, but the talk was called off several months later.
As part of the new merger deal, Axiata will get the 33.1 per cent stake in the merged entity and RM2 billion cash comprising RM1.7 billion from Digi and RM300 million from Telenor.
The planned merger comes as Malaysia moves to build and manage a 5G network on its own instead of relying on private carriers. This has spurred expectations of a consolidation in the industry.
Top executives of Axiata and Telenor declined to reveal valuation of the deal and said the merged company would be the leading telecommunications service provider in Malaysia.
Digi reportedly has a market value of US$7 billion.
"Size matters, not just in the combined cellphone customers, but in having the financial capability to support Malaysia's digital aspirations. We're preparing for a new reality that goes beyond connectivity, to participate in all the new technologies that 5G will enable," Telenor Asia executive vice president Jorgen C. Arentz Rostrup said at a briefing here today.
Axiata president and group chief executive officer Datuk Izzaddin Idris said it was no secret that the telecommunications industry continued 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."
Axiata and Telenor agreed to nominate Izzaddin as chairman of Celcom Digi, and Rostrup as vice chairman.
Celcom Axiata CEO Idham Nawawi has been nominated as CEO while Albern Murty was nominated as deputy CEO of Celcom Digi.
Izzaddin and Rostrup dismissed the idea that the planned merger would see job cuts, reiterating the groups' commitment to protecting employees' welfare with no forced retrenchments.
There would be retraining for staff with duplicated functions, they said, adding that Celcom employed 2,400 people while Digi had 1,400.
They also said there was no consideration of a merger between Axiata and Telenor, or sales of the groups' assets to each other.
Izzaddin and Rostrup expect to finalise the merger agreements by June this year following due diligence.
The proposal is subject to approval from the Digi board and Celcom shareholders as well as from the regulators.