(File pix) Rumours about a merger between Telekom Malaysia Bhd (TM) and Axiata Group Bhd come not entirely as a surprise to the market. Reuters Photo

KUALA LUMPUR: Rumours about a merger between Telekom Malaysia Bhd (TM) and Axiata Group Bhd come not entirely as a surprise to the market.

UOB’s Kay Hian said the market has been abuzz with talks of the potential merger since the roll-out of webe, TM’s wireless mobile arm, in the second quarter of 2016.

“At this juncture, we note that details remain sketchy, be it the valuation parameter or the exercise undertaking, that is, plain vanilla share swap or combination of cash.

It was reported that both companies had hired advisers, with CIMB Investment Bank advising TM, and Goldman Sachs working for Axiata on the deal.

Khazanah Nasional Bhd owns 26 per cent and 38 per cent of TM and Axiata respectively.

Axiata was spun off from TM in 2008 in a move that saw the former making inroads in overseas investment forays, while TM focuses on fixed-line dominance.

UOB’s Kay Hian believes the following synergies could provide credence to the potential merger: full product offering (wireless, fixed line and Internet protocol television with a recognisable local branding known as HyppTV), enlarged customer base of 13.5 million (Celcom: 11 million, TM: 2.5 million), superior network asset (Celcom’s 78 per cent 4G LTE population coverage and TM’s extensive fibre network, especially in the last mile).

Both groups will also get access to an enlarged distribution network to tap into the prepaid market segment.

The firm also noted that an enlarged Celcom-webe outfit could see cost savings in centralised procurement, staff overheads, marketing and general expenses.

“This fits nicely with Axiata’s aim to achieve RM2.3 billion in cost savings in 2017 to 2019, with the first RM800 million savings to be achieved in 2017,” it added.

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