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The proposed merger between Axiata and Telenor ASA would benefit consumers. - NSTP/SUPIAN AHMAD
The proposed merger between Axiata and Telenor ASA would benefit consumers. - NSTP/SUPIAN AHMAD

KUALA LUMPUR: Malaysians will benefit from the recent proposal by Axiata and Telenor ASA on the merger of their Asian operations, as any savings in capital expenditure (capex) and the reduction in duplication that can be achieved from the formation of the MergedCo would be passed on to consumers.

Axiata Group Bhd (Axiata) expects to achieve close to RM4 billion to RM5 billion in savings for Malaysia alone, as a result of synergies from the merger over a period of five to seven years.

Concerns that the merger may not benefit consumers are unfounded as these savings mean that consumers would eventually benefit from affordable prices, better network quality and coverage and more innovative products from a stronger Malaysian entity, supported by well-established regional telecommunications leaders that have been making strides across Asia.

In addition, a world-class Innovation Centre has been committed by both parties as part of the merger plans. The Innovation Centre, envisaged to be the largest in the region, will receive funding of approximately RM100 million per year form the MergedCo to develop products and solutions surrounding Internet of Things, Artificial Intelligence, Robotics and 5G amongst others that could make such technologies accessible at more attractive prices.

There have also been contentions surrounding the shareholdings and ownership of the MergedCo.

Although the planned ownership ratio of the merged company (MergedCo) will be 56.5 per cent owned by Telenor and 43.5 per cent by Axiata, both management teams have been very clear that it is going to be a “merger of equals”.

MalaysiaCo, as a result from the merger of Celcom and Digi, will be roughly 67 per cent owned by the MergedCo. Together with some major government institutions which would own this entity directly, Malaysian institutions are expected to be the single largest shareholder in MalaysiaCo, based on a combination of direct and indirect shareholdings of around 46 per cent versus Telenor’s indirect ownership of around 38 per cent.

With the scale, strong balance sheet and profitability, MalaysiaCo can be well-placed to offer affordable 5G and broadband services while increasing network coverage quality, much better and earlier than Celcom or Digi could do individually.

Meanwhile, even if Axiata does not own a majority stake in the MergedCo, the group would own a significant share of a much larger group and value, as the value of its assets would increase due to the synergy benefits of the merger between RM15 billion and RM20 billion. Axiata’s portion is believed to be between RM7 billion and RM9 billion.

The planned ownership ratio of the MergedCo was made based on several measurements to include operating profits, analysts’ estimates, both parties’ forecasts and market measurement.

While the board of directors’ mix of the MergedCo will reflect the shareholdings, the chairman will be from Axiata and the board will be professionally run.

More importantly, for the proposed MalaysiaCo, the chairman will be nominated by Axiata and will be a Malaysian. Besides that, it has been agreed that the majority of board members will be Malaysians and the CEO will also be a Malaysian.

All these are is in keeping with the spirit of a merger of equals and for this corporate structuring to remain committed to the Malaysian national agenda.

Despite Telenor having a majority stake, the concept of a merger of equals is fundamental to this MergedCo’s matters of governance and in delivering potential benefits to Malaysians.

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