Telenor, Axiata in talks to merge telecom operations in Asia
06 May 2019
Telenor Group and Axiata Group Berhad are in discussions regarding a potential non-cash combination of their telecom and infrastructure assets in Asia, MergeCo, in which Telenor would take a majority stake. Telenor is expected to own 56.5 per cent equity in MergeCo and Axiata the remaining 43.5 per cent.
The share ownership, however, is tentative and is subject to adjustments and due diligence, both companies say. There is also no certainty that these discussions will result in any transaction agreement between the parties, according to a Telenor release.
The merged entity will create a leading, well diversified Pan-Asian telco with operations in nine countries with a total population of close to one billion people. MergeCo will have close to 300 million customers and become one of Asia's largest mobile infrastructure companies operating approximately 60,000 towers across Asia. It will have its operational headquarters in Kuala Lumpur with the majority of functions and is planned to be listed at an international stock exchange as well as on Bursa Malaysia. In Malaysia, the intent is to merge Celcom and Digi, with MergeCo as the majority owner in the combined business.
“By uniting two strong organisations with complementary footprints and a merger of equals spirit, there will be attractive opportunities to capture substantial synergies preliminary estimated at around $5 billion (around NOK 43 billion) in total; support future investments and create shareholder value. MergeCo will take an active role in accelerating technology transformation and digitalisation in Malaysia and across Asia, and plans to establish the Malaysian Research and Innovation Centre for state-of-the-art technologies such as 5G, Internet of Things and Artificial Intelligence.
"Today we announce that Telenor and Axiata are in discussions on joining forces in Asia, one of the most dynamic and innovative regions in the world. Together, we aim to create a leading and well-diversified pan-Asian telecom and infrastructure company with substantial synergy potential and strong regional operations. It is Telenor's strategy to develop and create value from our core telco assets in the Nordic and Asian region. This potential merger is in line with that strategy, set by the Board and Management," said Gunn Wærsted, Chair of Telenor Group.
"By creating one of Asia's leading telecom players; with strong regional operations in nine countries and close to 300 million customers, we will combine scale and competence, thereby unlocking considerable synergies. I am confident this will create significant value for shareholders and will be beneficial to our customers," said Sigve Brekke, President and Chief Executive Officer of Telenor Group.
Telenor and Axiata will work towards finalising agreements in relation to the proposed transaction within the third quarter of 2019 following due diligence. The transaction will be subject to approval by shareholders, receipt of regulatory approvals and other customary terms and conditions.
Telenor's Asian footprint includes Thailand, Malaysia, Bangladesh, Pakistan and Myanmar.
Axiata has operating companies in Malaysia, Bangladesh, Cambodia, Nepal, Sri Lanka and Indonesia, and the tower business edotco. Pro-forma revenue and pre-synergy EBITDA of the combined entity is approximately $13 billion (around NOK 113 billion) and $5.5 billion (around NOK 48 billion). Axiata's mobile operations in Bangladesh, Robi, will continue to be separately and independently managed by Axiata.
Citi is acting as financial advisor to Telenor Group on the proposed transaction.