Axiata confirms “advanced discussions” with Telenor on Celcom-Digi merger

As earlier predicted, discussions on a proposed merger between the telco operations of Celcom Axiata Berhad and Digi.com Berhad is currently at the “advanced discussions” stage. The proposed merger, according to Axiata, will see both parties have equal equity in the merged entity, with Axiata and Telenor owning 33.1 percent each. Axiata, along with Malaysian institutional funds, will own over 51 percent of the merged entity in total.

This also means that newly-issued shares in Digi (amounting to 33.1 percent of post-transaction shareholding) will go to Axiata as part of the merger, equating to approximately RM2 billion. Of this sum, RM300 million will come from Telenor, while the remaining RM1.7 billion will come from Digi as new debt.

The “leading” Malaysian telco

The merger has the aim of creating the “leading Malaysian telco”, with Axiata and Telenor’s combined scale, competencies, finances, and resources to offer a commercially-resilient combined entity. According to the official press release, the merged group will be strategically placed to take advantage of opportunities that will come as the telco industry supports the Malaysian government’s fast-tracking of 5G services and high-quality broadband:

“Where connectivity is a critical digitalisation enabler, the telco industry will play an integral role in supporting the Government’s decision to fast-track 5G services and deliver ubiquitous high quality broadband speed and services. This will bode well for customers as a move that would reap benefits for the economy and industry.”

Celcom Digi Berhad, as the merged entity will be referred to, will have a proforma revenue of approximately RM12.4 billion, as well as pre-synergy EBITDA at around RM5.7 billion and roughly 19 million customers—all of which will set the group as a leading telco in Malaysia in terms of numbers. National interests, meanwhile, are still at the forefront of thinking, with Axiata and Malaysian institutional shareholders owning 51 percent of the merged entity.

As for senior management, Axiata has the initial right to nominate the Chairman and Chief Executive Officer; Axiata and Telenor have agreed on the following nominations:

Chairman – Dato’ Izzaddin Idris
Vice Chairman – Jørgen C. Arentz Rostrup
Chief Executive Officer – Idham Nawawi
Deputy Chief Executive Officer – Albern Murty

Celcom Digi Berhad will be listed on Bursa Malaysia, while both individual companies have assured that there will be no forced retrenchments for existing employees. The Celcom and Digi brands, meanwhile, will continue to operate “as is”, so customers will still be able to stay on their preferred mobile operators between the two. Finally, Axiata and Telenor have confirmed that a new Innovation Centre will help to push forward 4IR digital transformation, 5G development, and more.

A final agreement between Axiata and Telenor is expected during Q2 2021, following the necessary due diligence. There is, however, “no certainty” that these discussions will result in any agreement. It should be noted that a similar merger between the two parties was mooted back in 2019, although plans ultimately fell through.

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