KUALA LUMPUR, June 21 — Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.Com Bhd (Digi) had signed agreements for the merger of Celcom Axiata Bhd (Celcom) and Digi, referred to as MergeCo.
In a joint statement today, the parties said the signing of the agreement signified a confirmation of their intent to establish a commercially stronger and more resilient digital converged service provider to drive Malaysia’s digital ambitions.
On a pro forma basis, based on the financial year ended Dec 31, 2020, the MergeCo would serve an estimated 19 million customers with a revenue of RM12.4 billion.
Axiata and Telenor would be equal partners, each having a 33.1 per cent stake in MergeCo which would continue to be listed on Bursa Malaysia Securities Bhd (Bursa).
Targeted to be among the five largest companies listed on the Bursa in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50 billion, after taking into account the issuance of new shares in Digi.
“The integration planning phase will include further detailed work on synergies and business plan of MergeCo, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis,” it said.
MergeCo would see the combination of the scale, experience, competencies and financial strength of both global telecom groups with the market knowledge of two well-established local companies.
Positioned to address Malaysia’s increasing digital service adoption and expectations of better connectivity, MergeCo would have the capabilities to leverage technological advancements and attract global internet-based partnerships to deliver a wider range of innovative solutions.
It will be well-placed to fuel the implementation of digital technologies at a time when 5G, Internet of Things, artificial intelligence and cloud computing are coming to accelerate digitalisation.
“MergeCo will also aim to invest up to RM250 million over five years in building a world-class Innovation centre in Kuala Lumpur to catalyse the Fourth Industrial Revolution digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution,” it said.
In taking advantage of new opportunities in the digital economy, the Innovation Centre would conduct extensive research and development, develop 5G use cases, support local digital startups and provide a platform to nurture the creation of a knowledge-based workforce in line with the MyDIGITAL aspirations.
“We are charting good progress in the ongoing merger exercise with Telenor and Digi and remain aligned in our intentions to deliver a strong value proposition that will enable our customers to participate more confidently as the nation transitions towards a digital economy.
“We look forward to delivering better value and choices to benefit society, especially in bridging the divide in rural areas and assisting the home and enterprise businesses to take advantage of new opportunities in this digitally accelerated environment,” said Axiata president and group chief executive officer (CEO) Datuk Izzaddin Idris.
He said assuming a smooth transition, post-integration period, Axiata expects to see improvement in earnings before interest, taxes, depreciation and amortisation (EBITDA) and cash flow margins in the combined entity in line with its ongoing commitment to maximise dividend payouts for shareholders.
Meanwhile, Telenor Group executive vice-president and head of Asia, Jørgen A Rostrup said the merger would combine competencies, financial strength and scale to go beyond connectivity and implement technology that further advances customers digital experience.
According to an earlier announcement, Axiata and Telenor have agreed to nominate Izzaddin as chair, Rostrup as deputy chair, Idham Nawawi as CEO and Albern Murty as deputy CEO of the MergeCo, which would be known as Celcom Digi Bhd, subject to MergeCo’s shareholders’ approval.
From the aspect of Malaysia’s national interests, Axiata and key Malaysian institutional shareholders are expected to own over 51 per cent of the MergeCo upon completion of the merger.
Axiata and Telenor also reiterated their commitment to protecting employee welfare with no forced retrenchment, adding that MergeCo is slated to create opportunities for staff to continue to develop cross functions, build new competence and be part of the future growth of the merged company.
“The merger of Celcom and Digi would result in Axiata receiving newly issued shares in Digi, representing 33.1 per cent of the enlarged issued share capital of Digi, cash consideration of RM2.0 billion of which approximately RM1.7 billion would come from Digi as debt in MergeCo and RM300 million from Telenor as part of an ownership equalisation under the terms of the proposed merger,” they said.
Completion of the transaction would be subject to the approval of both Axiata and Digi shareholders, regulatory approvals and other customary terms and conditions.
Barring unforeseen circumstances, the proposed merger is expected to be completed by the second quarter of 2022.
