Celcom and Digi to merge? Talks at “advanced stages”, telcos say

STALLED in the past, Axiata Group Bhd (Axiata) and Telenor Asia (Telenor) are now in advanced stages of discussion on the possibility merging telecommunication giants, Celcom Axiata Bhd (Celcom) and Digi.com Bhd (Digi).

Called MergeCo, the parties are said will hold equal ownership of the new establishment, estimated at 33.1% each.

“Axiata together with Malaysian institutional funds, will own over 51% of the MergeCo. As part of the merger transaction, Axiata will receive newly issued shares in Digi representing 33.1% post-transaction shareholding and cash equalisation amounting about RM2 bil, of which RM1.7 bil to come from Digi as new debt, balance of RM300 mil from Telenor,” it said, in a statement.

With Axiata and key Malaysian institutional shareholders owning more than 51% of MergeCo, Axiata will have the right to nominate its initial chairman and CEO of the new company.

And with Telenor’s agreement, the individuals nominated are:

  • Chairman – Datuk Izzaddin Idris (Chairman)
  • Jørgen C. Arentz Rostrup (Vice Chairman)
  • Idham Nawawi (CEO)
  • Albern Murty (Deputy CEO)

On retrenchment concerns, the parties involved reiterated that employees’ welfare will be given top priority, with no forced retrenchments in place.

In added that MergeCo will create opportunities for staffers to continue developing across functions, build new competence and be part of future growth of the company.

“Customers, on the other hand, will benefit significantly from the merger, as the merged company will have the capacity to invest more to provide better service, at competitive rates.

“They will be able to maintain their choice of mobile operator brand, as both Celcom and Digi brands will continue as is post-merger,” it stated.

Nothing carved on stone

Axiata chairman Tan Sri Ghazzali Sheikh Abdul Khalid said that MergeCo would become a true Malaysian champion, as the two largest mobile operators would create tremendous opportunities in helping the nation leapfrog into the Fourth Industrial Revolution.

Its president cum Group CEO Datuk Izzadin Idris said: “It is no secret that the telecommunications industry continues to face long-term structural headwinds of slower growth, increased operating costs and lower profits.

“On one hand, we see prices of products and services continue to slide while capital expenditure especially on network, quality coverage and advanced technology continue to rise.

“But data traffic has doubled every year pre-COVID-19 and expected to accelerate even faster in the new norm. Digital aspirations and the ever-increasing demand for connectivity call for significant investments.

“So, the proposed merger of two excellent Malaysian brands will serve to make lives better for our customers, giving them more choices for digital needs and higher quality services and solutions.”

On related matter, Digi.com said that proposed merger will be subject to relevant board and shareholder approvals by Digi and Celcom, receipt of regulatory approvals, and other customary terms and conditions.

“The parties acknowledge that there is no certainty that these discussions will result in any agreement.

“The Board of Digi.Com Bhd has been informed that Telenor and Axiata will work towards finalising agreements in relation to the proposed transaction within the second quarter of this year, following due diligence,” it stressed.

In 2019, Axiata and Telenor mooted the merger idea and discussion also went underway to realise the consolidation process.

However, the plan was called off by mutual agreement, citing “complexities”. – April 8, 2021.

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