Malaysian telecoms firm Axiata Group Bhd and Norway’s Telenor ASA are merging their mobile operations in Malaysia. The merged entity, further to be named as Celcom Digi Bhd, is expected to become a new market leader in the competitive Southeast Asian nation.
Both companies have been discussing thoroughly over the $15 billion merger deal since April. Upon the advanced talks, each party agreed to own 33.1% of the combined firm.
Through a statement, the president & group CEO of Axiata said, “Assuming a smooth transition, post integration period, we are expecting to see improvement in EBITDA and cashflow margins in the combined entity in step with our ongoing commitment to maximise dividend payout for our shareholders,” Reuters quotes.
By far, both companies have become the second and third largest mobile services providers in Malaysia. Axiata and Telenor are also expecting big from the new company. Through a joint statement, both companies said that they are expecting an annual revenue of $3 billion from the new company, Celcom Digi Bhd. Additionally, both companies also said to target $1.4 billion in core profitability from a subscriber base of around 19 million.
According to the statement from both companies, the equity value for Celcom Digi Bhd has reached nearly 50 billion ringgit ($12.1 billion). In the future, the company will remain listed in Kuala Lumpur. This decision is in line with a preliminary agreement from April.
Additionally, two sources familiar with the deal told Reuters that the implied $15 billion enterprise value of Celcom Digi Bhd was based on Digi’s share price of 4.18 ringgit as of Friday. Accordingly, shares for Digi inclined 3.4% on Monday, taking its valuation to $8.1 billion.
Celcom Digi: adjusting from changes
Celcom Digi will further compete with one of the largest telecoms operators in the country, Maxis Bhd. The two companies will compete amidst a challenging industry environment and pressuring profit targets.
Noted from Reuters, both parties are expecting to complete subject to regulatory and other approvals for Celcom Digi by the second quarter of 2022.
Telenor’s statement elaborated that the companies plan to cut cost and saving on capital expenditure. Thus, the company could maintain a net present value of roughly $2 billion.
In accordance with this, Celcom Axiata will be transferring 100% of its equity interest to Digi. The total consideration roughly reaches 17.76 billion ringgit ($4.3 billion).
Furthermore, Axiata will receive newly issued shares in Digi. Along with it, Digi will also be giving cash consideration of 1.7 billion ringgit new debt in the merged company.
“As part of an ownership equalisation in Digi under the terms of the merger, Axiata will also receive close to 300 million ringgit from Digi’s largest shareholder Telenor,” the statement from Digi said.
Accordingly, last Tuesday, Axiata expressed its eagerness to seal the merger within days or a week.
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