KUALA LUMPUR – Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.Com Bhd have signed agreements for the merger of Celcom Axiata Bhd and Digi, referred to as MergeCo.
In a joint statement today, the parties said the signing of the agreement signifies a confirmation of their intent to establish a commercially stronger and more resilient digitally converged service provider to drive Malaysia’s digital ambitions.
On a pro forma basis, based on the financial year ended December 31, 2020, MergeCo will serve an estimated 19 million customers, with a revenue of RM12.4 billion.
Axiata and Telenor will be equal partners, each having a 33.1% stake in MergeCo, which will continue to be listed on Bursa Malaysia Securities Bhd.
Targeted to be among the five largest companies listed on the local bourse 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 the synergies and business plan of MergeCo, and initial estimates indicate a potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis,” said the statement.
MergeCo will see a combination of the scale, experience, competencies and financial strength of both global telecoms groups, with the market knowledge of two well-established local companies.
It will be well-placed to fuel the implementation of digital technologies at a time when 5G, the Internet of Things, artificial intelligence and cloud computing are accelerating digitalisation.
“MergeCo will aim to invest up to RM250 million over five years in building a world-class innovation centre in Kuala Lumpur to catalyse the Industrial Revolution 4.0 digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution,” said the statement.
The centre will conduct extensive research and development, develop 5G-use cases, support local digital start-ups and provide a platform to nurture the creation of a knowledge-based workforce in line with 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,” said Axiata president and group CEO Datuk Izzaddin Idris.
“We look forward to delivering better value and choices to benefit society, especially in bridging the divide in rural areas, and assisting home and enterprise businesses to take advantage of new opportunities in this digitally accelerated environment.”
Telenor executive vice-president and head of Asia Jørgen A. Rostrup said the merger will combine the companies’ competencies, financial strength and scale to go beyond connectivity and implement technology that 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 MergeCo, which will be known as Celcom Digi Bhd, subject to MergeCo shareholders’ approval.
In terms of Malaysia’s national interests, Axiata and local institutional shareholders are expected to own over 51% of MergeCo upon completion of the merger.
Axiata and Telenor reiterated their commitment to protecting employee welfare with no forced retrenchments, adding that MergeCo is slated to create opportunities for staff to continue developing cross-functions, as well as build new competencies and be part of the future growth of the merged company.
“The merger between Celcom and Digi will result in Axiata receiving newly issued shares in Digi, representing 33.1% of the enlarged issued share capital of Digi, cash consideration of RM2 billion, of which approximately RM1.7 billion will 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,” said the firms.
Completion of the transaction is subject to the approval of 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. – Bernama, June 21, 2021
