Axiata, Telenor confirm they are in advanced discussions to merge Celcom and Digi

• Parties to have equal ownership at 33.1% each, combined scale, competencies
• Creation of Innovation Centre to catalyse 4IR transformation, development of 5G use cases

AXIATA Group Berhad and Telenor Asia are in advanced discussions on the merger of the telco operations of Celcom Axiata Berhad and Digi.com Berhad, in which the parties will have “equal ownership” estimated at 33.1% each.

Axiata together with Malaysian institutional funds will own over 51% of the merger. As part of the merger transaction, Axiata will receive newly issued shares in Digi representing 33.1% post-transaction shareholding and cash equalisation amount of around US$480 million (RM2 billion), of which RM1.7 billion to come from Digi as new debt, balance of RM300 million from Telenor.

[RM1 = US$0.242]

The merger will bring together Axiata and Telenor’s Malaysian operations’ combined scale, competencies, finances and vast experiences to “generate significant synergistic value for a commercially stronger and more resilient merger company.”

It will be named as Celcom Digi Berhad and will continue to be listed on Bursa Malaysia.

In a statement, both parties said that the merger will be uniquely positioned to take advantage of opportunities that come with technological advancements and the surge in the adoption of digital services, while in parallel manage the evolving challenges of a highly competitive and complex environment.

The merging company will be considered a leading telecommunications service provider in Malaysia in terms of value, revenue and profit, with pro forma revenue of about RM12.4 billion, pre-synergy EBITDA of the combined entity at approximately RM5.7 billion, and an estimated 19 million customers.

With national interests firmly in place, Axiata and key Malaysian institutional shareholders will own more than 51% of the merger. Axiata has the right to nominate the initial chairman and chief executive officer of the Celcom Digi Berhad, and together with Telenor, have agreed to nominate the following individuals to the key positions:

• Chairman – Izzaddin Idris
• Vice chairman – Jørgen C. Arentz Rostrup
• Chief executive officer – Idham Nawawi
• Deputy chief executive officer – Albern Murty

“As Malaysia charges ahead in new areas of 5G, cyber security, Artificial Intelligence and Internet-of-Things, the new entity will be positioned to compete amidst uncertainties and challenges in the post-pandemic world,” said Ghazzali Sheikh Abdul Khalid, chairman of Axiata board.

“As we face fierce competition from global internetbased services and content providers, our stronger strategic position will allow for better negotiation levers in how we choose to compete and cooperate.”

No forced retrenchments, opportunity for continued staff development

The parties have reiterated their commitment to protect employee welfare with no forced retrenchments, and will create opportunities for staff to continue to develop across functions and be part of company growth.

According to the parties, customers will benefit from the merger, as the merged company will have the capacity to invest even more to provide better quality of service and at competitive rates.

Customers also will be able to maintain their choice of mobile operator brand, as both Celcom and Digi brands will continue as is post-merger.

Research and innovation will be a key agenda on the table as well with Axiata and Telenor agreeing to the creation of an Innovation Centre to catalyse 4IR digital transformation, development of 5G use cases and other technological advancement.

Both parties will work towards finalising agreements in relation to the proposed transaction within the second quarter of 2021 following due diligence.

The transaction will be subject to approval by Celcom and Digi shareholders, 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.

Haakon Bruaset Kjoel, chair of the Board of Directors of Digi.Com Berhad, said: “The board notes the proposal for the merger of Celcom and Digi, and the exciting prospect of creating a Malaysian market leader through the proven capabilities of the two established operating companies and the strength of two international telecom leaders Axiata and Telenor.

“It underpins a shared vision to create value through product and market innovation and high-quality data connectivity, to power Malaysia’s digital ambitions in the years to come.”