Axiata, Telenor, Digi ink agreements for proposed Celcom-Digi merger

  • Merger expected to serve estimated 19 million customers, with revenue of US$2.98 billion
  • There is aim to invest RM250mil over 5 years for develoment

Axiata, Telenor, Digi ink agreements for proposed Celcom-Digi mergerAXIATA Group Bhd, Telenor Asia Pte Ltd and Digi.com Bhd said they have successfully concluded the due-diligence exercise and signed the transaction agreements for the proposed merger of Celcom Axiata Bhd and Digi.

In April 8, 2020 Axiata and Telenor announced that they were in “advanced discussions” on the proposed merger. The signing signifies a confirmation of the intent to establish a digital converged service provider, both parties said in a statement.

On a pro forma basis, the merger will serve an estimated 19 million customers with revenue of US$ 2.98 billion (RM12.4 billion), EBITDA of US$1.37 billion (RM5.7 billion), Profit After Taxation of US$458 million (RM1.9 billion) and Free Cash Flow of US$964 million (RM4.0 billion).

[RM1 = US$0.241]

Axiata and Telenor will be equal partners with 33.1% ownership stake each in the merger, which will continue to be listed on Bursa Malaysia. Targeted to be among the five largest companies listed on Bursa in terms of market capitalisation, the merger is valued at a combined pre-synergy equity value of close to RM50 billion.

Both companies said the integration planning phase will include further detailed work on synergies and business plan of the merger, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.

The merger will also aim to make an investment of up to RM250 million over five years in building an Innovation Centre, to be established in Kuala Lumpur, the companies said.

The Innovation Centre is set to 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.

Axiata, Telenor, Digi ink agreements for proposed Celcom-Digi merger“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 Izzaddin Idris, president & group chief executive officer (CEO) of Axiata (pic).

“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 take advantage of new opportunities in this digitally accelerated environment.”

He added that if the transition goes smoothly, they expect to see improvement in EBITDA and cashflow margins in the combined entity post-integration period.

Details of the merger

Jørgen A. Rostrup, executive vice president and head of Asia in Telenor Group, said:“We look forward to partner with Axiata to realise the potential of the proposed merged company. The telecom industry is at the beginning of an exciting digital shift, and new technologies are going to change how we develop and deliver services for both the private and public sector.

“With this merger we bring together competencies, financial strength and scale to go beyond connectivity and implement technology that further advances our customers digital experience,” he said.

Axiata and Telenor have agreed to nominate Izzaddin Idris as chairman, Jørgen C. Arentz Rostrup as deputy chair, Idham Nawawi as chief executive officer (CEO) and Albern Murty as deputy CEO of the merged entity. It will be renamed to Celcom Digi Bhd subject to the merger’s shareholders’ approval.

Axiata and key Malaysian institutional shareholders are expected to own more than 51% of the merger at completion. Both parties also reiterated their commitment to protect employee welfare with no forced retrenchments.

The merger is slated to create opportunities for staff to continue to develop across functions, build new competence and be part of future growth of the merged company, the statement noted.

At completion, the merger of Celcom and Digi will result in Axiata receiving newly issued ordinary shares in Digi, representing 33.1% of the enlarged issued share capital of Digi, cash consideration of RM2.0 billion of which approximately RM1.7 billion will come from Digi as debt in the merger and approximately RM300 million from Telenor as part of an ownership equalisation under the terms of the proposed merger.

Completion of the transaction will 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, the companies said.

 

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