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Celcom Axiata to merge with Digi.Com, say sources

KUALA LUMPUR (April 8): Celcom Axiata Bhd, a unit of Axiata Group Bhd, is merging with Digi.Com Bhd to create the biggest mobile service provider in Malaysia, according to sources familiar with the telcos.

This time round it is the merger of the operations in Malaysia, unlike the previous mega-merger plan that Axiata and Digi.Com’s parent Telenor had previously tried to merge the operations in Asia region.

“The merger will bring in financial benefits although each party will not hold a controlling stake in the merged entity… the merger should be evaluated in the financial benefits,” said a source.

As the high growth era is over in the mobile service industry that requires large capital expenditure, merger to achieve economy of scale is seen to be a logical move going forward, said analysts.  

Furthermore, analysts noted mega merger of the regional operations is far more complicated as regulatory approvals are required.

Trading in the shares of Axiata Group and Digi.Com have been suspended this morning pending an announcement.

In separate filings to the stock exchange this morning, the companies said that accordingly, all structured warrants relating to Digi.Com will also be suspended at the same time.

Axiata will hold a media briefing this afternoon.

The trading suspension of the two telcos has sparked fresh speculation in the market given that Axiata and Digi.Com's parent Telenor were in merger talks before but negotiation fell through.

To recap, Axiata and Digi’s Norwegian parent Telenor ASA mutually agreed to terminate their mega-merger to consolidate both telecommunication giants’ operations in Asia after about four months of negotiation in 2019.

In May 2019, Axiata announced that it was in talks with Telenor to merge their operations in Asia, resulting in Telenor being the majority shareholder of the global Merged entity, and anticipated to own 56.5% and Axiata holding 43.5%.

The proposed merger would result in the emergence of Asean’s largest telecommunication company, with a pro forma revenue of RM50 billion and a net profit of RM4 billion.


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