(OSLO AND KUALA LUMPUR, June 21, 2021) Axiata Group Berhad (“Axiata”), Telenor Asia Pte Ltd (“Telenor”) and Digi.Com Berhad (“Digi”) (together the “Parties”) announced that they have entered into with successfully exercised due diligence and signed transaction agreements for the proposed merger of Celcom Axiata Berhad (“Celcom”) and Digi (together “MergeCo”).
Following April 8, 2021 announcement that Axiata and Telenor were in advanced merger talks, today’s signing signifies confirmation of intention to establish a commercially stronger digital converged service provider and more resilient, and a Malaysian telecommunications operator positioned to drive digital ambitions.
On a pro forma basis1, MergeCo will serve approximately 19 million customers with revenue of RM 12.4 billion, EBITDA of RM 5.7 billion, after-tax profit of RM 1.9 billion and free cash flow.2 of RM 4.0 billion.
Axiata and Telenor will be equal partners with a 33.1% stake each in MergeCo, and MergeCo will continue to be listed on Bursa Malaysia Securities Berhad (“Bursa”). Targeted to be among the top five companies listed on Bursa by market capitalization, MergeCo is valued at a combined pre-synergy equity value of nearly RM50 billion.3.
The integration planning phase will include further detailed work on synergies and MergeCo’s business plan, and early estimates point to a potential increase in value through cost and investment synergies of around 8 billion ringgit on a net present value basis.
MergeCo will see the combination of the scale, experience, skills and financial strength of the two global telecommunications groups with the market knowledge of two well established local companies. Uniquely positioned to meet the growing adoption of digital services in Malaysia and the expectations of better connectivity, MergeCo will have the capabilities to leverage technological advancements and attract global internet-based partnerships to provide a wider range of innovative solutions to its customers. It will be well positioned to fuel the implementation of digital technologies as 5G, IoT, AI and cloud computing come together to accelerate digitization at all levels of society.
MergeCo will also aim to invest up to RM 250 million over five years in building a world-class innovation center to be established in Kuala Lumpur with the aim of catalyzing the 4IR digital transformation, strengthening the local ecosystem. and keep Malaysia at the forefront. of global digital evolution. Leveraging new opportunities in the digital economy, the Innovation Center will conduct in-depth research and development, develop 5G use cases, support local digital startups and provide a platform to foster creation of a knowledge-based workforce in accordance with the MyDIGITAL aspirations.
Dato ‘Izzaddin Idris, Chairman and CEO of Axiata Group, said: “We are making good progress in the ongoing merger exercise with Telenor and Digi and remain aligned with our intentions to deliver a value proposition. solid foundation that will allow our customers to participate more with confidence as the country moves into a digital economy. We look forward to delivering better value and choices for the benefit of society, especially by bridging the gap in rural areas and helping home and business businesses take advantage of new opportunities in this accelerated digital environment. .
“Assuming a smooth transition after the integration period, we expect improved EBITDA and cash margins in the combined entity, in line with our continued commitment to maximize dividend payout to our shareholders” , he added.
“We look forward to partnering with Axiata to realize the potential of the proposed merged company. The telecommunications industry is at the start of an exciting digital shift, and new technologies will change the way we develop and deliver services to the private and public sector. With this merger, we bring together the skills, financial strength and scale to go beyond connectivity and implement technology that further enhances the digital experience for our customers, ”said Jørgen A. Rostrup, vice -executive chairman and head of Asia of the Telenor group.
As stated in the initial announcement, Axiata and Telenor have agreed to appoint Dato ‘Izzaddin Idris as chairman, Jørgen C. Arentz Rostrup as vice chairman, Idham Nawawi as CEO and Albern Murty as chief executive deputy of MergeCo, which will be renamed Celcom Digi. Berhad subject to approval by MergeCo shareholders.
From the perspective of Malaysia’s national interests, Axiata and major Malaysian institutional shareholders are expected to own more than 51% of MergeCo upon completion. Axiata and Telenor also reiterated their commitment to protect the well-being of employees without forced layoffs. MergeCo is expected to create opportunities for staff to continue to grow in all functions, develop new skills and be part of the future growth of the merged company.
Upon completion, the merger of Celcom and Digi will allow Axiata to receive newly issued ordinary shares of Digi, representing 33.1% of the enlarged share capital of Digi, a cash consideration of RM2.0 billion, of which approximately RM 1.7 billion will come from Digi as debt to MergeCo and approximately RM 300 million from Telenor as part of an equalization of ownership under the proposed merger.
Completion of the transaction will be subject to Axiata and Digi shareholder approval, regulatory approvals and other customary terms and conditions. Barring unforeseen circumstances, the Merger Project is expected to be completed by the second quarter of 2022.
Director of Media Relations, Telenor Group
+47 90 94 32 15 | [email protected]
Corporate Communication, Axiata Berhad Group
+ 6012-2380581 | [email protected]
1 Based on the fiscal year ended December 31, 2020.
2 FCF is defined as EBITDA less capital expenditure.
3 After taking into account the issuance of new ordinary shares of Digi.