Axiata and Telenor’s proposed merger may not happen, after all

Earlier this year, news surfaced that Malaysian-based Axiata Group Bhd and Telenor Group from Norway were in talks to merge their Asian operations, with Celcom and Digi potentially joining to form a “Malaysian Champion” headquartered in Malaysia. However, that merger has now hit a snag, according to a new report.

Initially, the merger was predicted in May to take 3 months to complete, with negotiations to form the largest telco operator in the ASEAN region now stalling due to a number of issues. Rather pertinently, one of the issues purported to be causing the breakdown in talks is regarding an imbalance in equity.

“What I heard is that we [Malaysia] wanted at least equal equity with the Norwegians in the merged company and [Axiata] was not willing to take a back seat in terms of control.”

Previously, Telenor announced that the Norweigan-based group would be holding 56.5% of shares, making it the majority shareholder over Axiata, with a 43.5% stake. But the power-struggle doesn’t end there. There are also apparent concerns over the fact that Telenor would be appointing the new CEO of the combined entity, with Axiata to choose the Chairman instead.

“We are nationalists”, says a source

Telenor reportedly has plans to move the headquarters of the proposed merged company to Singapore—a decision that has not gone down well with their Malaysian counterparts.

“We are nationalists, so of course we want to be … headquartered in Malaysia and not Singapore. But what if we were more bottom-line driven? Then, of course Malaysia with all its uncertainty, political and what not, would not be the choice.”

Coupled with rumours that the merger would see chunks of Axiata’s staff being laid off, another source revealed that Malaysian staff at Celcom Bhd (a member of Axiata Group) have been expecting significant job cuts once the potential merger was concluded. The same source went on to explain, “The way Telenor operates and how Celcom operates are worlds apart.”

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At the moment, there hasn’t been an official statement from Telenor regarding any collapse in the potential merger, with the 3-month period for talks to conclude predicted at the beginning of May. However, what’s possible is that there are also political factors at play here.

One source revealed that any merger that resulted in sizeable job losses for Malaysians would not play too favourably with the local government, while the Indonesian Minister of Communication and Information Technology has also shown his displeasure at the merger (Axiata also has operations in Indonesia) due to the European Union’s stance against palm oil—although Norway is not a part of the EU.

Axiata says merger discussions still ongoing

However, Axiata President and Group Chief Executive Officer (CEO) Tan Sri Jamaludin Ibrahim has just announced that the deal isn’t dead in the water, saying, “It is still ongoing. That is it for now. (We will announce it) soon.”

The CEO made the statement to reporters during the launch of the Axiata and Celcom’s Merdeka campaign, with Celcom Axiata CEO Mohamad Idham Nawawi also present.

As of last Friday, Axiata’s has a market value of RM45.83 billion, with a share price of RM5.02. A merger with Telenor would mean a revenue of RM50 billion and a net profit of RM4 billion for the combined entity.

As for the legitimacy of the report that the merger is running off the rails, the source explained that top officials in Axiata are already revisiting policies and moves—plans that were put on the back-burner when talks of the merger began.

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