UOB Kay Hian: TM-Ax­i­ata merger is no sur­prise

New Straits Times - - Business -

KUALA LUMPUR: Talk of a merger be­tween Telekom Malaysia Bhd (TM) and Ax­i­ata Group Bhd is not en­tirely a sur­prise.

UOB Kay Hian said the market had been rife with talk of the po­ten­tial merger since the roll-out of webe, TM’s wire­less mo­bile arm, in the se­cond quar­ter of last year.

“At this junc­ture, we note that de­tails re­main sketchy, be it the val­u­a­tion pa­ram­e­ters or the ex­er­cise un­der­tak­ing, that is, would it be a plain vanilla share swap or some com­bi­na­tion of cash.”

It had been re­ported that both com­pa­nies had hired ad­vis­ers, with CIMB In­vest­ment Bank ad­vis­ing TM, while Gold­man Sachs is work­ing for Ax­i­ata.

Khaz­anah Na­sional Bhd owns 26 per cent and 38 per cent of TM and Ax­i­ata, re­spec­tively.

Ax­i­ata was spun off from TM in 2008 in a move that saw the for­mer mak­ing in­roads in over­seas in­vest­ments, while TM fo­cused on fixed-line dom­i­nance.

UOB Kay Hian believed the fol­low­ing syn­er­gies could pro­vide cre­dence to the po­ten­tial merger: full prod­uct of­fer­ings (wire­less, fixed line and In­ter­net pro­to­col tele­vi­sion with recog­nis­able lo­cal brand­ing), a com­bined cus­tomer base of 13.5 mil­lion (Cel­com: 11 mil­lion, TM: 2.5 mil­lion), su­pe­rior net­work assets (Cel­com’s 78 per cent 4G LTE pop­u­la­tion cov­er­age and TM’s ex­ten­sive fi­bre net­works).

Both groups will also get ac­cess to an en­larged distribution net­work to tap into the pre­paid market seg­ment.

The firm noted that an en­larged Cel­com-webe outfit could see cost sav­ings in cen­tralised pro­cure­ment, staff over­heads, mar­ket­ing and gen­eral ex­penses.

“This fits nicely with Ax­i­ata’s aim to achieve RM2.3 bil­lion in cost sav­ings be­tween this year and 2019, with the first RM800 mil­lion in sav­ings to be achieved this year,” it added.

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