UOB Kay Hian: TM-Axiata merger is no surprise
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.