HLIB POSITIVE ON CELCOM-DIGI MERGER
It will likely lead to healthier market and more effective capex spending
THE merger of Celcom Axiata Bhd and Digi.com Bhd is a positive move as the consolidation leads to a healthier market, improved operational leverage, effective capital expenditure (capex) spending and more procurement bargaining power, said Hong Leong Investment Bank Bhd (HLIB) yesterday.
It said the merged company (MergeCo) would be the largest telecommunications company (telco) in Malaysia with revenue and sub-market share of around 34 and 40 per cent, respectively.
This means that the MergeCo will become Malaysia’s leading telco in terms of value, with a pro forma revenue of about RM12.4 billion, pre-synergy gross earnings of RM5.7 billion and an estimated 19 million subscribers.
“We do not discount the possibility that the merged company will consolidate its towers by maximising the usage of Digi towers, thus reducing its tower rental from edotco (Group Sdn Bhd),” it said.
On Thursday, Axiata Group Bhd and Norway’s Telenor ASA agreed to resume talks on the merger of their Malaysian operations. Following the merger, they will each own 33.1 per cent of the MergeCo, to be named Celcom Digi Bhd.
However, Axiata and local institutional funds will collectively control more than 51 per cent stake in the company.
HLIB has maintained its “neutral” call on the telco sector and reiterated its emphasis on fixed over mobile as it was the prime beneficiary in broadband or fifth generation mobile technology infrastructure deployment.
HLIB’s top sectoral picks are Telekom Malaysia Bhd and Time dotCom Bhd.