Axiata-Telenor merger is positive for DiGi

The megamerger between Axiata Group Bhd and Norway’s Telenor Group, which holds a 49 per cent stake in Digi.Com Bhd, is positive for DiGi as it would become the largest mobile operator in Malaysia, says Public Investment Bank.

It said via the merger, DiGi could potentially improve margins due to cost savings from sharing of resources, network optimisation and capex avoidance.

“We believe market sentiment over DiGi would be positive, and as such, upgrade the stock to a trading “buy”. Meanwhile, Axiata will be a proxy to the largest telco operator in Asia and become the “must have” stock due to its sizeable market capitalisation.

“Sealing a partnership with Telenor, the merged entity should be able to reap significant synergies in the future,” the research house added.

Public Investment has raised its sum-of-the-part valuationbased target price for Axiata to RM4.10 (from RM3.65 previously).

The merger company, MergedCo, is expected to create the largest telco player in Asia with revenue of more than RM50 billion earnings before interest, taxes, depreciation and amortisation of above RM20 billion, Public Investment Bank said.

Post-merger, Axiata and Telenor would hold 43.5 per cent and 56.5 per cent stakes in the merged unit respectively.

“There are plans to list the merged unit on Bursa Malaysia and another major international exchange within the next few years. But, the immediate focus of management would be integrating the businesses and extract synergies estimated at RM20 billion.

“At this juncture, it is still premature to assess the changes to the shareholding structure of DiGi due to the absence of key information, but we understand that its listing status would be maintained,” Public Investment said.

DiGi is expected to acquire Celcom to create the largest mobile operator in Malaysia in a non-cash transaction. Likewise, Axiata will remain listed with Robi (Bangladesh), Axiata Digital and Idea (India) held outside the merged entity.

The merged entity, however, will be an unlisted arm though there are plans for a public offering within the next few years.

“In our opinion, DiGi and Axiata should ultimately be privatised once the merged entity is listed,” Public investment said.

At a media briefing yesterday, Axiata president and group chief executive officer Tan Sri Jamaludin Ibrahim said the initial public offering (IPO) would be one of the largest in the ASEAN region.

However, he did not disclose the expected value of the IPO. — Bernama