Merger dilemma

MICHEAL KUEHNER on Thursday said that a merger between Telekom Malaysia Bhd (TM) and Axiata Group Bhd made sense.

His exuberance has not, however, been reflected in the share price of both companies for now.

Kuehner is CEO of Celcom Axiata Sdn Bhd, a unit of Axiata, and his job is to turn Celcom around.

Former TM director and current deputy minister of Home Affairs and Internal Security Datuk Nur Jazlan was not amused about Kuehner’s remarks.

In a tweet, Nur Jazlan said yes- terday “this statement (referring to Kuehner’s statement that “it makes sense to merge TM and Axiata as both are owned by Khazanah Nasional Bhd”) was hilarious. Ten years ago when I was a TM Board member, the de-merger TM and TMI (later rebranded Axiata) was explained by Khazanah as making a lot of sense at that time. So if a MERGER is considered sensible now, I guess the de-merger must have been NONsense.”

Axiata was created by demerging TM in 2008 so that there will be a cellular play.

Talk of a re-merger made it rounds last year even though both companies have denied it. Getting that done depends on Khazanah, which controls both companies, to push the merger ahead.

After the de-merger a decade ago, TM appeared a “dying horse’’ until it got into the fast broadband network.

Now it is looking good because broadband is vogue. However, TM wants to get back into the mobile business and some years ago bought P1 to offer “webe’’ but the latter has not lived up to expectations.

This week, TM re-branded its entire unifi offering as it positions itself as a “converged player’’ with fixed broadband, wifi, TV and unifi mobile.

With that in mind, and the fact that Celcom has dropped from its prime spot to the third largest player, a merger, makes sense as it will hopefully help lift Celcom.

For TM, the biggest benefit will be the mobile coverage that Celcom has, for TM’s webe has coverage issues.

But a merger would the creation of a bigger competitor, something that will not bode well for the other players. As it is, broadband transition cost is pretty much fixed because TM has the widest fast speed broadband network. With the advantage of Celcom’s wide cellular network, TM would have a tremendous advantage over the other players with broadband and cellular solutions in a market where some players rely on them for broadband services. Would there be healthy competition?