Axiata and Telenor scrap merger plans due to 'complexities'

Axiata Group and Telenor have mutually agreed to end discussions regarding a non-cash combination of their telecom and infrastructure assets in Asia, due to "some complexities" involved in the proposed transaction, according to the Bursa filing. This comes four months after both parties announced that they will be merging operations. During this period, both Axiata and Telenor have been working on due diligence and finalising transaction agreements to be completed within the third quarter of 2019.

Axiata said in the filing that the proposed transaction will not in any way affect the group in its ability to achieve its digital champion aspirations by 2022. Axiata said in the filing that it is confident in its capacity to leverage opportunities across the consumer, home, enterprise/IoT, digital and TowerCo businesses as the industry globally moves towards convergence. It added that as evidenced in its latest 2019 financial results, its shift in focus towards profitable growth and cash generation continues to demonstrate "excellent momentum and growing confidence" in the group’s profit after tax and minority interests (PATAMI) outlook.

Celcom stabilised with improvements in PATAMI and earnings before interest, tax, depreciation and amortisation margin (EBITDA) as a result of its focus on network as well as sales and marketing efficiency. Meanwhile, ADA is expected to be profitable in 2019, while edotco registered double-digit revenue and EBITDA growth.

The company has made a major strategic shift towards operational excellence which the filing said will result in increased focus on profit and cash, while future-proofing the group with prudent investments in new growth areas of enterprise, home and digital VAS. This will ensure its resilience in navigating an increasingly competitive business environment.

According to the filing, the group continues to stay on course, among others, in the execution of its operational excellence initiatives focusing on business model transformation, network and IT optimisation and cost excellence programme.

Axiata’s chairman Tan Sri Ghazzali Sheikh Abdul Khalid said the board acknowledges the "strong strategic rationale" of the proposed transaction and is equally cognizant of the level of complexity of such a deal that extends across nine countries and 14 major entities.

“Regardless of the expressed synergies of the merger, we are confident that the termination of the proposed transaction does not affect the group in achieving its digital champion ambitions.”

Meanwhile, president and group CEO Tan Sri Jamaludin Ibrahim said moving forward, it is transforming into a digital technology company in what can be described as an increasingly converged global industry, branching out beyond mobile and consumer to home broadband, enterprise, digital and TowerCo.

“We are confident of reaping the benefits of our investments in new growth areas including enterprise, home and digital VAS, digital businesses and infrastructure in the next few years. We continue to actively explore possible consolidation and portfolio optimisation opportunities to extract synergies, maximise efficiency and fund future growth areas," he added.

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