Telenor, Axiata in Talks on Creating Asian Mobile Giant

(Bloomberg) -- Norway's Telenor ASA and Axiata Group Bhd., Malaysia's biggest wireless carrier, are in talks to combine their Asian telecommunication operations to create a company with 300 million customers in nine countries.

The proposed transaction will form an entity with sales of about $13 billion and earnings of about $5.5 billion. Potential “synergies” from the deal would amount to about $5 billion, according to Telenor, set to own 56.5 percent of the new company. Telenor shares rose as much as 5 percent in Oslo.

A combination would provide a stronger foothold for both companies, which have recently seen their ambitions checked in Asia. The merged company would be the largest mobile operator in Malaysia, combining Celcom Axiata and Telenor's Digi.Com, and create a global top five mobile infrastructure company.

Once Norway's state phone monopoly, Telenor first entered Asia more than two decades ago and derives more than half of its revenue from the region. It also operates in Thailand, Bangladesh, Pakistan and Myanmar. Axiata has business in Cambodia, Nepal, Sri Lanka and Indonesia. Axiata's mobile operations in Bangladesh, Robi, aren't part of the deal.

Self Financing

A final agreement is sought by the third quarter, but the companies said that there's no certainty that the discussions will result in an accord. They would aim to eventually list the company on an international exchange and in Malaysia.

The deal won't change Telenor's debt and dividend targets and may make the merged entity the leading Asian telecommunication company outside of China, according to Chief Financial Officer Jorgen C Arentz Rostrup.

“Asia in the new structure is self financing,” Rostrup said by phone from Oslo. “We have just recently said that we will gear up the balance sheet a little bit from a very, very solid less-than-one-times Ebitda to a range of 1.5 to 2 times Ebitda and that still remains.”

Rostrup declined to disclose an estimate for the total equity value of the merged unit.

The deal would continue a transformation for Telenor, which has sold its eastern European businesses and purchased a mobile operator in Finland to focus more on its Nordic home region. Telenor in 2017 sold its unit in India after years of tough competition. Axiata has seen similar troubles, having to exit Singapore and seeing an expansion in Pakistan checked.

The deal with Axiata “brings benefits on many levels, and is a sign of increased dynamism in terms of portfolio management for the group,” said DNB Markets analyst Fran Maao in a note.

The CEO of the merged unit will be appointed by Telenor, while Axiata would pick the chairman, Chief Executive Officer Sigve Brekke said in a press conference in Kuala Lumpur on Monday along with Axiata CEO Jamaludin Ibrahim.

The talks have the “blessing” of Axiata's largest shareholder, Malaysian sovereign wealth fund Khazanah, Ibrahim said.

To contact the reporters on this story: Elffie Chew in Kuala Lumpur at echew16@bloomberg.net;Stephen Treloar in Oslo at streloar1@bloomberg.net

To contact the editors responsible for this story: Jonas Bergman at jbergman@bloomberg.net;Yudith Ho at yho35@bloomberg.net

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