KUALA LUMPUR (April 18): Axiata Group Bhd, Malaysia’s largest telecommunications company by revenue, and India’s Bharti Airtel Ltd signed a definitive agreement on Thursday to combine their Sri Lankan operations.

Under a share swap deal, Axiata’s unit Dialog Axiata will acquire a 100% stake in Airtel Lanka, with issuance equivalent to 10.355% of Dialog shares to Bharti Airtel, the companies said in a joint statement. 

The Telecommunications Regulatory Commission of Sri Lanka has granted its approval for the proposed merger, though the transaction is still pending other relevant approvals, the statement read.

The merger comes at a time when Axiata is shedding some of its operations in frontier markets to boost its profit-and-loss statement as well as strengthen its balance sheet.

Axiata is in the process of selling its tower business in Myanmar for US$150 million (RM716.78 million) and exiting the country amid “worsening macroeconomic parameters and business conditions”. In December last year, Axiata sold its Nepal operations at a loss after seven years, citing prolonged regulatory challenges and uncertainties.

The consolidation will provide economies of scale and reduce duplication of infrastructure, “achieve synergies in technology and capital expenditure”, leading to better broadband connectivity, voice and value added services, cost savings and operational efficiencies, the statement said.

"The merger between Dialog and Airtel Lanka is aligned to Axiata’s strategy of market consolidation and resilience,” said Axiata group chief executive officer Vivek Sood. “The merger will create value for the shareholders of Dialog and Axiata through achievable synergies.”

For Bharti Airtel, India’s second-largest mobile network operator, the merger in Sri Lanka “will unlock new opportunities for innovation and growth, and this will benefit consumers,” said Ashish Chandra, the CEO of Bharti Airtel Lanka (Pvt) Ltd.