KUALA LUMPUR (May 15): Axiata Group Bhd (KL:AXIATA), Malaysia’s largest mobile telecommunications company by revenue, said on Wednesday it had signed a non-binding agreement with conglomerate Sinar Mas to explore combining their Indonesian units.
The proposed merger between Axiata’s XL and Sinar Mas’ Smartfren “is at an early stage of evaluation”, Axiata said in an exchange filing. Both Axiata and Sinar Mas intend on remaining as joint controlling shareholders of the merged entity, the company said.
The move would “create a strong mobile telecommunications service provider in Indonesia”, Axiata said, but noted that the ongoing discussions with Sinar Mas may not necessarily lead to a deal, and any transaction would still be subjected to relevant approvals.
The merged unit is expected to “deliver superior customer experience in the telecommunications sector and create additional shareholder value including through synergies from the combined operations of XL Axiata and Smartfren,” Axiata said in a statement accompanying the announcement.
XL Axiata, listed on the Indonesian stock exchange, is already Axiata’s largest asset. Axiata runs five main businesses in Indonesia – XL Axiata, Link Net, edotco, Boost and ADA.
Prior to the announcement, Axiata and Sinar Mas had sought permission from the Indonesian government to merge their telco units, said Indonesian Communication and Information Technology Minister Budi Arie Setiadi in an interview with Reuters.
The transaction may create a US$3.5 billion (RM16.74 billion) entity with about 100 million customers, according to a Bloomberg report.
Axiata, controlled by sovereign wealth fund Khazanah Nasional Bhd, has been shedding assets and acquiring new ones as part of an effort to boost its profitability. The company announced the sale of its businesses in Myanmar in April this year and Nepal in December last year.
Shares in Axiata finished up one sen or 0.4% at RM2.83 on Wednesday ahead of the announcement.