Axiata-Telenor merger unlikely to be approved unconditionally

Axiata-Telenor merger unlikely to be approved unconditionally

Axiata and Telenor’s possible mobile merger is likely to face resistance from Malaysian regulators as it could contravene laws around competition and ownership.

The Malaysian Reserve (TMR) reported that the proposed merger of Celcom Axiata and Telenor-controlled Digi would be a preliminary step in a wider merger between the parent firms’ Asian operations. If this goes ahead, the resulting entity would have a share of over 50% of Malaysia’s mobile market.

Speaking anonymously to the paper, a brokerage analyst noted that reducing the number of operators in the market is counter to the aims of the Malaysian Communications and Multimedia Commission (MCMC), as well as many of the country’s politicians. Nonetheless, the analyst expected shareholders in both companies to support the merger.

Unconditional approval by Malaysian regulators is even less likely as Telenor would hold a 56.6% stake in the merged Asian business. Since the unit would be headquartered in Malaysia, this could contravene the country’s foreign ownership laws. Malaysia’s prime minister has already sought reassurances that the deal will not cause job losses.

Jamaludin Ibrahim, the president of Axiata Group, appeared to skirt the issue of competition by highlighting that the merged unit would have a lower stake of roughly 33% in converged services. This would allow both firms to expand their coverage while delivering services for lower tariffs, he stated to TMR.

The newspaper quoted a separate anonymous analyst as saying that the deal could still receive regulatory approval, but with conditions attached. Cited examples included relinquishing some of the merged entity’s spectrum holding or maintaining Celcom Axiata and Digi as individual brands.

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