Malaysia's Axiata Group and Telenor ASA said Thursday they were in "advanced" talks to merge their Malaysia telecommunications units and form the country's biggest mobile company, according to a statement to Bursa Malaysia Thursday.
The merger is expected to improve service and cut costs. "The proposed merger represents an important milestone in Telenor Group's strategy to strengthen its Asian presence and create value in the region," said Jorgen C Arentz Rostrup, executive vice president and head of Telenor Asia.
Telenor currently owns 49% of DiGi Telecommunications - Malaysia's second largest mobile services provider by subscribers. Axiata's domestic unit Celcom Axiata is the third largest. Telenor is a Norwegian multinational telecommunications company majority owned by the state. Malaysian sovereign wealth fund Khazanah Nasional owns 37% of Axiata.
The merger will result in a new company - Celcom Digi - in which the parties will have equal ownership estimated at 33.1% each. Axiata together with Malaysian institutional funds will own more than 51%.
Celcom Digi will continue to be listed on Bursa Malaysia and will be amongst the top stocks in terms of market capitalization.
Axiata will receive new DiGi shares representing 33.1% of Celcom Digi after the deal. It will also get around 2 billion ringgit ($483.6 million) in cash.
"With the intent to create the leading Malaysian telco (the merger) will bring together Axiata and Telenor's Malaysian operations' combined scale, competencies, finances and vast experiences to generate significant synergistic value for a commercially stronger and more resilient (company), the statement said.
The new company will have revenue of about 12.4 billion ringgit and an estimated 19 million customers.
There were no expected forced jobs losses as a result of the deal, the statement said.
"Customers will benefit significantly from the merger, as the merged company will have the capacity to invest even more to provide better quality of service and at competitive rates. Customers also will be able to maintain their choice of mobile operator brand, as both Celcom and Digi brands will continue post-merger," it said.
The transaction is expected to be concluded in the second quarter.
In September 2019, Telenor and Axiata called off a proposed deal to create a telecoms joint venture with nearly 300 million customers across South Asia and Southeast Asia, blaming "complexities" in the project.
And last year, Telenor said it was combining its Asian operations into a single entity under new leadership to be better placed to pursue deals in the region.