Axiata Group Bhd. is pursuing mergers as a key strategy despite an abrupt end to its plan to form an Asian mobile giant with Telenor ASA, its top executive said.
Malaysia’s largest wireless carrier, which provides telecommunication services to more than 300 million people from India to Cambodia, could see mergers happening for its Indonesian and Malaysian operations within three to five years, Chief Executive Officer Jamaludin Ibrahim said in an interview.
“Consolidation is key to future-proof us in the medium term given the challenges in the industry,” Jamaludin said at his office in Kuala Lumpur. “The cancellation of the merger does not deter us from looking at other possibilities.”
Earlier this month, Axiata ended talks with Telenor on combining their Asian operations to create a company with $13 billion in sales, just a week after saying the deal was on track. Telecommunication companies are turning to mergers and acquisitions to fend off competition and amass enough scale to adopt new technologies. Southeast Asian deals in the sector doubled from a year ago to $2.7 billion so far in 2019, according to data compiled by Bloomberg.
Axiata has received offers for its $3 billion tower unit Edotco Group Sdn., Jamaludin said, confirming an earlier Bloomberg report. The company is duty-bound to consider all offers and will explore all options for Edotco including reviving a listing plan, with a decision to be made by the end of the year, he said.
Axiata has also had informal approaches from several investors for its other assets, he said, declining to say if CK Hutchison Holdings Ltd., the Hong Kong conglomerate backed by tycoon Victor Li, has expressed interest in combining their Indonesian telecommunications operations.
Despite the canceled merger, Axiata’s shares have outperformed the benchmark to gain 7.4% in 2019, compared with a drop of 5.3% for the FTSE Bursa Malaysia KLCI index. The company is expected to report a 1.2 billion ringgit ($287 million) net income this financial year, a turnaround from the 5 billion ringgit loss in 2018, according to the average estimates by analysts polled by Bloomberg.
While the company will keep focusing on operational efficiency, “we believe that profit and cash aren’t good enough because the industry is slowing down,” Jamaludin said.
“For the last three years, we have been talking to parties in both countries,” he said, referring to Malaysia and Indonesia. “One of which resulted in almost a merger with Telenor.”
Source: Bloomberg | 17 September 2019