Axiata, Sinar Mas confirm talks for $3.45b Indonesian telecom merger

Axiata, Sinar Mas confirm talks for $3.45b Indonesian telecom merger

FILE PHOTO: A general view of the Axiata headquarters building in Kuala Lumpur, Malaysia, October 1, 2019. REUTERS/Lim Huey Teng

Malaysia’s Axiata and conglomerate Sinar Mas are in talks to merge their telecommunications operations in Indonesia to create an about $3.45 billion entity, the Malaysian firm said on Wednesday, as it seeks to tap into the growing demand in the local telecom sector.

Bloomberg News had reported in late April that the owners of PT XL Axiata and PT Smartfren Telecom were discussing the structure of a potential combination of the two telecom firms.

XL Axiata is currently Indonesia’s third-largest telecom operator, serving 58 million customers, followed by Smartfren, which has 32 million users.

Indonesia’s communication minister told Reuters earlier this month that the two firms had sought permission from the domestic government to merge the units.

The merged entity will have the agility and scale to meet the increasing expectations and consumer demand in the Indonesian public sector, Axiata said on Wednesday.

The entity 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,” it said.

XL Axiata has a market capitalization of $2.12 billion whereas Smartfren is valued at $1.33 billion, according to LSEG IBES data.

Axiata and Sinar Mas have entered into a non-binding agreement, the companies announced on Wednesday, saying discussions were at an early stage and there was no certainty that a deal would take place.

“Smartfren will provide necessary support to Sinar Mas in the due diligence and other process that may need Smartfren’s involvement, within regulatory compliance,” the Indonesian telco said in a statement on Wednesday.

Shares of Axiata ended the day 0.4% higher at 2.83 ringgit apiece whereas Smartfren rose as much as 2% in Jakarta during the day but ended flat.

Reuters

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