PETALING JAYA: Axiata Group Bhd and Norwegian telco Telenor ASA are in discussions for a potential merger, which would combine both parties’ Asian operations and portfolio of telecommunications, digital and infrastructure assets.

According to Axiata’s filing with Bursa Malaysia, the shareholding of the merged entity will reflect the relative asset valuation, with Telenor anticipated to own 56.5% and Axiata 43.5%, subject to adjustments and due diligence.

Telenor is also the largest shareholder of Digi with a 49%% stake.

Axiata and Telenor are working towards a binding agreement by the end of the third quarter following the due diligence exercise. The merged entity is expected to be listed on Bursa Malaysia and another major international exchange within the next few years.

The potential merger, if realised, would create an international merged entity with proforma revenue of more than RM50 billion and earnings before interest, taxes, depreciation and amortisation (ebitda) of more than RM20 billion.

The new entity will have control over operating subsidiaries in nine countries with a combined population of more than one billion people and 300 million customers.

It will be one of the largest telecommunications groups in the region in terms of value, revenue and profit, with a strengthened balance sheet to support growth and expansion amid a competitive landscape.

The portfolio of controlled telecommunication operations will comprise six countries with number one positions, two countries with number two positions and one market with third position within their respective markets.

The combination of assets from both parties could deliver up to RM20 billion incremental value in synergies through consolidation of assets and organisations, economies of scale and scope, and complementary best practices.

Axiata noted that its subsidiary in Bangladesh, Robi Axiata Limited, will continue to be managed independently by Axiata post completion of the proposed merger.

In Malaysia, the merger of Celcom Axiata Bhd and Digi.Com Bhd would create the largest mobile operator in the country.

The proposed transaction would also lead to the formation of a global top five mobile infrastructure player, by combining Axiata’s edotco Group Sdn Bhd with Telenor’s Asian tower assets. edotco is currently the 13th largest tower company globally.

In addition, the proposed transaction would provide the opportunity for the parties to establish the largest innovation centre in the region to include IoT and 5G, and a global talent factory.

“This proposed merger that will take a Malaysia-based company to global heights marks a momentous milestone in the country’s growth story. This will open up tremendous global opportunities in the areas of technology, talent and innovation for Malaysia and also for all the countries we operate in,” said Axiata chairman Tan Sri Ghazzali Sheikh Abdul Khalid.

Axiata president and group CEO Tan Sri Jamaludin Ibrahim said the proposed merger would create a global champion headquartered in Malaysia, bringing together the breadth, experience and knowledge of Axiata and Telenor.

“Leveraging on the synergies of our combined assets, organisations, talents, best practices, scale and financial firepower, we would create the largest telecom operator in the region,” he said.

Morgan Stanley is the international financial advisor to Axiata on the proposed transaction.

Trading in the securities of Axiata and Digi have been suspended today. The stocks were last traded at RM4.04 and RM4.52 respectively.