Axiata, Sinar Mas to merge Indonesian units in $8.7 billion deal
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The merger has been met with pushback. Over a thousand employees of XL Axiata took mass leave on Dec 8.
PHOTO: REUTERS
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JAKARTA – Malaysian wireless carrier Axiata Group and Indonesian conglomerate Sinar Mas Group have agreed to merge their telecommunications operations in Indonesia in a deal that values the business at US$6.5 billion (S$8.7 billion).
The owners of XL Axiata and Smartfren Telecom said the transaction would take effect on April 15, with the former being the surviving entity and changing its name to XLSmart Telecom Sejahtera, according to the companies’ disclosures on Dec 11.
The proposed merger comes as telecom players in Asia consolidate to increase their scale and resources to invest and adapt to the rising demand for digitalisation and connectivity amid a boom in 5G and artificial intelligence.
“We know that the telecommunications industry is increasingly saturated, the room for growth is also getting smaller, so I think the merger is inevitable,” Mr Nezar Patria, deputy communication and digital minister said on Dec 11, according to state news agency Antara.
The companies estimate the merger will result in pre-tax synergies of US$300 million to US$400 million, through strategic network integration and resource optimisation.
The merger has been met with pushback.
Over a thousand employees of XL took mass leave on Dec 8 as the workers’ union demanded transparency about the process and assurance about job security, local media reported.
XL president director Dian Siswarini also unexpectedly announced her resignation last week.
XL’s shares fell as much as 2.6 per cent in early morning trading in Jakarta on Dec 11, their steepest drop in a month, to 2,230 rupiah apiece. Trading of parent Axiata’s shares in the Malaysian bourse was suspended.
The deal caps over three years of talks between both companies.
They made headway in May with the signing of a non-binding memorandum of understanding.
Axiata and Sinar Mas will become joint controlling shareholders, each holding a 34.8 per cent stake in XLSmart, with equal influence over its strategic direction and decisions, according to their statement.
The Indonesian telecoms sector has seen some consolidation over the years.
CK Hutchison Holdings and Qatar’s Ooredoo completed a merger of their local telecoms businesses in 2022 in a US$6 billion transaction as they sought to fend off competition. BLOOMBERG, REUTERS
