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    AXIATA   MYL6888OO001

AXIATA GROUP BERHAD

(AXIATA)
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End-of-day quote. End-of-day quote BURSA MALAYSIA - 01/21
3.73 MYR   -0.27%
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SummaryMost relevantAll NewsAnalyst Reco.Other languagesPress ReleasesOfficial PublicationsSector newsMarketScreener Strategies

Norway's Telenor and Malaysia's Axiata pull plug on Asian telecom tie-up

09/06/2019 | 11:09am EST
FILE PHOTO: Telenor flag flutters next to the company's headquarters in Fornebu

OSLO/KUALA LUMPUR (Reuters) - Telenor and Malaysia's Axiata Group have ended talks to create a telecoms joint venture with nearly 300 million customers across South Asia and Southeast Asia in a blow to the Norwegian group's growth strategy and shares.

Shares in Telenor, which has expanded in Asia in pursuit of growth outside its mature home market in Scandinavia, fell on Friday's announcement by the two companies that talks were over.

"This removes the prospect for $5 billion of potential deal synergies," brokerage Jefferies said in a research note.

Telenor sold its central European operations last year as it seeks to focus on its Nordic and Asian businesses.

The proposed non-cash combination of Telenor's telecom and infrastructure assets in Asia with Axiata's would have had operations in nine countries including Thailand, Malaysia, Bangladesh, Pakistan and Indonesia, with a total population of nearly 1 billion people.

Failure of the talks also highlights the difficulty of merging phone operators around the world and the growing problems it presents for investors.

The joint venture would have competed with firms such as Singapore Telecommunications and created an entity worth $40 billion including debt, a person with knowledge of the matter told Reuters in May when the talks were first announced.

Telenor said in a statement that both parties had agreed to end the discussions "due to some complexities involved in the proposed transaction", without giving further details of what had scuppered plans for the largest such cross-border deal in Asia, excluding China and Japan.

However, Telenor left the door open to a deal with Axiata, saying both companies "still acknowledge the strong strategic rationale" of the combination and "do not rule out that a future transaction could be possible."

Axiata President and Chief Executive Jamaludin Ibrahim said later on Friday that the company was "surprised" by the collapse of the planned deal.

"We know that this has come as a surprise for most of you, and for us too, actually," he told a conference call with analysts.

Shares in Telenor were down 4.2% at 0931 GMT, lagging a flat European STOXX 600 Telecoms index <.SXKP>. Axiata shares were trading up 2.3% before being halted, pending the news.

"It has been a theme among investors that this deal could have created fair amount of value," said Stefan Billing, analyst at Kepler Cheuvreux.

"Telenor and Axiata have been talking about synergies, and there has also been expectations on a high valuation of the planned listing, so it's natural that there is a bit of disappointment initially."

The Norwegian mobile operator was to have owned a 56.5% stake and Axiata the remaining 43.5% with no cash changing hands, the companies had previously said.

"The Board acknowledges the strong strategic rationale of the proposed transaction and is equally cognizant of the level of complexity of such a deal," Axiata Chairman Ghazzali Sheikh Abdul Khalid said in a statement, only days after the Malaysian company said the deal was on track.

Axiata was not immediately available for comment on Friday, while Telenor declined further comment.

JOBS AND CONTROL

Control of the combined entity and job cuts could have been the main sticking points, particularly for the Malaysian government, whose sovereign wealth fund Khazanah owns a 37% stake in Axiata.

"Malaysian government-linked corporations usually want more control and that's no different with Axiata. But would Telenor let go?" a telecoms analyst in Kuala Lumpur said, declining to be named as he was talking about the government.

In March, the fund, which has housed Axiata in its commercial portfolio, announced a new strategy under which it will look to trim stakes in non-strategic assets to improve returns to the government.

"(Malaysian Prime Minister) Mahathir (Mohamad) was also clear to say the government did not want any retrenchment in the cost rationalization," said the analyst.

"In any merger, there is always cost rationalization, and the first thing is chopping headcount. If the company is not allowed that, what's the point of the exercise?"

(Additional reporting by Krishna Das in Kuala Lumpur and Victoria Klesty in Oslo; editing by Jason Neely and Alexander Smith)

By Gwladys Fouche and Liz Lee


ę Reuters 2019
Stocks mentioned in the article
ChangeLast1st jan.
AXIATA GROUP BERHAD -0.27% 3.73 End-of-day quote.-10.34%
JASON CO., LTD. 0.44% 454 Delayed Quote.-3.81%
MIRAINOVATE CO., LTD. -1.09% 182 Delayed Quote.-13.33%
NORWAY OSLO BORS BENCHMARK(TRG) -1.85% 1182.75 Real-time Quote.-1.55%
SINGAPORE TELECOMMUNICATIONS LIMITED 0.40% 2.48 Delayed Quote.6.90%
STOXX EUROPE 600 -1.84% 474.44 Delayed Quote.-2.74%
TELENOR ASA -0.42% 143.75 Real-time Quote.3.72%
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Financials
Sales 2021 25 260 M 6 036 M 6 036 M
Net income 2021 1 131 M 270 M 270 M
Net Debt 2021 16 558 M 3 957 M 3 957 M
P/E ratio 2021 28,9x
Yield 2021 2,64%
Capitalization 34 223 M 8 175 M 8 177 M
EV / Sales 2021 2,01x
EV / Sales 2022 1,88x
Nbr of Employees 12 976
Free-Float 82,9%
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Mean consensus BUY
Number of Analysts 18
Last Close Price 3,73 MYR
Average target price 4,52 MYR
Spread / Average Target 21,1%
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Managers and Directors
Mohammad Izzaddin bin Idris Independent Non-Executive Director
Vivek Sood Group Chief Financial Officer
Shahril Ridza bin Ridzuan Non-Executive Chairman
Nirmal Anthony Rodrigo Group Chief Information Officer
Thomas Hundt Chief Technology & Strategy Officer
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