Axiata and Telekom Malaysia may re-merge

By:
Natalie Bannerman
Published on:

Axiata and Telekom Malaysia are set to benefit from a increased valuation by merging the two companies together

A re-merger between Axiata Group and Telekom Malaysia could reduce the valuation differential between Axiata and its competitors, says Star Online.

The recommendation was made by AmInvestment Research, the Malaysian research firm which has valued the Axiata’s assets at 6.30 Malaysian Ringgit ($1.49) a share.

Axiata is one of five participants bidding in Indonesia's 2300MHz spectrum auction. At a reserved price of 297 billion Indonesian Rupiah ($21,900,000), the Indonesian government is auctioning off two 5mHz blocks of 2100MHz spectrum. In addition to, a 30MHz block of 2300MHz spectrum at 367 billion Indonesian Rupiah ($27,000,000).

Early last month the Malaysian Communications and Multimedia Commission opened up bids for spectrum in the 700MHz range.

AmInvestment Research says that Axiata has no need for additional 2100MHz spectrum but would consider 2300 MHz if the price was right, adding: “Assuming a 20-year amortization charge and a final successful bid price which is 20% above the reserve price, we estimate a mild impact from a successful bid for the 2300MHz band, as XL’s FY18F-FY19 earnings may be lowered by 1%-2% while its FY18F net debt/EBITDA may slightly rise to 1.44x from 1.39x given its relatively high net debt of 12.6 trillion Malaysian Ringgit currently”.

XL, the Indonesian mobile operator, is majority owned by Axiata Group and accounts for 12% of its revenues. 

“In Q2FY17, XL's service momentum rose 9% q-o-q, supporting overallgrowth of 8%. This was driven by a 2.5 million increase in subscriber base to 50.5 million and 2,000 Indonesian Rupiah a month increase in blended ARPU to 35,000 Indonesian Rupiah a month”, adds AmInvestment Research.

"We view Axiata’s struggles in regaining forward momentum in subscribers and ARPUs in Malaysia and regionally as underpinning the need for the group’s re-merger catalyst with Telekom Malaysia,” concluded AmInvestment Research.