KUALA LUMPUR: Axiata Group Bhd
has entered into a definitive agreement with Sinar Mas for the proposed merger of PT XL Axiata Tbk, PT Smartfren Telecom Tbk, and Smartfren subsidiary PT Smart Telcom (SmartTel) in Indonesia.
According to a joint statement, Axiata and Sinar Mas will each have 34.8% stake in the merged entity, named PT XLSmart Telecom Sejahtera Tbk (XLSmart), which will have an enterprise value of IDR104 trillion (US$6.5bil).
Upon completion of the merger, shareholding equalisation will result in Axiata receiving up to US$475mil.
The group will receive US$400mil at the completion of the transaction, with an additional US$75mil paid at the end of the first year subject to the satisfaction of certain conditions.
According to Axiata, the funds will go towards paring down debt.
It added that after a a successful merger, it would operate in markets with a three-player structure, where it will hold over 25% market share.
As for XLSmart, the merged entity will serve a combined mobile subscriber base of approximately 94.5 million, representing around 27% of the local market share.
It said the expanded scale will support combined pro forma revenues of IDR45.41 trillion (US$2.8bil) and earnings before interest, taxes, depreciation and amortisation (Ebitda) of IDR22.4 trillion (US$1.4bil), providing a solid financial foundation for reinvestment into profitable growth and yield.
The operational synergies from the merger, which is estimated to realise annual run-rate pre-tax synergies of US$300mil to US$400mil post completion of integration, will enhance profitability, deliver sustainable returns and support reinvestment into critical areas such as 5G expansion, customer experiences, and network connectivity, contributing to long-term sustainable growth, said Axiata.
Meanwhile, XL Smart will be in better position to compete with larger players to capture market share, improve revenue streams and drive shareholder value.
"The combined financial and operational capabilities will enable the new entity to deliver competitive services and innovative solutions at scale, meeting the demands of Indonesia’s high-growth digital market," said Axiata.
The telco added that XLSmart will also have the resources to support the Indonesian government’s agenda for a connected, inclusive digital economy, creating opportunities for individuals, businesses, and public sector entities to thrive in the digital era.
"We are incredibly proud to deepen our partnership with Sinar Mas through the creation of XLSmart as we work together toward our ambitious commitment to bridging the digital divide and fostering a connected, inclusive, and thriving digital economy across Indonesia and the broader ASEAN region," said Axiata chairman Tan Sri Shahril Ridza Ridzuan.
Axiata managing director Vivek Sood added that an essential part of its value creation strategy was how the group was reshaping the competitive landscape by leading consolidation in the markets in which it operates to create stronger, more competitive companies.
"We are excited to bring our expertise to XLSmart, combining two complementary and solid businesses to form a strong telecommunications operator uniquely positioned to meet the evolving needs of customers across all key segments."
Axiata noted that the transaction remains subject to regulatory and shareholder approvals, as well as customary closing terms and conditions.
Assuming all approvals and conditions are met, the proposed merger is expected to be completed by the first half of 2025.
