Jakarta Gives Nod To XL Axiata-Axis Merger

PETALING JAYA (Dec 3, 2013): PT XL Axiata TBK, an Indonesian cellular service provider 66.5% owned by Axiata Group Bhd, has received the Indonesian government's nod to buy a 95% stake in PT Axis Telekom Indonesia for US$865 million (RM2.77 billion).

In a filing with Bursa Malaysia yesterday, Axiata Group said XL on Nov 29, 2013 received written approval from the Ministry of Communications and Informatics of Indonesia for the proposed acquisition, which would result in the merger of XL and Axis.

"The approval includes the condition for the return of 2x10 MHz of the 2.1 GHz (3G) spectrum licence to the Government of Indonesia," it added.

Shares in XL closed up 150 rupiah or 3% at 5,150 rupiah yesterday, with 2.83 million shares traded.

In a report dated Sept 27, 2013, RHB Research Institute Sdn Bhd telecommunication analyst Jeffrey Tan said XL's acquisition of Axis is a longer-term positive that gives the former access to valuable spectrum and capital expenditure (capex)/operating expenditure (opex) savings but is medium term earnings per share dilutive.

"It is getting a clean, debt-free telco at zero book value but would have to contend with earnings dilution over the next two years since Axis' earnings before interest, tax, depreciation and amortisation (ebitda) is negative. The deal's funding, comprising an internal advance from its parent and external debt, is within its net debt/ebidta ceiling and should not affect its current 30% dividend payout policy," he said.

Tan deems the acquisition price fair as XL stands to gain from additional 25MHz spectrum worth US$250 million, US$800 million savings in opex/capex, US$530 million in tower and network assets, and the potential monetisation of some of Axis' 1,600 towers valued at over US$200 million.

SOURCE LINK: http://www.thesundaily.my/news/895397