Celcom and Digi Merger Is Now Complete

After obtaining shareholder approvals, Axiata Group Berhad and Digi.com Berhad have officially announced the completion of the merger of Celcom and Digi. The two telcos not only form the single largest mobile telco in the country but it's also the largest local-listed technology company on Bursa Malaysia.

According to the official statement, both Axiata and Telenor will hold equal ownership in Celcom Digi at 33.1% each, followed by other shareholders such as EPF, PNB and KWAP. Axiata received newly issued Digi shares representing 33.1% of the enlarged share capital of Digi and a cash consideration of RM2.5 billion funded by Digi, and to be assumed by the merged entity. Digi has also issued shares to Telenor to reach equal ownership following Telenor's payment of RM300 million to Axiata.

The merged parties aim to form a world-class Malaysian digital telco that will contribute significantly towards the growth of the country's digital ecosystem and economy. On a pro forma basis for the financial year 2021, Celcom Digi will serve an estimated 20 million customers, with revenues of RM13 billion and an EBITDA of around RM5.8 billion. It added that it remains committed to the previously announced synergy target of RM8 billion.

Commenting on the successful merger, Axiata Group Berhad's Chairman Tan Sri Shahril

Ridza Ridzuan said "Celcom Digi is strategically poised to invest in network expansion and

support the growth of Malaysia's digital ecosystem. We are also heartened at the role this tech giant can play in spurring talent development here in our very own backyard, as Malaysia charts advancements in 5G innovations, automation, IOT, Al and cyber resilience, among others. Moving forward, I am confident that Celcom Digi backed by the global experiences, excellent governance standards and financial strengths of Axiata and Telenor as shareholders, is well-placed to serve Malaysian consumers and enterprises seeking to step up on digital competitiveness in the current era."

Meanwhile, Telenor Executive Vice President and Head of Asia Jrgen C. Arentz Rostrup, said "The launch of Celcom Digi represents a major milestone in Malaysia's digitalization journey, aligned with Telenor's ambition to build leading operators that serve customers with relevant, attractive, and convenient products and services. By combining the strengths of two well-loved local telco brands, the new company can enhance customer satisfaction and provide a broader platform to serve the growing needs of Malaysian SMEs and large enterprises. Employees can look forward to development opportunities, build new competencies and shape the growth journey of a successful digital telecom champion," he added.

The merged entity has pledged to invest up to RM250 million over 5 years in building a worldclass innovation centre in Kuala Lumpur as part of its nation-building efforts. It aims to catalyse the 41R digital transformation and strengthen the local ecosystem through the adoption of IOT, Al, cloud computing and 5G. It remains committed to bridging the digital divide in rural areas to spur greater socioeconomic participation.

As part of MCMC's approval, both Celcom and Digi have agreed to several undertakings to address competition concerns. This includes returning a total of 70MHz of spectrum which covers 1800MHz, 2100MHz and 2600MHz bands over a three-year period. Even after the spectrum divestment is completed, Celcom Digi will retain 150MHz of spectrum which is more than any other retail telco in Malaysia including Maxis which currently uses 115MHz.

In addition, Celcom and Digi will have to establish a separate independent business unit to manage Mobile Virtual Network Operators (MVNO) while ensuring continued access to wholesale service for MVNOs at terms no worse off than the current agreements. Yoodo, the digital telco brand under Celcom, will need to be divested within 18 months after the completion of the merger. If Celcom Digi fails to divest Yoodo within 18 months, they will have to cease Yoodo operations within 3 months of the expiry of the Divestiture Period.

Within 3 years, Celcom and Digi must also remove exclusive arrangements with its distributors in Sabah, Labuan, Sarawak, Terengganu, Pahang and Kelantan. At the same duration, the merged company is not allowed to enter any new exclusivity arrangement with exclusive distributors or other distributors in the region unless it is approved by the MCMC.

Moving forward, consumers should start seeing Celcom and Digi products gradually positioned under a single corporate brand. Celcom and Digi have previously assured that they will prioritise minimising any potential service quality impact to customers while delivering these undertakings specified by the MCMC.

Required

1. Based on the article and your knowledge on telecommunication industry, examine FIVE (5) external forces that most impacted Celcom Axiata Bhd and Digi.Com Bhd when initiating the merger.

- first point and explanation

- second point and explanation

- third point and explanation

- forth point and explanation

- fifth point and explanation

2. Propose TWO (2) potential intensive strategy that will be taken from the Celcom Axiata Bhd and Digi.Com Bhd merger.

- first point and explanation

- second point and explanation

3. The competition in the telcos industry can be described as intense. By adapting Porter's Five-Forces Model of Competition, assess the competition environment in the telcos industry. Provide example in your answer.

- first point and explanation

- second point and explanation

- third point and explanation

- forth point and explanation

- fifth point and explanation