PETALING JAYA: The proposed Celcom-Digi merger passed one of its biggest hurdles in securing the regulator's approval for the creation of South-East Asia's biggest telecoms company that will have control of half of Malaysia's mobile subscribers.
But its creation also raises questions about fair competition, job cuts and there are suggestions that its approval could even be sweetener for the players to agree to take up 5G access.
The "no objection'' notice from the regulator, Malaysian Communications and Multimedia Commission (MCMC), was secured yesterday after a second attempt by Axiata Group Bhd and Norwegian-Telenor ASA to merge their mobile units.
Axiata's Celcom Axiata Bhd and Telenor's Digi.com Bhd will merge to create Celcom Digi Bhd (merged entity), which will remain listed on Bursa Malaysia.
This approval also signals the industry consolidation from a big-four (Celcom, Digi, Maxis Bhd and U Mobile) mobile player landscape to two.
The question going forward is will Maxis Bhd, the biggest player by revenue market share as at first quarter 2022 at 38%, or even U Mobile consider a merger.
Size is relevant in a changing landscape more so in a 5G environment where none of the players will have their own 5G mobile networks and the reliance is on external access.
Experts believe the way to compete is with product differentiation and a big subscriber base helps.
"We also want to know that with the creation of a huge player that controls the mobile market space, will consumer protection in terms of pricing and product quality be rigidly monitored? Will the regulator ensure fair competition for the industry to grow?,'' asked a telecoms executive.
Experts believe that with the "go ahead'', there is nothing stopping the merged entity to venture across the region, especially in Indonesia where Axiata has a unit. Telenor has been eyeing the region's most populous country for a long time.
The executive also pointed out the possibility of job cuts, given a merged entity may not need so many people and repetitive roles may be dropped in the new company structure.
Celcom has about 2,500 employees and Digi over 1,400. When combined, it is over 3,900 people.
"It is worrying, especially at this time when the world is headed for a recession and locally, inflation pressures are looming. Some form of job guarantee is necessary to allay fears,'' he added.
However, at the point of the announcement on June 21, 2021, both Axiata and Telenor reiterated "their commitment to protect employee welfare with no forced retrenchments''.
In terms of subscribers, Digi has 10.24 million, Celcom 9.58 million, Maxis 9.5 million, U Mobile 7.0 million and Telekom Malaysia Bhd about one million.
The merged entity will have about 20 million users, which is more than half of the country's mobile subscribers.
"We reiterate our commitment to ensure that the proposed merger delivers benefits to the nation as a whole.
"It is aimed at combining the best of Celcom and Digi so that our customers and community have good options in accessing solutions to participate more equitably in this digital era,'' said Axiata chairman Tan Sri Shahril Ridza Ridzuan.
While the nod from MCMC is critical to move ahead with the merger, Axiata and Telenor/Digi still need the approvals of the Securities Commission, Bursa Malaysia and their respective companies' shareholders.
Both parties expect the merger to be completed in the second half of this year.
Upon completion, Axiata and Telenor will hold equal ownership of 33.1% each in Celcom Digi. The Employees Provident Fund, Permodalan Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan) will collectively own about 19.2%.
"We will now focus on completing the remaining necessary steps to conclude this transaction and work on delivering a seamless integration programme to bring the vision and value of the merged entity to reality for the benefit of many," said Digi chair of the board of directors Haakon Bruaset Kjoel.
Even though the approval has been given, there are some conditions that the promoters – Axiata and Telenor – have to make good.
Among them is to return the 70MHz of spectrum across several bands over a period of 24 to 36 months to the MCMC or else Celcom Digi would be in an advantageous position versus competition.
Experts believe the regulator should distribute the 70MHz to other players since they will not be the same size as Celcom Digi.
"For a long time, there has been cordial relationships among players for network sharing. This merger could impact such arrangements,'' he added.
The corporate brand of Celcom Digi can only be effective after year two once the merger is completed. Celcom will need to sell "Yoodo'' brand and set up a separate independent business unit for mobile virtual network operators wholesale business.
It needs to remove exclusive arrangements for distribution in some states.
After the announcement yesterday, the share price of both Digi and Axiata rose to close 17 sen and 5 sen higher at RM3.42 and RM2.86, respectively.
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