KUALA LUMPUR (Reuters) - Malaysia's communications regulator on Wednesday approved a merger between the mobile operations of Axiata Group Bhd and Norway's Telenor ASA, in a deal that will form the Southeast Asian country's biggest player in the sector.
Telenor's Digi.Com Berhad and Celcom Axiata Berhad are Malaysia's second- and third-largest mobile service operators, respectively, and the tie-up will create the country's top mobile service operator, the Malaysian Communications and Multimedia Commission (MCMC) said in a statement.
MCMC said it has issued a notice of no objection after the companies submitted a set of undertakings to address competition issues that may arise from the merger.
In a joint statement, Digi.Com and Celcom said undertakings included divestment of 70 MHz of their spectrum and Celcom's "Yoodo" brand. In addition, they agreed to establish a separate independent business unit for their mobile virtual network operators' (MVNO) wholesale business, and position existing products under a single corporate brand.
When the merger was announced last year, it was estimated the new Celcom Digi Berhad would create a company with annual revenue of around $3 billion and core profitability of $1.4 billion from a subscriber base of about 19 million customers. Digi.Com had a market value of around $6 billion.
Maxis Bhd is currently Malaysia's top mobile services provider with more than 9.4 million revenue-generating subscribers.
The companies expect the merger to be completed in the second half of 2022, with Axiata and Telenor holding equal ownership of 33.1% each.
It will now be subject to the approval of the Securities Commission, Bursa Malaysia, and shareholders, the companies said.
"Today brings us a step closer to creating a strong Malaysian company with the combined scale, experience, network, and innovation leadership to drive Malaysia's digital growth in the coming years," said Haakon Bruaset Kjoel, Digi.Com's chair of the board of directors.
The companies would be well-placed to drive 5G solutions, the statement said. Malaysia plans to roll out the 5G telecommunications spectrum in stages and has set up a special purpose vehicle, Digital Nasional Berhad, to oversee infrastructure and network deployment.
Digi.Com shares rose as high as 7.7% when trading in the stock resumed. Axiata's shares climbed as high as 2.85%.