Indonesian telcos XL Axiata, Smartfren Telecom and Smart Telcom (SmartTel), a unit of Smartfren, said on Wednesday they have agreed to merge to create a combined entity with an enterprise value of 104 trillion rupiah ($6.5 billion).
Reuters first reported on the merger with financial details earlier on Wednesday.
The companies said in a joint statement the merged entity will be called XLSmart Telecom Sejahtera and “will have the scale, financial strength and expertise to drive investments in digital infrastructure, expand service coverage”, and other areas.
“This merger is an important step in laying the foundation for a robust digital economy,” said Vivek Sood, Group CEO of Axiata Group, parent of XL Axiata.
XLSmart will have a combined mobile subscriber base of around 94.5 million and a market share of 27% in Indonesia, with pro-forma revenues of 45.4 trillion rupiah and earnings before interest, tax, depreciation and amortisation (EBITDA) of over 22.4 trillion rupiah, the statement said.
The proposed merger comes as telecom players in Asia consolidate to increase their scale and resources to invest and adapt to the rising demand for digitalisation and connectivity amid a boom in 5G and artificial intelligence.
“We know that the telecommunications industry is increasingly saturated, the room for growth is also getting smaller, so I think the merger is inevitable,” Nezar Patria, deputy communication and digital minister said on Wednesday, according to state news agency Antara.
The companies estimate the merger will result in pre-tax synergies of $300 million to $400 million annually, through strategic network integration and resource optimisation.
Sood said the companies could decommission sites in the 20% to 30% of the network where their operations overlap, which would allow the combined group to refocus expansion on profitable targets.
No layoffs are expected in the short term following the merger, he said.
The deal is expected to complete in the first half of 2025 subject to regulatory and shareholder approvals, the companies’ statement said.
Malaysia-listed Axiata Group and Smartfren’s parent, Sinar Mas Group, will become joint controlling shareholders, each holding a 34.8% stake in XLSmart, with equal influence over its strategic direction and decisions, the companies said.
The shareholding equalisation will result in Axiata receiving up to $475 million cash in two payments with $400 million as the first, subject to certain conditions, according to the statement.
Shares of XL dropped 0.9% on Wednesday, but were up 13.5% year-to-date. SmartFren shares declined 7.4% and were down by almost 50% year-to-date, LSEG data showed.
CIMB and J.P. Morgan are financial advisers to Sinar Mas’ entities. Deutsche Bank and Maybank are financial advisers to Axiata. Citibank acts for XL Axiata, the statement said.
