Axiata, Sinar Mas move closer to US$3.5 billion telco merger

WIRELESS carrier Axiata Group and conglomerate Sinar Mas Group are moving forward with plans to merge their telecommunications operations in Indonesia, sources familiar with the matter said.

The owners of XL Axiata and Smartfren Telecom are discussing the structure of a potential transaction that would create a US$3.5 billion entity with about 100 million customers, the sources said. A deal could involve a mix of cash and shares, they said, asking not to be named as the process is private.

A non-binding agreement may be reached in the coming months, allowing the companies to continue negotiations and carry out due diligence, the sources said. Talks are ongoing and there’s no guarantee that Kuala Lumpur-based Axiata and Sinar Mas will proceed with a merger of the units, the sources said.

A representative from XL Axiata said consolidation would benefit the industry and that the company is open to exploring possibilities, without commenting directly on a possible Smartfren merger beyond saying it was a decision for shareholders. Smartfren’s president director and Sinar Mas representative, Merza Fachys, said he had no official information to share.

XL Axiata’s shares have climbed 22 per cent in Jakarta this year, valuing the company at about US$2 billion. Smartfren has remained mostly flat, giving the Indonesian operator a market value of US$1.2 billion.

Axiata and Jakarta-based Sinar Mas revived the merger talks last year, Bloomberg News reported in September. Other options under consideration include network-sharing agreements and partnerships, sources familiar with the matter have said. Previous discussions between Malaysia’s biggest wireless carrier and the Indonesian conglomerate did not result in a deal.

Indonesia’s telecom market has been consolidating in recent years. In 2022, CK Hutchison Holdings and Qatar’s Ooredoo combined their telecom businesses in the country in a US$6 billion transaction as they sought to fend off competition. BLOOMBERG