KUALA LUMPUR: Malaysia’s political upheaval risks derailing a deal involving the nation’s biggest mobile-phone carrier, people with knowledge of the matter said.
Talks between Axiata Group Bhd.’s biggest owner and Norwegian operator Telenor ASA that were re-opened earlier this year have come to a standstill, the people said.
The change in Malaysia’s government — at a time when Axiata is undergoing its own leadership transition — has left executives and advisers uncertain about who’s going to push through a transaction, according to the people.
Axiata and Telenor had already backed down from plans to combine their Asian telecom operations, opting instead for a more piecemeal approach where Telenor would initially buy a stake in the Malaysian carrier. Khazanah Nasional Bhd., the nation’s sovereign wealth fund, owns 37% of Axiata.
The deepening coronavirus outbreak has added to uncertainties around the deal, the people said. Malaysia has the highest number of infections in Southeast Asia, and has imposed nationwide restrictions on movement. The complexity of the proposed transaction, which could involve merging the two companies’ phone-tower operations, is another factor.
But the biggest hurdle is the political turmoil that broke out in February with the shock resignation of former Malaysian leader Tun Dr Mahathir Mohamad, the people said, asking not to be named. The change in government could lead to new senior appointments at state-backed entities like Khazanah, they said.
Malaysia’s government wanted to reform large companies like Axiata, including by bringing in foreign investors. Still, that vision collided with Dr Mahathir’s desire to avoid any major job losses.
Tan Sri Muhyiddin Yassin, who succeeded as prime minister, delayed parliament sitting by more than two months to give himself extra time to shore up support and prove his majority in the divided legislature. Dr Mahathir had called for a confidence vote, but he said in an interview last week the opposition coalition may lack the support needed to remove the current government.
Izzaddin Idris, Axiata’s deputy chief executive officer, will take over from interim CEO Jamaludin Ibrahim by December. Shares of Axiata have slumped almost 23% this year, while the FTSE Bursa Malaysia KLCI Index fell about 18%.
No final decisions have been made, and Khazanah and Telenor could resume talks on any deals, the people said. Representatives for Axiata and Khazanah declined to comment, while representatives for Telenor didn’t immediately respond to requests for comment.
Axiata and Telenor first announced in May that they were in talks to combine their Asian telecom operations to create a company with $13 billion in sales and 300 million customers across nine countries. They ended their negotiations in September, citing “complexities” as the reason.
Just four months after the carriers scrapped discussions, Khazanah and Telenor started exploring several possible scenarios including Telenor buying part of the wealth fund’s stake in Axiata, people familiar with the matter have said. A stake purchase could pave the way for more deals, such as a merger of Axiata and Telenor’s phone tower assets or consolidation in certain markets, as well as a combination and eventual listing of the two carriers’ frontier-market operations, the people have said.
Telenor first entered Asia more than two decades ago and derives more than half of its revenue from the region. Beyond Malaysia, it also operates in Thailand, Bangladesh, Pakistan and Myanmar. Axiata, which has 150 million subscribers in total, also has business in Cambodia, Nepal, Sri Lanka and Indonesia.
Telenor appointed Tone Hegland Bachke as its new chief financial officer last week. The telecom giant also named a new head for its operations in Asia with a goal to unite the business units across the region. – Bloomberg