Malaysia's biggest wireless carrier Axiata Group Bhd. and Indonesian conglomerate Sinar Mas Group are exploring options that could include a merger of their telecommunications operations in Indonesia, according to people with knowledge of the matter.
The owners of PT XL Axiata and PT Smartfren Telecom are working with advisers to weigh options that could also include agreements around sharing their networks, said two of the people, who asked not to be named as the process is private.
Shares in XL Axiata and Smartfren surged. XL Axiata stock jumped as much as 4.5% on Friday, giving the company a market capitalization of about 32 trillion rupiah ($2.3 billion). Smartfren shares spiked as much as 8%, valuing the company at approximately 33 trillion rupiah.
Deliberations are still ongoing and there is no certainty that a merger will take place, said the people. Representatives for Axiata and Sinar Mas declined to comment.
"Smartfren is open to consolidate or collaborate with other industry players aiming for operational efficiency," Smartfren Telecom President Director Merza Fachys said in response to a query by Bloomberg News. "However, all parties must get the same benefits," he added.
XL Axiata President Director Dian Siswarini said the company has always been open to various possibilities to "consolidate with any party" and directed Bloomberg News to shareholders.
A strategic collaboration between XL Axiata and Smartfren would come amid consolidation in one of the fastest developing telecommunication markets in the world. Last month, CK Hutchison Holdings Ltd. and Qatar's Ooredoo QPSC agreed to combine their Indonesian telecom businesses in a $6 billion transaction. State-owned PT Telkom Indonesia remains the largest operator in Southeast Asia's most populous country.
Axiata was approached by CK Hutchison, the Hong Kong conglomerate backed by tycoon Victor Li, on a potential combination of their telecommunications operations in the Southeast Asian nation in 2019, Bloomberg News has reported.
XL Axiata has 56.8 million subscribers as of June 30, according to its latest financial statement. The Jakarta-listed company reported net income of about 716 billion rupiah on revenue of nearly 13 trillion rupiah for the six months to June. Axiata owns about 66% of the firm.
Smartfren, a unit of Sinar Mas, has 27.9 million users as of the end of 2020, according to its latest annual report. The company reported a net loss of 452 billion rupiah on revenue of 4.95 trillion rupiah for the six months of 2021 according to its latest financial statement.
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