KUALA LUMPUR: Axiata Group Bhd has entered into a non-binding agreement with Indonesian firms to explore a merger of XL Axiata and Smartfren to create a new entity (MergeCo).
Axiata today said it had signed a memorandum of understanding (MoU) with PT Wahana Inti Nusantara, PT Global Nusa Data and PT Bali Media Telekomunikasi (collectively referred to as Sinar Mas) on the prospect.
In a filing to Bursa Malaysia, Axiata noted the proposal is at an early stage of evaluation with both Axiata and Sinar Mas intending to remain as joint controlling shareholders of MergeCo.
"With the intent to create a stronger telecommunications service provider in Indonesia, the proposed merger of XL Axiata and Smartfren is expected to bring together the combined scale, competencies, finances and deep telecommunication expertise of Axiata and the local scale and market knowledge of Sinar Mas to generate significant value.
"Both principals are expected to wield an equitable influence over the strategic direction and operational decisions of MergeCo, bolstered by their respective strengths," it noted.
There is no certainty that the ongoing discussions between the parties will result into any binding agreement nor the completion of the transaction, it said.
"Axiata believes that MergeCo will have the strategic agility, competence and scale to meet increasing expectations and demand from consumers, businesses and the Indonesian public sector.
"MergeCo is expected to deliver superior customer experience in the telecommunications sector and create additional shareholder value including through synergies from the combined operations of XL Axiata and Smartfren," it added.
Axiata's share price closed one sen or 0.35 per cent higher at RM2.83 today with a market capitalisation of RM25.98 billion.