Axiata Unit Buys Axis Telekom by Assuming $865 Million Debt

PT XL Axiata Tbk., (EXCL) a unit of Malaysia’s largest mobile-phone operator, will acquire PT Axis Telekom Indonesia from Saudi Telecom Co. (STC) and settle $865 million of the closely held carrier’s debts.

XL Axiata, a 66.5 percent-owned subsidiary of Axiata Group Bhd. (AXIATA), is paying $100 cash for the share capital of Axis, according to a stock exchange filing in Kuala Lumpur today. The price represents Axis’s enterprise value on a cash-free and debt-free basis, parent Axiata Group said in the filing.

The acquisition will allow XL Axiata to add services and coverage after the company said in August second-quarter profit slumped 55 percent to 354.92 billion rupiah ($31 million) from a year earlier. Ten operators compete for subscribers in Indonesia’s mobile market, the second-highest number in Asia after India, in what XL Axiata described in May as an “unsustainable situation.”

“All industry participants are in agreement that the industry must consolidate,” XL Axiata President Director Hasnul Suhaimi said in the statement. “This will be driven by companies like XL who have the will and ability to accelerate the development of high quality communication services in Indonesia.”

XL Axiata jumped 4.8 percent to 4,400 rupiah as of 3:22 p.m. in Jakarta, paring the stock’s decline this year to 23 percent. It had the third-biggest percentage gain in the MSCI Emerging Markets Index today. Axiata Group increased 0.4 percent to 6.93 ringgit in Kuala Lumpur trading.

“For companies that want to grow in Indonesia like Axiata, acquisition is the fastest way,” Ang Kok Heng, who helps manage $428 million of assets as chief investment officer at Phillip Capital Management Sdn. in Kuala Lumpur, including Axiata Group shares, said by phone today. “You’d get customers, people and the broadband.”

The transaction still needs regulatory approvals and is expected to be completed by the end of March, the filing shows.

To contact the reporter on this story: Chong Pooi Koon in Kuala Lumpur at pchong17@bloomberg.net

To contact the editor responsible for this story: Barry Porter at bporter10@bloomberg.net

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