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XL has long way to go in acquiring Axis
PT XL Axiata (EXCL) announced that it has signed an agreement to acquire fellow operator PT Axis Telekom Indonesia
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PT XL Axiata (EXCL) announced that it has signed an agreement to acquire fellow operator PT Axis Telekom Indonesia. However, the third-largest operator must meet key governmental preconditions to process the acquisition, says telecommunication regulators.
XL announced on Thursday that it agreed to acquire Axis by signing a conditional sales purchase agreement (CSPA) with Saudi Telecom Company (STC) and subsidiary Teleglobal Investment BV. STC holds 80.1 percent direct and 3.7 percent indirect stakes in Axis.
Under the deal, Teleglobal will sell 95 percent of its equity in Axis to XL. Axis, at 100 percent enterprise value, is worth US$865 million in a cash and debt-free basis. Proceeds from the purchase will cover the payment of Axis shares at nominal value, in addition to debts.
However, XL ' 66.5 percent of which is owned by Malaysia's Axiata Group Berhad via Axiata Investments Sdn. Bhd. ' noted that the transactions would be closed once XL had obtained the approval of shareholders and the government. XL also seeks to maintain rights over the current frequencies it operates on.
Director general of post and informatics resources at the Information and Communication Technology Ministry Muhammad Budi Setiawan said that telecommunication regulators were currently outlining the conditions that operators had to fulfill to process the acquisition.
'Principally, we endorse this acquisition to occur,' he said. 'However, we are currently delineating the technicalities that the operators must meet before the ministry gives final permission,' he said.
The ministry has formed three special teams to review the acquisition. The teams, comprising officials from the ministry and the Indonesian Telecommunications Regulatory Body (BRTI), are tasked with recommending official acquisition approval. Budi added that the technicalities included frequency allocations.
By law, the ministry has the sole authority for apportioning frequency, which is considered a limited natural resource under the state, for various use. Operators are barred from handing over the frequencies uniquely allocated to them to other entities, including subsidiaries.
BRTI official Ridwan Effendi said that XL and Axis could not 'automatically combine' all the frequencies currently apportioned to them in the case of an acquisition.
'The government has the prerogative over certain resources, such as frequency. Thus, we will weigh how these operators will remain entitled to utilize their current frequencies,' he noted.
He pointed out that Axis had received frequency allocations, or blocks, over two bands: 2,100 megahertz (MHz) and 1,800 MHz. Meanwhile, XL has licenses for blocks across three bands: 2,100 MHz, 1,800 MHz and 900 MHz.
XL Axiata CEO Hasnul Suhaimi said the company was attending to the list of regulatory prerequisites and permits it had to fulfill, which made it difficult to estimate when the acquisition process would be completed.
'There are still many phases left, including the extraordinary shareholders meeting,' he said.
'We are also still weighing our source of funds, which will most likely come from multiple channels, such as a shareholders' loan from our parent company, Axiata,' he noted.
XL recorded a gross revenue of Rp 10.3 trillion ($919.4 million) in the first half of the year, of which nearly 18 percent came from data and value-added services (VAS).
