LAST_UPDATEFri, 22 Jun 2018 7pm

Axiata, TM Shares Higher On Possible Merger

KUALA LUMPUR -- Both Axiata Group Bhd and Telekom Malaysia Bhd's (TM) shares were higher by 1.81 per cent and 0.48 per cent, respectively, today on news of a possible merger between the two.

As at 12.13 pm, Axiata's shares stood at RM5.06, up nine sen, with 7.56 million shares traded. TM stood at RM6.35, up three sen, with 4.91 million shares exchanging hands.

In a note, Public Investment Bank Research said it was not surprised by the news as the re-marriage was first mooted when TM entered into the mobile space with the acquisition of Packet One Networks (P1).

"As TM aims to become a convergence player to offer fixed line, broadband and wireless services, merging with Axiata would provide it a quick entry into the wireless market.

"We believe it could take TM at least three years to gain a strong footing in the mobile market via P1," it added.

The research house said considering that information on the possible corporate exercise remained sketchy at this juncture, it retained the "neutral" rating on Axiata with an unchanged target price of RM4.48.

Meanwhile, Public Investment Bank Research said Axiata's strategic review in its shareholding of Singapore-based telco M1 Ltd, would potentially result in a divestment of Axiata’s stake in M1 or perhaps a privatisation of the latter.

"M1 has been struggling with a declining profit margin as competition in Singapore's telco market becomes keener with the entry of fourth mobile operator, TPG Telecom," it said.

Last Friday, Axiata confirmed that it and the other substantial shareholders of M1, Singapore Press Holdings Ltd (SPH) and Keppel Telecommunications & Transportation Ltd, would undertake a strategic review of their shareholdings in the company.

Axiata holds a 28.5 per cent stake in M1, while Keppel and SPH 19.2 per cent and 13.4 per cent respectively.

Furthermore, it was reported that Axiata's 19.8 per cent-owned unit, Idea Cellular Ltd, and Britain's Vodafone Group today agreed to merge their Indian operations, which would then create India's biggest telecommunication business.

Axiata's share price ended the day 2.21 per cent or 11 sen higher at RM5.08 with 17.31 million shares traded.