Southeast Asia Telecom merges into a large group to invest in 5G

Southeast Asia Telecom has announced a combined transaction total of 30 billion U.S. dollars this year, seeking to expand market influence and increase profitability.

Analysts said that although the merger should help the investment plans of these companies, whose shareholders include some of the world’s largest telecommunications operators, their growing dominance in the region’s rapidly growing communications infrastructure may allow Consumers are worried.

In a recently announced transaction, Thailand’s True, the second largest mobile operator owned by Thailand’s largest conglomerate Charoen Pokphand, said at the end of last month, Team up with Dtac, Owned by Telenor of Norway. The merger will create a $8.6 billion company with approximately 51 million users, while its biggest competitor, AIS, has approximately 43 million users.

In Indonesia, the largest economy in Southeast Asia, Qatar-based Ooredoo and Hong Kong-based two largest operators, Yangtze River Hutchison, will merge to complete a $6 billion transaction. Regulators are expected to approve the transaction before the end of the year.

According to Fitch Ratings estimates, in Malaysia, regulators are prepared to evaluate a large US$15 billion merger between local companies Axiata and Telenor, which will create an industry leader with 46% to 50% market share.

Telecom industry integration Global pace is accelerating, Because the company pursues scale to cover the cost of investing in 5G and all-fiber broadband networks.

100 metres

Subscribers under the potential merger between Indosat Ooredoo and Hutchison 3 Indonesia, which will only lag behind the leading operator Telkomsel

The same push for profitability has prompted telecom operators to exit regions that are seen as growth drivers but fail to generate sufficient returns. Telia in Sweden Untie Its Asian assets, while Spain’s Telefónica is quit Most parts of Latin America.

But analysts say that in Southeast Asia, some regulators tend to be more lenient in integration and competition than regulators in other regions of the world, which makes the region attractive to global telecom groups seeking scale.

Last year, the Thai Trade and Competition Commission approved a $10.6 billion offer Charoen Pokphand has taken a dominant position in many areas, acquiring Tesco’s Thai and Malaysian supermarkets, making it the country’s largest retailer.

The National Broadcasting and Telecommunications Commission of Thailand has authority over antitrust issues in the telecommunications sector, describing the True-Dtac merger as “inevitable” and saying it will not stop it.

“In European countries, it is difficult to conduct mergers and acquisitions because the regulators are very strict,” said Pisut Ngamvijitvong, an equity analyst at Kasikorn Securities in Bangkok. “But in this region, the regulator is considered not as strong.”

Facts have proved that Malaysia is more strict with telecommunications companies seeking cooperation. In 2019, Telenor’s earlier attempt to merge its entire Asian business with Axiata was blocked by the government, which will create a company with $23 billion in revenue and 300 million users.

The Norwegian company revised its plan to only merge its Malaysian operations and announced Myanmar departure After a military coup took place there this year.

Industry analysts said that from the operator’s point of view, the business case for mergers is strong. Jefferies analyst Ulrich Rathe said that the merger of Telenor’s Thai subsidiary Dtac and True is strategic because it will release synergies in a market that is more mature than in previous years, when Asia was called “growth, exclamation point.”

“Telenor is looking for integration partners to help withstand political and shareholder pressure,” he said.

However, some scholars questioned the impact of the reduction in the number of telecom operators in the region on competitiveness. In Thailand, the government is advocating the “Thailand 4.0” digital innovation drive to reshape the underperforming economy in its region. The merger will reduce the number of large telecommunications companies to two.

Somkiat Tangkitvanich, director of the Thailand Development Institute, told the Financial Times that the True-Dtac merger “reversed Thailand for 17 years” when it had only two main operators: Dtac and AIS.

“If there is a merger, the price will fall much slower, and operators will not need to compete so much on quality,” Somkiat said. “Thailand wants to become Thailand 4.0, but for that, we need to compete to create the necessary infrastructure.”

Analysts said that mobile operators also act as gatekeepers for a range of other emerging digital services that extend beyond the scope of mobile phones, from remote robotics to education.

“Although there is no magic number on how many players should be allowed to participate in an industry as large as telecommunications, this transaction-if allowed-will formally change Thai Telecom. [sector] It becomes a duopoly,” said Pavida Pananond, professor of international business at Bangkok Law and Political Science and Business School.

At the same time, the cooperation between Indosat Ooredoo and Hutchison 3 Indonesia will create a network with more than 100 million users, second only to leading operator Telkomsel, and reduce the number of large operators from 5 to 4.

Fitch analyst Nitin Soni said that Indonesian regulators support the merger because the price is already low, so the proposed merger “is unlikely to have much impact on consumers.” “Five changes and four changes are not a big problem for regulators.”

The Indonesian Ministry of Communications and Information Technology has approved the transaction in principle.

However, Sony stated that the proposed Telenor-Axiata cooperation in Malaysia may face more regulatory scrutiny, which will be the largest telecommunications transaction in the country’s history.

The latest attempt will allow the combined entity to control as much as half of the domestic market and reduce the number of large participants from four to three, leading some to speculate that regulators may block the deal again.

“The regulatory agency may not even allow it, or may [restrictions on] Spectrum,” Sony said.

#techAsia Weekly Newsletter

An important guide to the billions of dollars you have created and lost in the Asia Tech world.A selection of exclusive news, clear analysis, intelligent data, and the latest technological craze from FT and Nikkei

Sign up here with one click

Source link

Leave a Reply

Your email address will not be published.