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Ministry Approves XL Axiata-Axis Telekom Merger

XL Axiata, Indonesia’s third largest mobile phone operator, has secured official approval from the Ministry of Communications and Information Technology to acquire Axis Telekom Indonesia, the company’s chief confirmed on Friday.

Malaysia’s Axiata Group, which has a 66.5 percent stake in XL Axiata, has reportedly offered to acquire Axis Telecom, which is 84 percent controlled by Saudi Telecom Company.

The merger is said to give the Indonesian operator access to the mobile-phone frequencies it requires to expand in the competitive Indonesian market.

“We have received a letter of approval from the Ministry of Communications and Information,” said Hasnul Suhaimi, the president director of XL Axiata on Friday.

However Hasnul added that the process still had a long way to go.

“We are still in the negotiation phase. After this, we will sign a conditional sale and purchase agreement,” said Hasnul, a veteran telecommunication executive who previously held the position as president director at rival Indosat ¬— the second largest mobile phone operator by customer size in the country — from 2005 until 2006.

The value of the acquisition is still unknown but Saudi Fransi Capital valuated Axis’s shares, including the company’s debt, at $1 billion.
XL Axiata, which registers around 49 million customers, is now competing with nine other operators for subscribers in the country, which issues more SIM cards than its population.

Its current competitor includes Axix, which serves 17 million subscribers.

Combined, the two companies will be bigger than Indosat — the second largest mobile phone operator by customer in Indonesia — which now serves around 59 million subscribers.

Hasnul said, XL Axiata plans to acquire all of Axis’ assets, including its employees, brand, subscribers as well as frequencies.

Saudi Telecom acquired Axis in 2007, with hopes to exploit the prospect of the nation’s fast growing mobile market.

A few years on, the company recorded poor financial performance of its Indonesian unit amid stiff competition in the market.

STC said in a statement on July 22 that it managed to initially lure the Indonesian company with significant operational and financial support to aid business expansion. reported on July 22 that STC said “the operational performance of Axis in Indonesia … continued to drag the financial results of the group.”

The report said STC has studied all alternatives related to the continuity of Axis and decided that selling the Indonesian unit is “one of the best alternatives” available for stakeholders.

Communications and Information Technology Minister Tifatul Sembiring has called on the country’s other mobile phone operators to consolidate through mergers and acquisitions in order to strengthen the health of the industry.

He said there are 10 operators in Indonesia, but 92 percent of the revenue is enjoyed by the top three operators.

“The small ones get the rest,” he said.