Axiata has announced that it is talking to CVC, the private equity owner of broadband company Linknet, about buying its 66% stake.
Axiata is working on the proposed deal with XL Axiata, the Indonesian mobile operator of which it already has a controlling 66.48% stake.
If successful, Axiata and Linknet would become a competitor to Telkom Indonesia, the only integrated fixed and mobile operator in the country, said Fitch Ratings on Sunday.
“A merger would strengthen the convergence capabilities of XL, allowing it to diversify its mainly mobile business to provide quadruple play services,” noted Fitch.
The ratings agency added: “The proposed acquisition follows other attempts at consolidation in the Indonesian telecoms sector, including ongoing discussions for the merger of mobile rivals PT Indosat Tbk and Hutchison 3 Indonesia. Competition in the Indonesian mobile sector is tough, as it is plagued by the proliferation of unlimited mobile-data plans, while the government’s data-subsidy programme, part of its Covid-19 pandemic relief measures, has squeezed data yields and slowed industry growth.”
The agreement between Axiata and its Indonesian subsidiary XL Axiata is with existing shareholders in Linknet, Asia Link Dewa and PT First Media, but behind them is CVC Capital Partners, which invested in Linknet 10 years ago and is reported to want to sell the stake, according to Bloomberg last month.
Fitch said yesterday: “Linknet is the second-largest provider of high-speed broadband services in the country, after Telkom. Its niche focus on affluent households in high-income areas, such as Greater Jakarta, Surabaya and Bandung, … Nevertheless, Linknet’s 859,000 subscribers at end-March 2021 is only a fraction of Telkom’s 8 million users. The latter targets the mass market and provides fixed broadband coverage nationwide.”
In January Linknet reported an increase in subscribers in 2020 of 25.6% over the previous year. It is also working with the local electricity company to use its poles for its distribution network. It migrated 65,100 poles by the end of the year, ahead of the 65,000 target and under the budget.
In June, Axiata and Telenor signed an agreement to merge their Malaysian mobile operations, Celcom Axiata and Digi.
