Officially Merger, XL And Smartfren Will Open The Roads Of Indonesia And ASEAN To Be More Connected

Cooperation (photo: dock. Unsplash)

JAKARTA PT XL Axiata Tbk (EXCL), PT Smartfren Telecom Tbk (FREN), and PT Smart Telcom (SmartTel) announced the achievement of a definitive agreement to merge with a combined value of pre-synergy reaching more than IDR 104 trillion or USD 6.5 billion.

The merger will form a new telecommunications entity called PT XLSmart Telecom Sejahtera Tbk (XLSmart).

Group Chief Executive Officer Axiata Group Vivek Sood stated XLSmart will have a scale, financial power, and expertise capable of encouraging investment in digital infrastructure, expanding service reach, and encouraging innovation for customers, as well as creating a healthier and more competitive market.

"We firmly believe that this industrial consolidation opens the way for a more connected Indonesia and ASEAN, as well as helping to unravel the problem of digital inequality in creating an inclusive future for the entire community and business so that it can develop," he said in his statement, Wednesday, December 11.

Vivek said this merger was an important step in building a strong digital economy foundation. In addition, this merger will make it possible to meet the unique infrastructure needs of Indonesia as an archipelagic country.

According to Vivek, the synergy produced by this merger will increase the value for shareholders and some will be used to seize future growth opportunities.

"Axiata has the expertise of executing successful mergers and providing value for shareholders, and we are excited to bring this expertise to XLSmart, combining two complementary businesses to create telecommunications companies that have a unique position to meet the growing needs of customers across key segments," he explained.

Meanwhile, XL Axiata will be a surviving entity, while Smartfren and SmartTel will combine themselves into part of XLSmart.

Meanwhile, Axiata Group Berhad (Axiata) and Sinar Mas will become joint controlling shareholders, each holding 34.8 percent of XLSmart's shares with the same influence for the company's strategic direction and decision.

At the time of completion of the transaction, equal ownership of shares will result in Axiata receiving up to 475 million US dollars. After the transaction is closed, Axiata will receive 400 million US dollars, along with an additional 75 million US dollars at the end of the first year, depending on the fulfillment of certain conditions.

In addition, XLSmart will utilize networks, expertise, and resources from shareholders to accelerate digital transformation in Indonesia.

Chairman of Sinar Mas Telecommunication and Technology Franky Oesman Widjaja stated that this merger is an important effort made to provide great added value to all stakeholders through excellent services, digital connectivity, and innovation, including to support the efforts of the Government of Indonesia in encouraging digital transformation.

"This is in line with the principle of being united for a greater common goal; as the saying goes, 'If you want to go fast, you go alone; if we want to go far, we go together'. At Sinar Mas, we always say, 'Together, we go far, fast, and beyond'. This is what will add value to all customers and employees, as well as support the digitalization efforts carried out by the Government of Indonesia", he said.

Meanwhile, XLSmart utilizes a combination of powers from XL Axiata, Smartfren, and SmartTel to provide better connectivity to customers, both at individual, corporate, and public sector levels. Through re-investing in 5G expansion, network improvement, and product innovation.

In addition, the merger is expected to generate significant cost synergies, with an estimated synergy before tax of US$300 to US$400 million after the completion of the strategic network integration process and resource optimization.

With a total of 94.51 million combined cellular subscribers and a 27 percent market share, XLSmart will generate a proforma revenue of IDR 45.4 trillion or USD 2.8 billion and EBITDA worth more than IDR 22.4 trillion or USD 1.4 billion.

President Director and CEO, XL Axiata added Dian Siswarini by combining resources, expertise, and market position, we will increase competitiveness, encourage innovation, and open up new growth opportunities to build a better future together.

Dian conveyed that this merger not only illustrates the commitment to strengthening Indonesia's digital economy, but also shows dedication to bridging the digital divide, expanding access to reliable telecommunications services, and producing an inclusive digital society.

"With a common vision and collective work, we are confident to be able to provide benefits to shareholders, support the aspirations of Indonesia's technological advances, and create a new standard for the telecommunications industry," he said.

Meanwhile, the merger plan has received approval from the board of directors XL Axiata, Smartfren, and SmartTel but is still awaiting approval from regulators and shareholders, as well as certain closing provisions. If all approvals and conditions are met, the completion of the merger process is expected to be carried out in the first half of 2025.