New Delhi, India (BBN)-Bharti Airtel Ltd, the world’s third largest telecom by subscribers, has entered into exclusive discussions with Malaysia’s Axiata Group Bhd to explore a possible merger of their respective telecom units in Bangladesh—Robi Axiata Ltd and Airtel Bangladesh Ltd.
“There is no certainty that this discussion will lead into the execution of binding definitive agreements between the parties,” Bharti said in a statement on Wednesday, reports the Livemint.com.
“This announcement is to facilitate the ongoing discussions and exchanges of information between the parties, including but not limited to discussions with the relevant regulatory authorities,” the statement added.
Bangladesh currently has six telecom service providers, including Banglalink Digital Communications Ltd, Pacific Bangladesh Telecom Ltd (Citycell), Grameenphone Ltd, and TeleTalk Bangladesh Ltd, with a combined mobile phone subscriber base of 128.77 million at the end of July.
Norway-based Telenor run Grameenphone is the market leader with 53.8 million users, followed by Egypt’s Orascom owned Banglalink with 32.4 million.
Robi and Airtel follow with 27.9 million and 9.08 million subscribers, respectively.
A merger of the two would make the resultant entity a strong No. 2 operator with almost 37 million subscribers.
“The proposed merger, where we will be strategic minority partner, will combine the strengths of both companies to create the second largest mobile operator in Bangladesh with over 37 million customers. This will lead to greater industry stability and translate into affordable and innovative products and services for customers through continued investments. As stated earlier, we will continue to work towards maximizing shareholder value, whether it’s by way of growing business to the next level by ourselves or by way of restructuring the portfolio including mergers and acquisitions,” a spokesperson for Bharti further added, on the development.
After the acquisition of 70 per cent of Abu Dhabi-based Warid Telecom’s telecom assets in 2010, for an estimated $300 million, Bharti Airtel became the sixth operator to enter Bangladesh. Bharti bought the remaining stake in March 2013.
Axiata and Bharti will issue a further announcement in the event there is any material development on this matter.
“It’s a good move for Bharti as this way they can get a lot more subscribers in a market where they have been struggling to compete. They also get a lot more geographical coverage through the deal. They currently cover the metros well but rural area coverage is very poor. Their business model only works when they have a critical mass of subscribers. They even launched the per second billing in Bangladesh last year, in a bid to get more subscribers but it has not worked as well as they would have hoped,” a Mumbai-based analyst with a multinational brokerage firm said. “It was a bad idea for them to go to that market in the first place. They have another problem—that country’s merger and acquisition regulations are not very conducive to such kind of consolidation,” he added.