XL Axiata to seek loans for acquiring Axis

JAKARTA. Mobile network operator PT XL Axiata (EXCL) is expecting to finalize its acquisition of PT Axis Telekom Indonesia (Axis) by February 2014, which will mostly be financed through a loan from its parent company.

“Up to 58 percent of the acquisition costs will be covered by a loan from our parent company Axiata,” XL Axiata president director, Hasnul Suhaimi, said.

Axiata Group Berhad owns 66.5 percent of XL Axiata via Axiata Investments (Indonesia) Sdn. Bhd. The remaining 33.5 percent is publicly owned.

“We will seek loans from financial firms to cover the remaining costs. However, we are still reviewing which banks, either domestic or foreign, to approach,” he added.

The value of the conditional sales purchase agreements between XL Axiata and Axis stands at US$865 million.

Hasnul said that XL Axiata could save up to $600 million altogether through their merger and acquisition of Axis through cost efficiencies related to network usage.

“For example, we would gain access to the 15 megahertz of spectrum belonging to Axis on the 1800 megahertz frequency without having to participate in auctions for spectrum allocation,” he said.

However, Axis has been in the red for years. Their liabilities stood at Rp 21.7 trillion ($1.78 billion) while their equity was a negative Rp 13.6 trillion in the first nine months of 2013. They booked a Rp 7.3 trillion loss during that period, and Rp 5.5 trillion loss throughout 2012.

Hasnul said XL Axiata was still studying the impact Axis’ negative financial report would have on XL Axiata’s financial performance in subsequent years. “Our debt to equity ratio [DER] is 2.7 times. We would like to maintain our DER at around 3 times and prevent it from surpassing 4 times,” he noted.

He added XL Axiata aimed to conclude the acquisition and merger process by the first quarter of next year.

“Our goal is to conclude the acquisition by January and the merger by February,” he said.

He added that the Investment Coordinating Board (BKPM) had just given them permission on Monday to acquire Axis.

“We have to process the permit for the merger separately. We are now in the process of obtaining it,” he said.

In addition to processing the aforementioned permit with the BKPM, he added that the mobile network operator had submitted the necessary documents to the Financial Services Authority (OJK) and Business Competition Supervisory Commission (KPPU).

“We have to obtain multiple permits from various state bodies given that we are a listed company,” he said.

“We will also hold an extraordinary shareholders meeting on Jan. 22 next year to also obtain approval for the merger and acquisition process from their shareholders,” he said. (Mariel Grazella)