EXCL – Axiata and Sinar Mas considering merging Indonesian mobile operators XL Axiata and Smartfren

EXCL – Axiata and Sinar Mas considering merging Indonesian mobile operators XL Axiata and Smartfren Axiata Group Berhad and Wahana Inti Nusantara, Global Nusa Data, and PBali Media Telekomunikasi (collectively Sinar Mas) announced a non-binding MoU to explore a proposed merger of XL Axiata and Smartfren, creating a new entity (MergeCo). Both parties aim to remain joint controlling shareholders. The merger is in early evaluation stages, involving due diligence and agreement on key terms. Regulatory and corporate approvals will be required if a binding agreement is reached. MergeCo is expected to improve customer experience and generate shareholder value through operational synergies. (Source: IDX) Comment : We view this plan favorably. If executed smoothly, MergeCo could reach 95.6 mn customers, just below Indosat's 100.8 mn customers. Axiata and Sinar Mas intend to remain joint controlling shareholders of MergeCo. Operational synergies, similar to those seen in the IOH merger, could drive cost-optimization. We estimate the total post-merger NAV to be IDR109.55 tn (vs. ISAT’s NAV IDR108.91tn). Maintain BUY on EXCL with a TP of IDR3,100 (-0.5sd of 7-year EV/EBITDA 2024F of 3.0x).