While Europe pushes the idea of cross-border mergers, telcos will hope regulators follow Asia’s lead in approving in-market consolidation
The sector has seen significant M&A activity: Over the past two years, consolidation has reshaped mobile markets in Asia, creating enlarged operators that claim their new-found scale will enable them to realise efficiencies and accelerate 5G deployments. CK Hutchison and Ooredoo commenced talks to merge their Indonesian units in January 2021, with negotiations taking around nine months to complete. The proposed transaction was quickly approved by the MCI (known locally as Kemkominfo), albeit subject to coverage and service quality obligations. Talks between Axiata and Telenor also began in early 2021, with the firms looking to combine their Malaysian operations. Here, the regulator (the MCMC) identified competition concerns at the wholesale and retail levels. To secure the green light, the parties agreed to various undertakings, including the divestment of spectrum and the Yoodo sub-brand, and the formation of an independent wholesale MVNO business.
Certain mergers have proved particularly contentious: In November 2021, two operators in Thailand – DTAC and True – announced their intention to merge. The transaction faced stiff opposition (for example, from consumer groups and some MPs) as it would effectively establish a duopoly with AIS. Two of the four subcommittees set up by the NBTC to review the merger voted in favour of prohibition; however, the regulator’s leadership eventually gave it the go ahead based on several conditions, including retail price controls, transparency of voice, data and SMS charges on customers’ bills, and an independent verification of costs. M&A in Taiwan has also undergone close scrutiny, with the regulator recently granting conditional approval to two mergers: Taiwan Mobile/Taiwan Star and Far EasTone/Asia Pacific Telecom. The decision (which would reduce the number of operators from five to three) is subject to the new entities relinquishing spectrum and accepting enhanced coverage obligations – and is awaiting final sign-off from the country’s competition authority.
Some markets could yet consolidate further: These transactions do not necessarily reflect developments elsewhere across the region. In the Philippines, DITO is rapidly deploying its 5G network as it seeks to challenge incumbents Globe and Smart. Similarly, Singapore has witnessed the emergence of SIMBA (formerly TPG Mobile), which has adopted a value-led approach. Nevertheless, further M&A activity in Asia can’t yet be ruled out. In India, the Government has already overseen the merger of fibre infrastructure provider BBNL with state-owned telco BSNL as part of the latter’s INR1.64tn (£16.46bn) revival programme. It is now seeking to combine BSNL with MTNL, an indebted public sector operator serving Mumbai and New Delhi. Other deals may also be in the offing, with Airtel (the smallest mobile operator in Sri Lanka) tipped to pursue a merger with a rival due to the market’s intense competition and high taxes and capex requirements.
