Indonesian authorities have said they will support Saudi Telecom’s sale of its majority stake in Axis to local rival XL Axiata, reports The Jakarta Post.
The deal would see XL Axiata (Jakarta, Indonesia), owned by Malaysia’s Axiata Group (Kuala Lumpur, Malaysia), bolster its position as the country’s third-biggest operator and close the gap on number-two rival Indosat (Jakarta, Indonesia), owned by Qatari incumbent Ooredoo (Doha, Qatar).
“In principle, I have approved the [acquisition] plan involving XL Axiata and Axis,” said Tifatul Sembiring, Indonesia’s communications and information minister, as quoted by The Jakarta Post.
Sembiring said that he would not be able to give his formal approval to the plans until later in the year, with regulatory authorities expected to finish their own review sometime in August.
Rival operators have reportedly expressed concern that Saudi Telecom’s (Riyadh, Saudi Arabia) divestment will disrupt “industry cohesiveness”.
However, Sembiring believes the consolidation would improve competition because of overcrowding in the marketplace.
Indonesia is reportedly home to about 14 operators but the top three – Telkomsel (Jakarta, Indonesia), Indosat and XL Axiata – control about 70% of the market.
As a result of a merger, Axis would be required by Indonesian law to return its spectrum holdings to authorities, instead of combining them with those of XL Axiata.
Press reports say it is not yet clear whether authorities would then return the frequencies to the new entity or put them up for auction.
The Jakarta Post also reports that Indosat boss Alexander Ruslie is relatively unconcerned about the short-term impact of the merger because of industry stagnation.
“However, in the medium to long term, their [XL and Axis] networks will be wider and hence, investment will cost less. Thus, they could lower their prices,” he is quoted as saying.