By Dominic Chopping and Yantoultra Ngui
Telenor ASA (TEL.OS) and Axiata Group Bhd. (6888.KU) on Friday called off a planned merger of some Asian assets, citing "complexities" involved in the proposed deal, which people familiar with the situation said relate to concerns over job losses and foreign ownership in Malaysia.
The two companies had been working toward finalizing an agreement within the third quarter, but "due to some complexities involved in the proposed transaction, the parties have mutually agreed to end the discussions."
Both companies didn't elaborate on what the complexities were.
In May, both companies said they were discussing a possible noncash merger of their Asian telecom and infrastructure assets that would have created one of Asia's largest telecom companies with a potential $12 billion in annual revenue. If the deal had materialized, Telenor would have been the largest shareholder of the combined entity with a 56.5% stake, with the rest held by Axiata.
Axiata is Malaysia's largest telecommunications operator by market capitalization. The company, which is 37% owned by the country's sovereign wealth fund, Khazanah Nasional Bhd., operates in nine countries including Indonesia, Sri Lanka, Bangladesh, Thailand and Pakistan. Telenor is Norway's largest telecommunications service provider and operates in five Asian countries where Axiata is also present.
One of the people familiar with the process said worries that the proposed merger may not get regulatory approval from Indonesian authorities also weighed on the deal. Norway, which is not a member of European Union, has been a strong advocate of the EU's plan to phase out palm oil from renewable fuels by 2030 due to deforestation concerns.
Indonesia, the world's largest palm oil producer and exporter, has raised concerns regarding the plan and had threatened to reciprocate by boycotting products from the EU.
Telenor and Axiata said they don't rule out the possibility of a future transaction.
Shares of Axiata and DiGi.com Bhd., the Malaysian unit of Telenor, will resume trading Tuesday. While Axiata was up 2.3% at 4.88 Malaysian ringgit ($1.16) before the trading halt, DiGi.com was down 0.2% at MYR4.89.
Write to Dominic Chopping at email@example.com and Yantoultra Ngui at firstname.lastname@example.org