The companies had said in April they were in advanced talks to merge Celcom Axiata Bhd and DiGi.Com Bhd, and each party would own 33.1% of the combined firm.
"Assuming a smooth transition, post integration period, we are expecting to see improvement in EBITDA and cashflow margins in the combined entity in step with our ongoing commitment to maximise dividend payout for our shareholders," Izzaddin Idris, president & group CEO of Axiata, said in a statement on Monday.
The union of the country's second and third largest mobile services providers will create a company estimated to have annual revenue of $3 billion, with core profitability of $1.4 billion from a subscriber base of about 19 million, Axiata and Telenor said in a joint statement.
The merged entity, Celcom Digi Bhd, has a "pre-synergy" equity value of nearly 50 billion ringgit ($12.1 billion), the companies said. It will remain listed in Kuala Lumpur, in line with a preliminary agreement announced in April.
Two sources familiar with the deal said the implied $15 billion enterprise value of the combined firm was based on Digi's share price of 4.18 ringgit as of Friday. Digi's shares rose 3.4% on Monday to take its valuation to $8.1 billion.
The deal comes at a time when mobile operators are facing pressure on profits in a challenging industry environment. Celcom Digi's main competitor would be the current largest telecoms operator in the country, Maxis Bhd.
The transaction, subject to regulatory and other approvals, is expected to be completed by the second quarter of 2022.
As a result of the deal, the companies plan cost cuts and savings on capital expenditure with a net present value of about $2 billion, Telenor said in a statement.
Axiata said it entered into the agreement with Digi, where 100% equity interest of Celcom Axiata would be transferred to Digi for a total consideration of 17.76 billion ringgit ($4.3 billion).
Digi said the merger would result in Axiata receiving newly issued shares in Digi and a cash consideration of 1.7 billion ringgit from Digi as new debt in the merged company.
"As part of an ownership equalisation in Digi under the terms of the merger, Axiata will also receive close to 300 million ringgit from Digi's largest shareholder Telenor," it said in a statement.
Axiata said last Tuesday it hoped to seal the merger within days or a week, having completed due diligence.
Morgan Stanley was the sole international advisor to Axiata on the deal, while Citi advised Telenor.
($1 = 4.1480 ringgit)
(Reporting by Terje Solsvik in Oslo, Liz Lee in Kuala Lumpur and Anshuman Daga in Singapore; Editing by Christopher Cushing, Stephen Coates and Bernadette Baum)
By Liz Lee, Anshuman Daga and Terje Solsvik