MALAYSIA’S communications regulator must investigate the proposed merger between Celcom Axiata and Digi because it breaks anti-competition laws, an opposition lawmaker said today.

DAP Sarawak chairman Chong Chieng Jen added to the proposed deal’s chorus of disapproval, which if given the go-ahead will mean the new entity will control more than 50% of Malaysian mobile subscriptions.

“This will greatly reduce the choices to consumers at large in Malaysia, which is counter-competitive and adverse to consumers’ interests in both choices and pricing,” he said.

Chong added that Section 133 of the Communications and Multimedia Act (CMA) 1998 provides that “a licensee shall not engage in any conduct which has the purpose of substantially lessening competition in a communication market”.

He added that the Malaysian Communications and Multimedia Commission (MCMC) could authorise the merger under Section 140 of the CMA, provided that it was on the grounds of “national interest”.

“There is no question that the proposed merger will have an anti-competitive effect on the telco sector in Malaysia, which contravenes Section 133 of CMA 1998 and there is nothing of ‘national interest’ for MCMC to authorise.”

Chong drew parallels to the 2015 failed merger between Sweden’s TeliaSonera and Norwegian operator Telenor, which said would “boost investments in networks and technology and benefit Danish consumers”.

“The Danish European Commission immediately opened investigation with concerns the deal could lead to higher prices and less innovation and fears the two remaining rivals, TDC and Three Denmark, would provide insufficient competitive constraints.

“At the end, the proposed merger was called off as the two operators could not justify the proposed merger in terms of the interest of the Danish consumers.”

He said the case was similar to the proposed Celcom-Digi merger because Malaysia also has four major service providers – Celcom, Digi, Maxis and U Mobile – and the merger would reduce that number to three.

“The merged entity will control more than 50% of the current market, leaving the other two operators unable to provide effective competition in the market.”

He added that Axiata’s president-cum-CEO, Izzaddin Idris, when asked about the possible merger of both companies in respect to their operation in Bangladesh, said that it was “impossible to merge the businesses as it will go against the anti-competition act”.

“If even a country like Bangladesh has laws to prohibit such mergers to protect its consumers’ interest, we, Malaysia should not fall behind in terms of protection of our consumers’ rights and interests in our country.

“Therefore, the MCMC should act immediately and not authorise such a merger,” Chong said.

As of the second quarter of 2020, Digi had 10.6 million subscribers, Celcom had 8 million mobile subscribers and Maxis had 9.5 million users. U Mobile at the fourth quarter of 2020 had 7 million users.

On April 8, Axiata announced its plans to merge with Digi’s parent company, Telenor Asia, and is aiming to finalise agreements over the proposed transaction within the second quarter of 2021, following due diligence.

In the event of a successful merger, the parties will each have equal ownership of about 33.1% stake.

Among the terms of the transaction, Axiata will receive newly issued shares in Digi representing 33.1% post-transaction shareholding and cash equalisation of about RM2 billion, of which RM1.7 billion will come from Digi as new debt and the balance of RM300 million from Telenor.

Trading in the shares of Axiata and Digi in Bursa Malaysia have been suspended since the announcement. – April 13, 2021.