AXIATA Group Bhd’s announcement on Friday that its group CEO is stepping down effective was hardly surprising.

Was his abrupt departure due to Celcom’s delay in accepting the government’s offer to all mobile network operators of 70% of equity in Digital Nasional Bhd (DNB)?

Only a day earlier, on Thursday, at a press conference after Axiata’s EGM, the group CEO said Axiata’s mobile arm, Celcom, was still studying the proposal but that it would be able to meet the June 30 deadline to make a decision on the offer.

It is widely known that heads of government-linked companies often are unwilling to oppose the government’s wishes out of fear of damaging their careers.

On May 20, it was reported that the country’s four dominant service providers – Celcom Axiata Bhd, DiGi Telecommunications, Maxis Bhd and U Mobile, four of whom are known as CDMU – wrote to the Finance Ministry, countering a proposal made by the government in March 2022 offering all Mobile Network Operators (MNO) in the country a combined equity stake of up to 70% in DNB,

In that letter, CDMU informed the government it was seeking a majority stake of 51% collectively among the four of them. Not reported, however, was whether the counter proposal was for 51% of DNB 51% of the 70% offered by the government.

A local news portal reported on May 23 that the finance minister had indicated to two of the four that the government intended to stick with its June 30 deadline, thereby rejecting a move by the companies to demand a controlling stake in DNB.

According to the latest Bloomberg report, Khazanah Nasional Bhd is the largest shareholder of Axiata with a total stake of 3.37 billion, or 36.75% shares, followed by the Employees Provident Fund (16.99%) and Amanah Saham Bhd (14.68%). Even though all three government-linked investment companies (GLICs) and trust institutions do not report directly to the Finance Ministry, it is known that the ministry exerts significant influence over them on certain matters.

Was subtle influence exerted on Axiata due to Celcom’s delay in accepting the offer from the government on DNB in view of the looming deadline of 30 June 2022?

In April, Axiata Group has announced, in a filing with Bursa Malaysia, that the proposed merger between Celcom Axiata Bhd and Digi.com Bhd to form a new entity known as MergeCo is expected to be completed in the second half of 2022, pending the approval of both the company and Digi shareholders, as well as regulatory approvals and other terms and conditions.

Both Axiata and Telenor Group, the single largest shareholder of Digi, will emerge as two of the largest shareholder in the merge entity following the merger.

Does this means that the expected decision by Celcom to accept the offer from the government to participate in DNB is also binding on the merged entity bearing in mind that at the present moment, Digi, collectively with Maxis, U Mobile and Celcom, is seeking a majority control of DNB?

Celcom, Digi and Maxis are listed on Bursa Malaysia and are subject to the listing rules and governance standards set by the regulatory authorities. And the regulatory authorities has always proclaimed to the capital market investors – both local and foreign alike – that the country has a governance and reporting regime on par with the world’s best.

DNB was conceived as a 100% owned entity of the government. After it contracted with Ericsson to build the network infrastructure, DNB re-emerged with a new concocted shareholding structure.

Investors are now watching with interest to see how the government will bring the hammer down on the recalcitrant MNOs that have yet to accept its offer. – May 29, 2022.

* FLK reads The Malaysian Insight.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.