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Posted Date: April 9, 2021

MARC highlights that there is no impact on its rating of AA+IS /Stable on Celcom Networks Sdn Bhd's (CNSB) RM5.0 billion Sukuk Murabahah Programme following the proposed merger between CNSB's parent Celcom Axiata Berhad (Celcom) and Digi.com Berhad (Digi). CNSB provides network telecommunication services to the Celcom group; its rating reflects the overall credit profile of Celcom based on the strong financial and operational linkages of the entities within the group. The AA+IS/Stable rating was last affirmed on December 16, 2020.

While we note that the proposed merger is subject to negotiations on definitive agreements, as well as approvals from respective shareholders and regulatory bodies, we opine that the merger is credit positive for Celcom. This view is based on the stronger profile of the merged entity – Celcom Digi Berhad that would arise from an enlarged market share in the telco industry, improved cost efficiency and strengthened ability to invest in network quality.

We also take note that the merged entity's pro-forma revenue of approximately RM12.4 billion, profit after tax of RM1.9 billion and free cash flow of about RM3.9 billion bode well for its credit metrics. These strengths notwithstanding, there are potential integration and execution risks that could arise from the merger transaction. Given that this proposal is at an early juncture, a full assessment on the business and financial profile of Celcom Digi Berhad would be made when greater details are available including the strategic direction of the merged entity. The merger is expected to be completed by end-2021.

Contacts:
Lim Wooi Loon, +603-2717 2943/ wooiloon@marc.com.my;
Hafiza Abdul Rashid, +603-2717 2955/ hafiza@marc.com.my.

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