Malaysia's Axiata is a step closer to acquiring Indonesian mobile operator Axis Telecom and merging it with its mobile unit in the nation, XL Axiata.
The company announced it has entered into a conditional agreement with Axis owner Saudi Telecom Company to purchase 95% of Axis.
The remaining 5% will be held by an Indonesian shareholder, in accordance with local foreign investment regulations.
The proposed transaction will involve XL Axiata paying just $100 in cash for the stake, but also assuming around $865 million worth of debt. XL will fund the purchase through a combination of external debt and a loan from Axiata Group.
Merging XL and Axis would create a mobile operator with over 65 million customers and a revenue market share of around 22%.
Axiata said the merger will also allow the company to avoid over $250 million of spectrum acquisition costs, improve XL's spectrum parity with market leaders and give it the ability to compete in LTE on the 1800-MHz band.
The deal is contingent on conditions including receiving final government and regulatory approval. But in a good sign for Axiata, Indonesia's communications ministry had already given in-principle approval to an XL-Axis merger before the conditional deal was reached.
The Indonesian mobile market is unsustainably overcrowded, so a move to reduce the number of competitors is seen as potentially healthy to competition.