KUALA LUMPUR, May 7 ― MIDF Research has maintained its "neutral” call on the Axiata Group Bhd and Telenor ASA mega-merger, as having a sizeable presence in the telecommunications industry would provide the group with certain competitive advantages.

In a note, the research house said it also provides the group with a stronger balance sheet to execute future expansion plans as the industry is capital intensive.

"Nonetheless, the move might trigger regulatory risks, in the case of Malaysia, as well as higher exposure to forex translation risks.

"Also, we view the group as having to iron out the issue surrounding Ncell which could potentially affect Axiata’s standing in the new merged entity,” it said.

Axiata and Telenor are set to create a new global champion with discussions to combine their Asian operations under a new merged global entity (MergedCo).

Both parties are still in the early stage of discussions, to be finalised earliest in the third quarter 2019.

Under the new entity, Telenor will own 56.5 per cent of it, and Axiata the remainder 43.5 per cent.

MIDF Research said this could lead to the realisation of an additional present value upside of RM15 billion to RM20 billion and the deal would also improve the strength of the balance sheet, giving it a larger debt headroom for the future expansion plan.

It has recommended a "neutral” call on Axiata at a target price of RM3.80. ― Bernama