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Why a merger between Astro and Maxis is being talked about

There is much talk that Astro Malaysia Holdings Bhd will merge with Maxis Bhd as changes in the operating environment for the satellite pay-TV operator may force major shareholder tycoon T Ananda Krishnan to consider all possibilities.

In a Dec 6 report, CIMB Research upgraded its call on Astro to “add” due to a drop in its share price. It sees “attractive risk-reward potential for investors to ride the privatisation or M&A angle” for the pay-TV operator.

The question is, does a merger between Astro and Maxis make good business sense, and what would it create? Will a highly dominant multimedia and communications company be formed, and what does that mean for the public?

A lawyer who is an authority in competition law in Malaysia says such a merger is “interesting”.

“Why do I find it interesting? Because from the business point of view, the merger makes sense as the broadcasting industry moves deeper into digitalisation, and with the changed preference of the younger generation to consume broadcast content on-demand and on-the-go,” she says when contacted by The Edge.

“Astro is dominant in its field while Maxis has a strong market share in the mobile telecommunications segment. It is interesting to see how the regulators will react if there is a merger between the two companies.”

Astro is a major player in the broadcasting industry. As at end-October, the group had 5.66 million customers for its TV operations, which represent 76% of Malaysian households. It had a 75% TV viewership share, even after accounting for the shares of free-to-air broadcasters.

Meanwhile, Maxis is the largest mobile telecommunications company in the country. As at Sept 30, it had a 38.9% market share, compared with 31.3% for Axiata Group Bhd’s Celcom and 29.8% for DiGi.Com Bhd.

Observers say a merger between Astro and Maxis will result in a company that is strong in telecommunications and broadcasting. As more people consume content through their data network, the merger will allow Astro to become a full-fledged data-based broadcaster.

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