PETALING JAYA: The telecoms industry regulator, the Malaysian Communications and Multimedia Commission (MCMC), has issued a set of guidelines on mergers and acquisitions (M&As) that will prohibit entities from lessening the level of competition in the marketplace and it can take action against the companies if breaches are found.
The guidelines for M&As, which have been issued for the first time, come weeks after Axiata Group Bhd and Norwegian-Telenor ASA announced a proposed mega-merger to create a pan-Asian telecoms giant by merging their Asian assets.
One of the concerns of the mega-merger was the impact it would have on competition in Malaysia, as it would create a significant market player with over 50% market share with the merger of Digi.Com Bhd and Celcom Malaysia Bhd.
“The communications and multimedia industry is a critical component and key contributor to the country’s economy. Policies that ensure a competitive and forward-looking industry can significantly impact Malaysia’s economic growth.
“While M&As can allow our companies to achieve efficiency through greater scale and scope, as well as gain access to new technologies and markets, they can also serve to reduce competition and result in market dominance,’’ MCMC chairman Al-Ishsal Ishak said.
However, he added that “it is imperative that we strike a balance between allowing companies to pursue their corporate strategies and prioritising shareholder returns, while maintaining competitive dynamics in the market to protect products and services available for consumers and businesses”.
The guidelines developed some time ago – for M&As and the “authorisation of conduct” – are aimed at infusing transparency and clarity to parties involved in M&As on the type of information and processes that MCMC would adopt when assessing an M&A.
However, it is voluntary assessment.
Notwithstanding this, Al-Ishsal said “with or without the guidelines of substantial lessening of competition, it is prudent for licences involved in an M&A to seek approval from MCMC”.
He added that under “Section 140 of the the Communications and Multimedia Act 1998 (CMA), licensees can seek authorisation on conducts that substantially lessen competition, if the conduct is in national interest”.
“The guidelines are fair and much needed by the industry,’’ said an industry player.
The merger scope has been widened, as they consider significant cross-shareholding between the parties of a 40% market share or more. They also cover the M&A of two international companies that result in a merger of Malaysian subsidiaries.
“If the M&A results in a market share of 40% or more, it is deemed suitable for notification. We have decided to adopt the same threshold as that adopted for (market) dominance,’’ Al-Ishsal said.
The guidelines also allow for third-party consultations. However, confidential assessment is not available where the merger has been publicly announced.
The proposed merger between Digi and Celcom will create market dominance. Given the guidelines, the parties can now apply for assessment of their merger by MCMC.
“Even though the merger of Digi and Celcom creates a significant market player, with recent developments in Europe and Australia, approvals were given despite the perceived lack of competition,’’ said an industry source.
It is a two-stage process that can take up to 170 business days for assessment. At the end of the process, the regulator will issue a “notice of objection’’ or “no objection”.
If there is a “notice of objection’’, then the parties would be given a “statement of issues’’ which contains MCMC’s preliminary assessment and the parties have 30 days to give their feedback.
“MCMC will make a final decision after taking into consideration the parties’ feedback,’’ Al-Ishsal said.
As for the Authorisation on Conduct, that is the second stage if there is an issue. The process can take up to 180 days.