U Mobile reportedly rejects takeover bid from Maxis

Sources cited by Bloomberg claimed that Maxis is in early deal talks with its close rival, which is valued by its owners at more than MYR10 billion ($2.1 billion).

As usual, these same sources inserted the caveat that an agreement might not be reached, and on top of that, one of U Mobile's owners claims to have already turned Maxis away.

Malaysian businessman Vincent Tan, who along with Singapore's Temasek Holdings and ST Telemedia is among U Mobile's major shareholders, said in the Bloomberg report that "we are rejecting Maxis' offer."

Instead, U Mobile plans to file for an IPO at the end of July, he said.

This could be U Mobile's final word on the matter, or it could be an attempt to squeeze a higher bid out of Maxis. Bloomberg's sources did suggest that the MYR10 billion valuation was on the high side, so there's every chance Maxis opened negotiations with a low-ball offer.

Currently-unlisted U Mobile has built a network comprising 9,000 4G sites, and its dual-mode core network means it is ready to flick the switch on 5G. According to a recent press release, its customer base passed 9 million in 2023.

Acquiring U Mobile would propel the merged entity to within touching distance of the top spot in Malaysia's mobile market.

It is currently dominated by Celcom Digi, the operator that emerged in 2022 from the tie-up between Telenor and Axiata's respective operations. As of the end of March, it served 20.3 million mobile customers.

While Maxis has a larger fixed-line subscriber base, it trails Celcom Digi by some distance in the mobile market, with 9.4 million customers. Adding another 9 million-plus would put it almost on level pegging.

As well as the synergies generated by merging their 4G networks, the resulting scale benefits would also put the combined company in a much stronger position to compete in 5G.

Due to Malaysia's controversial decision to roll out a single national wholesale 5G network called Digital Nasional Berhad (DNB) – and then subsequently establish a second wholesaler to compete with the first – there is little scope going forward for operators to compete on network reach and capacity.

As a result, the more likely winners in 5G will be those that can more easily absorb the wholesale access fees, which is where scale comes into play.

On the flip-side, Malaysia is still fairly early in its 5G journey, so there is plenty of headroom for operators to try and make it on their own.

Perhaps once the market matures, telcos will be more open to cutting deals.