Axiata Group Berhad announced that it has signed a definitive agreement with Sinar Mas to progress the proposed merger of PT XL Axiata Tbk, PT Smartfren Telecom Tbk, and Smartfren's subsidiary – PT Smart Telcom – in Indonesia.

The merged entity will combine Axiata's regional expertise and deep experience in managing integrated operations with the local knowledge and established presence of Sinar Mas, creating a larger, financially robust organisation. Axiata said the merged entity will be named PT XLSmart Telecom Sejahtera Tbk ("XLSmart").

XLSmart will serve a combined mobile subscriber base of approximately 94.5 million, representing around 27% of the local market share. This expanded scale will support combined pro forma revenues of IDR45.4 trillion (USD2.8 billion) and EBITDA of IDR22.4 trillion (USD1.4 billion).

The merger is part of Axiata's broader strategy to strengthen its market position in the region, upon completion the group will operate in markets with a three-player structure, where the Group holds an over 25% market share.

Following the completion of the merger, XLSmart will join a high-value creation Indonesian portfolio of four other businesses – Link Net, EDOTCO, Boost, and ADA.

XL Axiata will serve as the surviving entity while Smartfren and SmartTel will dissolve by operation of law upon merger completion and become part of XLSmart. Axiata and Sinar Mas will remain joint controlling shareholders with 34.8% ownership stake each in XLSmart, with equal influence over its strategic direction and decisions, as well as offering unique access to their extended networks, resources and expertise to support growth.

At completion, shareholding equalisation will result in Axiata receiving up to USD475 million. At transaction closing, the Group will receive USD400 million, along with an additional USD75 million at the end of the first year subject to the satisfaction of certain conditions. The group said it will use the funds to primarily pare down debt. Additionally, by continuing to own shares of XLSmart, Axiata shareholders will have the opportunity to capture synergies and participate in the new company's long-term value creation potential.

By combining the operational resources and infrastructure assets of XL Axiata and Smartfren, XLSmart will benefit from significant cost efficiencies and improved economies of scale. These synergies, estimated to realise annual run-rate pre-tax synergies of USD300 to USD400 million post completion of integration, will enhance profitability, deliver sustainable returns and support reinvestment into critical areas such as 5G expansion, customer experiences, and network connectivity, contributing to long-term sustainable growth.

With an expanded customer base, higher spectrum basket, broader service offerings, and enhanced financial stability, XLSmart is better positioned to compete with larger players in the market to capture market share, improve revenue streams, and drive shareholder value. The combined financial and operational capabilities will enable the new entity to deliver competitive services and innovative solutions at scale, meeting the demands of Indonesia's high-growth digital market.

This merger aligns with Axiata's vision to bridge the digital divide by expanding digital access and promoting connectivity. XLSmart will have the resources to support the Indonesian government's agenda for a connected, inclusive digital economy, creating opportunities for individuals, businesses, and public sector entities to thrive in the digital era.

Tan Sri Shahril Ridza Ridzuan, Chairman of Axiata said "We are incredibly proud to deepen our partnership with Sinar Mas through the creation of XLSmart as we work together toward our ambitious commitment to bridging the digital divide and fostering a connected, inclusive, and thriving digital economy across Indonesia and the broader ASEAN region.