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JULY 2013 H
Transactions
107
ello Axiata Company Limited in strategic merger with Latelz Company Limited Legal advisor to Latelz Company: Legal advisor to Axiata Group:
deal overview
Axiata Group Berhad (Axiata), one of Asia’s largest telecommunications companies, recently announced the strategic merger of Hello Axiata Company Limited ("Hello") and Latelz Company Limited ("Latelz"), which operates under the Smart Mobile brand name.
the merger will create the 2nd largest mobile telecommunications company in Cambodia with five million subscribers.
Hello Axiata Chief Executive officer Simon Perkins said the time was right for consolidation in the mobile telecommunications market
in
Cambodia. "Currently there are nine players in the market and we believe through consolidations it will come down to three to five operators. the time is right for us to consolidate and we at Smart Mobile and Hello are proud to be leading the way in Cambodia."
VdB Loi acted for Latelz on this transaction,
led by Edwin
Vanderbruggen and Clint o’Connell, tax partners. Here we speak to Mr o’Connell about the deal and his firm’s involvement.
Advisor Insight Please introduce yourself and your firm.
I am a Tax Partner working for VDB Loi in Cambodia. VDB Loi is a leading law and tax advisory firm with more than 60 transactional lawyers and tax advisors across our offices in Cambodia, Indonesia, Laos, Myanmar, Vietnam and our liaison office in Singapore. We provide the highest quality solutions for transactions and taxation.
VDB Loi offers a combination of highly experienced transactional lawyers and specialist tax advisors. This combination, where half of the firm’s fee earners are legal professionals, and half are tax professionals, is unique in Southeast Asia and highly effective for transactions in M&A, investment, resources, real estate, energy and infrastructure, and top-end corporate tax structuring.
VDB Loi brings a new approach to professional services; we like to do things differently. Along with bringing legal and tax services together under one roof, we believe strongly in the value of results – that’s why we bill based on outcome, not time.
What were the main challenges that arose? How did you overcome them?
The tax issues associated with doing a merger in Cambodia, which has hardly been done before, were a central challenge in the structure. The interpretation and application of the tax laws is at times unclear. We assisted the client in working with the authorities to reduce the uncertainties within the existing legal framework, while integrating the implications into the legal structure in an efficient manner.
Is there any need for legislative change in your opinion that would help these types of deals?
A number of the tax issues faced in this assignment came about because of the lack of
domestic regulations in Cambodia that deal with the tax implications of a merger. Whilst mergers are contemplated in the Cambodian Commercial regulations there is a need for guidance as to the resulting tax implications of a merger in Cambodia.
What other deals have you been involved in recently?
In Cambodia we have been working on a number of electricity generation projects in particular in the bio-fuel sector and we are also assisting with some commercial real estate development and manufacturing projects at the moment.
Why is this a good deal for all parties involved?
Basically there were too many players in the Cambodian telecoms market. Having nine mobile players in a country with a population of 15 million was leading to a cut-throat market with razor thin margins. By allowing Axiata to hold a 90% stake in the combined Hello/Latelz entity allows it to emerge as one of the largest operators in Cambodia in terms of subscribers and revenue. Unique subscriber penetration in Cambodia is less than 40% with an expected double digit growth of around 10% over the next 3 years. With this merger, Axiata will have a head start with a significantly strengthened entity and clear market leadership.