Telenor ASA and Axiata Group Bhd’s plan to merg e the ir A s ian telecommunication operations will be bad news for Maxis Bhd, say analysts and industry officials. They said the planned merg er would create economies of scale in markets where competition was intensifying. They cited rising operating costs with higher capital expend i t u re spend on network, quality coverage and updated technolog y. The Axiata-Telenor talks, announced on Monday, would likely see the merger of Celcom Axiata Bhd and Digi.Com Bhd. Telenor owns a 49 per cent stake in Digi. Public Investment Bank Bhd (PublicInvest) believes the merger prospect will be positive for Digi as it will be acquiring Celcom and become the largest mobile player in Malaysia. Subsequently, it has up grade d Digi to a “buy ” and maintained its “neutral” call on Axiata. PublicInvest said a Celcom-Digi merger would be negative to Maxis as the merged unit would overtake the latter to become the leader in Malaysia’s mobile s egment. PublicInvest has maintained its “underp erform” call on Maxis. MIDF Research is positive on the development as the industr y is highly competitive. It said having sizeable presence would provide Axiata with certain competitive advantages, such as economies of scale and better negotiation power in terms of equipment procurement, especially for its Malaysian operation. “It also provides the group with a stronger balance sheet to execute future expansion plan as the industry is capital-intensive. “Nonetheless, the move might trigger regulatory risk, in the case of Malaysia, as well as higher exposure to forex (foreign exchange) translation risk,” it said. For now, MIDF keeps its “neutral” call on Axiata. A spokesperson for Khazanah Nasional Bhd, Axiata’s controlling shareholder, said the group welcomed the plan to create further value for A x i a t a’s shareholders. “In addition, there are potentially significant benefits to the economy, consumers and the countr y, especially from having the operational headquarters based in Kuala Lumpur and the establishment of a proposed Regional Innovation Centre. “It is a positive development for Malaysia as it shows that we have companies that are globally competitive and that foreign investors have confidence in Malaysia and its economy,” s aid the spokesperson. Meanwhile, Johor Bahru Internet Exchange chief peering officer Weng Yew Wong said the merger between Axiata’s and Telenor ’s Asian businesses was apparently a financial rationalisation exercise. He said given the upcoming 5G capital expenditure and th at many of the operating markets were fast becoming mature and saturated, the fastest way to deliver shareholders’ value was to cut cost by merging operations and combining forces