Write the remedy before the regulator does

Mobile mergers in Southeast Asia have become common enough that their sequence is now familiar. Two operators announce that they will combine. They promise investors a large figure for annual cost savings. They file with the regulator, describe the market as fiercely competitive and wait. Months later the regulator sets out its concerns, the parties negotiate, and conditions are attached that neither side designed with much care. The merger completes, often a year or more after it was announced, and the company spends the following years complying with commitments it never wanted.

When Altirra and Lembayung agreed to merge in March 2023, I argued for a different sequence, and the boards of both companies eventually agreed. We filed our remedies with our application. I now think this is the better approach for most in-market mobile mergers. Regulators are not adversaries to be outmanoeuvred. The point is that the merging companies understand their own networks, customers and contracts better than anyone else can, and that knowledge is wasted if they spend it on resisting.

Why waiting for the objection costs more

The case for waiting is usually put in terms of negotiation. If you offer remedies early, the argument runs, you start from a weaker position, because the regulator will treat your offer as a floor and ask for more. There is something in that. But it ignores three costs that the merging companies bear and the regulator does not.

The first is time. In our case each month of delay pushed back savings worth about RM40 million a year once fully achieved. More important, it extended the period in which 5,000 employees did not know whether their jobs would survive, and in which two dealer networks were deciding which of our brands to promote. Uncertainty inside a company is expensive in ways that do not appear in a deal model. Good engineers leave first.

The second is design. A regulator drafting a remedy has to work from what it can observe: market shares by region, spectrum holdings, published tariffs. It cannot easily see which spectrum carries the traffic that matters, which rural sites are fragile or which wholesale terms a virtual operator could actually use. Conditions drafted without that knowledge tend to be either too blunt or too narrow. They protect a share statistic rather than the customer the statistic is meant to describe.

The third is ownership. Commitments that a company has argued against for a year are complied with grudgingly. Commitments that it proposed are run like products, with owners and budgets, because they were the company's own idea.

Structural or behavioural: choose what you can live with

Remedies divide roughly into two kinds. Structural remedies change what the merged company holds: spectrum returned, sites or customers sold, a business divested. Behavioural remedies change how it acts: price commitments, access obligations, service undertakings. Competition specialists generally prefer structural remedies, because they need less monitoring. Operators generally prefer behavioural ones, because they keep the assets.

Our package mixed both, and each element was chosen deliberately. We offered to return 2 × 10 MHz of spectrum in the 2.6 GHz band. It hurt, because that band carried much of our capacity in the Klang Valley, and Lembayung's chief technology officer argued against it with good reason. But the alternative structural remedy, selling customers or sites in Sabah, would have left those customers worse served than before the merger. Spectrum could be reassigned to an operator who would use it. A divested rural customer base would simply have been stranded.

The behavioural elements were a five-year wholesale reference offer for virtual operators at published prices, a 24-month freeze on our cheapest prepaid pass and a three-year commitment to keep every rural site that served only one of the two former networks. Each answered a specific question a regulator would ask. Would the merger weaken competition for price-sensitive prepaid customers? The freeze and the wholesale offer addressed that. Would it reduce coverage in places served by only one network? The rural commitment addressed that.

The regulator accepted the package in February 2024, ten months after we filed, with one addition: an independent annual audit of the wholesale offer. I thought the addition reasonable, and it has proved useful to us as well, because the audit tells our own board whether the offer is working as intended.

The remedy that surprised us

I should be honest about where our design was wrong. We expected virtual operators using the reference offer to take about 300,000 of our subscriptions over two years. By June 2026 they had taken about 640,000. Our wholesale price, set to be comfortably acceptable, was lower than it needed to be, and two virtual operators built attractive prepaid brands on it. The wholesale revenue they now pay us exceeds RM95 million a year, which softens the loss, but it does not replace the retail margin.

If I were designing the offer again, I would link the wholesale price to a floor derived from our own retail cost of serving a prepaid customer, and I would propose it on those terms. I think it would have been accepted. The lesson is not that early remedies are a mistake. It is that a company offering remedies early must model them as carefully as it models its savings, because it will live with them for as long.

The spectrum return also cost more than we planned. Replacing the lost capacity with small cells and re-farmed 1800 MHz spectrum took RM210 million, about a quarter more than our estimate. Our model had valued the spectrum correctly but underestimated how long new small-cell sites take to approve in the densest parts of Kuala Lumpur.

For directors considering an in-market mobile merger, I would offer three questions. Which remedies would you accept if the regulator asked for them tomorrow? If the answer is any, the case for offering them now is strong. Who in the company understands the customers most affected by the merger, and have they been asked to design the remedy? And has the remedy been modelled with the same care as the savings figure? If not, the company is negotiating with only half of its arithmetic.

A merger is not finished when it is approved. It is finished when the undertakings have been met and the customers they were meant to protect can see that they were. Remedies written by the company that must honour them are more likely to reach that point, and to reach it sooner.