Asian operator group Axiata’s Indonesian unit has gained regulatory approval to acquire Axis Telekom, the Saudi Telecom-owned operator, creating Indonesia’s second-largest player.

The deal has been given the green light by the KPPU, the Indonesian antitrust body, meaning it has fulfilled the final requirement for the deal to go through.

The Ministry of Communications and Informatics cleared the deal last December, while XL Axiata shareholders approved the merger in February, according to Telecomasia.

An XL Axiata statement said the KPPU decided the merger would not constitute a monopoly as the combined company would only have a 21 per cent market share (65 million subscribers).

“By obtaining the approval from KPPU, we have complied with all the regulatory requirements in the conditional sale and purchase agreement,” said Hasnul Suhaimi, president director of XL.

The deal was first agreed with Axis owner Saudi Telecom in September last year. The agreement covers 95 per cent of Axis shares with an Indonesian shareholder holding a 5 per cent stake in accordance with Indonesian foreign investment rules. The transaction values Axis at $865 million on a cash-free and debt-free basis.

XL Axiata outlined a $500 million loan arranged with its parent group to finance the purchase. Axiata owns a 66.5 per cent stake in XL.

XL said the merger will “improve the service quality and provide better and wider network coverage with higher capacity as well as wider product and customer service in the market”.

The XL statement added that the company remains committed to being a “maverick” and “pro-community” operator, providing affordable services to consumers.

According to GSMA Intelligence figures, XL Axiata had 60.5 million connections at the end of 2013, with Axis on 17.8 million connections. The combined company would therefore have 78.3 million connections, giving it the number-two spot in Indonesia.

Market leader Telkomsel had 131.5 million connections, with current number two Indosat on 59.6 million connections. Hutchison Whampoa’s 3 had 32 million connections.