KUCHING: Nine out of 10 may look good on a scoreboard, but for regional telecommunication player Axiata Group Bhd (Axiata) that missing ‘one’ actually signifies a huge presence that is Pakistan.
Talks among observers had pointed out that while the divestiture could narrow the group’s focus more into its core mobile telecommunications business, its exit from the country that housed about 53 million mobile youth owners appeared to be somewhat of a ‘loss’.
Moreover, data from mobile market intelligence agency Youth Research Partners had foreseen that mobile youth ownership in Pakistan could reach 68 million in the next two years, accounting for over half of estimated total mobile subscribers in the country by 2012.
Shift to core mobile business
This might not be so, according to Axiata’s executive director and group chief financial officer, Datuk Yusof Annuar Yaacob, who shared similar sentiment with the group’s president and group chief executive officer Datuk Seri Jamaludin Ibrahim.
“Pakistan is a huge market that offers significant opportunities. However, the divestment of Multinet, a non-mobile company, is part of our strategy of focusing on our core areas, that of mobile telecommunications,” he told The Borneo Post in response to an e-mail.
Since Axiata’s initial investment in 2005, non-mobile Multinet had grown into an established fibre infrastructure company, the first company to launch a 5,000 kilometre-long fibre network connecting 107 cities across Pakistan.
“This said, Pakistan does present significant opportunities. We will evaluate mobile opportunities there, as and when they arise,” he added.
With the divestiture of Multinet, Yusof said it would open up more rooms for attention to its other core markets, in particular Cambodia.
The South Asian operation, known as Hello Axiata Co Ltd (Hello Axiata), had continued to face challenges in a highly competitive market held by eight other operators.
Last year, its revenue, as well as earnings before interest, tax, depreciation and amortisation (EBITDA) and profit after tax (PAT) had dropped by 14.1 per cent, 18.1 per cent and 52.5 per cent, respectively.
“With a penetration rate of about 30 per cent, Cambodia represents an emerging mobile market with growth opportunities. However, the industry is undergoing challenges, not only in the form of competition but also in terms of regulatory reform.
“On the positive side, it did reach a 30.1 per cent year-on-year increase in subscriber base in 2009. As such, the group remains focused on executing cost management programmes to ensure Hello Axiata’s operations are cost efficient amidst these challenges,” related Yusof.
Stronger markets
Notwithstanding this, Axiata seemed to hit it big via its Indonesian operation, PT XL Axiata Tbk (XL Axiata). Most recently, it planned to invest up to 4.5 trillion Indonesian rupiah in strengthening its network coverage through the setup of up to 2,000 base transceiver stations (BTS) this year. According to XL Axiata’s president director Hasnul Suhaimi, the group had realised 900 units of BTS for the first quarter.
“XL Axiata has had a very good first quarter of 2010, and will continue to further improve its operations. Diligent focus on yield and strict cost management had culminated in strong performance across all financial metrics at XL Axiata,” disclosed Yusof.
Adding to this would be XL Axiata’s solid balance sheet; with healthy operational momentum combined with prudent capital expenditure practice, this had resulted in its positive free cash flow.
“XL Axiata has used both the proceeds of the 2.8 trillion rupiah-rights issue, completed in December 2009. This coupled with generated internal free cash to repay its significant amount of debt, reducing outstanding debt by nearly 30 per cent.
“Gross debt to EBITDA ratio has significantly improved from 3.5 times in 2008 to less than 2.2 times in 2009, putting the company in excellent shape to continue growing its business,” enthused Yusof.
Coming back to its ‘big brother’ markets, Axiata’s presence had remained solid. In India, the group is branded under Idea Cellular Ltd (Idea) while in Bangladesh and Sri Lanka, it is managed as Robi Axiata Bangladesh Ltd (Robi) and Dialog Telekom Plc (Dialog), respectively
“We are very pleased with the performance seen at Idea, Robi and Dialog. Though each market is different with its own challenges, we have been able to execute a unique strategy in each of them with a cost rescaling initiative in Sri Lanka and turnaround programme in Bangladesh.
“Idea’s management has been exceptional in steering the company through exacting conditions and is showing strong signs of growth,” added Yusof.
Annualised PAT growth rate for Idea stood at 9.7 per cent last year, contributing RM44.8 million to the group’s profit of RM1.7 billion. Robi exhibited a turnaround in earnings that amounted to RM46.1 million last year, from a loss of RM62.3 million a year before.
Dialog, on the other hand, had seen continued mobile subscriber growth amidst a
competitive environment, recording a robust 15.7 per cent annualised growth last year to 6.4 million subscribers.
Overall, many investment bank-backed research houses had favoured Axiata. CIMB Research, OSK Research and HwangDBS Vickers Research pegged target prices per share at RM5.25, RM4.80 and RM 4.75, respectively, on the group; all higher than their previous takes.
In due consideration, perhaps the ‘nine out of 10′ score for Axiata might not be so bad after all.
by Ghaz Ghazali
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