Axiata aggressively pursues fixed broadband strategy

By Sharmila Ganapathy August 28, 2018

Making significant investment next year to provide nationwide fixed broadband access
Yet to receive formal directive from the Ministry to reduce broadband prices

Axiata aggressively pursues fixed broadband strategy

REGIONAL telco player Axiata Group Bhd will make a significant investment next year in providing fixed broadband access throughout Malaysia, as part of its strategy to become a convergence player.

Axiata president and group chief executive officer Jamaludin Ibrahim (pic) said that the company will expand its fixed wireless broadband services in Malaysia within the next two to three years.

He shared that for Malaysia, they’re currently in discussions with Telekom Malaysia Bhd to use their network to provided fixed wireless broadband services.

“We’ve started already with fixed wireless in Sabah, which is much less crowded and we’re looking at the possibility of some kind of collaboration with TM to use their network to reach some of the homes. We are looking at fixed wireless compared to fixed fibre broadband for now.”

Jamaludin reiterated that the company has declared it will eventually transform into a full convergence player.

“We are looking at growth in convergence, as a fixed broadband company in practically all the markets, both organically…in fact we’re invested quite a lot. In Indonesia we announced an investment of about US$100 million to start the ball rolling in our investment in fixed broadband,” he said during a recent media briefing.

“We are expanding our fixed broadband reach in Malaysia, Indonesia and in Sri Lanka we’re ahead because of Dialog.” For Dialog he said, they have invested between US$30 and US$40 million this year alone to provide fixed broadband.

When asked if Axiata or its subsidiary Celcom Axiata had received a directive from the Ministry of Communications and Multimedia to reduce broadband prices and increasing speeds, he said that they had yet to receive “anything formal from the Ministry regarding reducing broadband prices”.

“We are doing things to support that call, to provide higher speeds at lower prices for our products. That’s something we’re working on right now. As an example we now have a RM50 plan which is not quite half yet but that is one example. While we have not received anything formal, we’ve heard enough from the Ministry and are doing our best to make their vision happen,” he added.

Whither edotco

Concerning the future of its tower company edotco, Jamaludin said that there’s no immediate plan for an initial public offering (IPO).

“We have appointed some bankers to look at our options. Our answer is not necessarily an IPO, bearing in mind that edotco has been given a mission to expand in Asia and South Asia in a big way and to do that we need funding.

“To provide funding, an IPO is just one of them. The bankers are looking at how best to support the expansion. Private equity could be an answer, there could be a restructuring or even Axiata putting more money in.”

Second quarter performance

Axiata’s underlying performance for the second quarter ended June 30, 2018 saw improved revenue and earnings before interest, tax, depreciation and amortisation (Ebitda) compared to the previous corresponding quarter.

The telco group’s reported earnings results however, showed a net loss of RM3.36 billion during the quarter due to a technical, non-cash accounting adjustment from the de-recognition and reclassification of Idea Cellular Ltd from associate to simple investment.

To recap, Axiata had on July 27 announced a long-awaited merger between Idea and Vodafone India Ltd, which has diluted Axiata’s stake in Idea to 8.17% from 16.33%, hence the reclassification.

In a statement, Axiata said that revenue (on a constant currency basis and excluding the application of MFRS15 and 9), increased 4.6% to RM6.3 billion from RM6.1 billion the year before.

"The growth in revenue is attributed to all of its mobile operating companies’ successfully capturing gains in revenue and revenue market share, while edotco increased contribution to 7.3% of Group revenue," it said.

Meanwhile, Ebitda rose 4% year-on-year to RM2.4 billion due to of greater cost efficiencies. "Overall cost optimisation initiatives delivered RM800 million in savings group-wide for the first half of the year and is on track to meet its target of RM1.4 billion for 2018. However, given the nature of start-up digital businesses Ebitda has been diluted as planned," Axiata said.

The group recorded a lower normalised profit after tax and minority interest (Patami) of RM263.7 million from RM462.6 million last year due to higher depreciation and amortisation charges.

The normalised Patami excludes operational losses from Idea, non-cash technical impairment and loss in dilution, forex gains/losses, XL tower gains and one-off impairments of digital services non-core businesses.

Year-to-date, the group's underlying performance saw revenue growth of 5.1% to RM12.6 billion while Ebitda rose 4.6% to RM4.6 billion.