Axiata rebounds but warns of COVID-19 pressures

Southeast Asian telco group Axiata has bounced back from its mid-year pandemic slump, doubling Q3 earnings on the back of revenue growth and stronger cost management.

The Malaysian-based company, which owns mobile operators in six markets including Indonesia and Bangladesh, announced a RM353 million (US$86.7 million) net profit, up 97% year-on-year.

Its stock on the Kuala Lumpur Bursa closed 11.3% higher at RM3.73.

Bright lights, big city: Axiata is headquartered in Kuala Lumpur, Malaysia.  (Source: Esmonde Yong on Unsplash)
Bright lights, big city: Axiata is headquartered in Kuala Lumpur, Malaysia.
(Source: Esmonde Yong on Unsplash)

While quarterly revenue of RM6.1 billion ($1.5 billion) was off 1.6% year on year, EBITDA (earnings before interest, tax, depreciation and amortization) rose 9.9%, primarily through RM366 million ($90 million) in cost savings, in particular lower depreciation and amortization.

"Despite the pandemic and heightened competition in a few markets, our teams across the group bounced back convincingly," said President and CEO Tan Sri Jamaludin Ibrahim.

All but one of the group's six regional operators had returned to revenues above pre-lockdown level thanks to a spike in subscriber take-up and data usage, the company said.

Coronavirus still in wait

Malaysian operator Celcom recorded 6% growth in revenue and 24% in EBITDA 24% on a quarterly basis, but revenue is still down 9% for the year to date.

The group's biggest operator, XL in Indonesia, had grown despite growing competition, boosting service revenue 5% and EBITDA 34.5%.

However, Ibrahim warned that the outlook "has become challenging again as some countries including Malaysia have reimposed lockdowns."

The company also cautioned that tower business Edotco faced rising bad debt exposure.

The unit recorded 3.9% higher revenue on the first three quarters, but EBITDA was flat, a result of "proactive measures" the company was taking in risk-monitoring several customers across the region.

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Ibrahim said the company's healthy balance sheet provided a "huge cushion to weather most pandemic and economic scenarios."

With free cash flow up 45% for the year at RM2.4 billion ($589 million), helped by a $1.5 billion US bond issue in August, the group has a cash balance of RM10.7 billion ($2.6 billion).

After reducing debt in Q4, Jamaludin said the company expected to end the year with cash of around RM6 billion ($1.4 billion).

Axiata's full-year guidance points to a "low single-digit percentage decline in revenue and EBITDA."

The company cited the potential for continued lockdowns in Malaysia and Sri Lanka and the impact of lower GDP growth in many of its operating markets.

In Indonesia, XL faced escalating competitive pressures and greater corporate social responsibility demands.

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— Robert Clark, contributing editor, special to Light Reading

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