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Axiata Profits Plunge on OpCo Woes

Iain Morris
8/25/2016

Asian telecom giant Axiata has blamed a sharp fall in post-tax profits on operational difficulties across a number of its markets.

The Malaysian conglomerate, whose subsidiaries and affiliates together serve about 290 million customers across ten countries, has reported a 63.1% drop in profit after tax in the April-to-June quarter, to 232 million Malaysian ringgits ($57.7 million), compared with the year-earlier period.

Sales and earnings were buoyed by Axiata Group Berhad 's $1 billion takeover of Ncell, a Nepalase operator, from Sweden's Telia Company (formerly TeliaSonera) in December last year.

Second-quarter revenues grew 12.8%, to MYR5.3 billion ($1.3 billion), while EBITDA was up 20.4%, to MYR2.1 billion ($520 million).

Without the inclusion of Ncell, revenues would have been about the same as in the year-earlier quarter, while EBITDA would have dropped about 9%.

Axiata flagged "challenging" conditions in some of its core markets, including Malaysia and Indonesia.

In Malaysia, the Celcom Malaysia business saw revenue drop by 6.7%, to around MRY1.7 billion ($420 million), because of a sharp fall in customer numbers and average revenue per user (ARPU).

Celcom finished the second quarter with 11.2 million customers, down from 12.3 million a year earlier, while monthly ARPU dropped from MRY43 ($10.70) to 39 ($9.71) over the same period.

Indonesia's XL, meanwhile, similarly reported a 6.8% year-on-year fall in revenues, in local currency units, to 5.3 trillion Indonesian rupiahs ($401 million), with customer numbers dropping to around 44 million, from nearly 46 million in the second quarter of 2015.

Axiata says its Indonesian business is being hit by the decline in revenues from legacy services as it turns its attention to new digital offerings.


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Even so, the company expressed optimism that it was on the right track, with customer numbers at XL growing on a year-to-date basis. It is also hopeful that staff changes in Malaysia will begin to bear fruit in the coming quarters.

"The management refresh at Celcom will accelerate the momentum already built over the last few months by the present team," said Tan Sri Jamaludin Ibrahim, Axiata's CEO, in a statement. "At XL, its transformation agenda remains the right strategy for the long term."

Axiata enjoyed better fortunes in Sri Lanka, where mobile market leader Dialog GSM reported an 18.7% year-on-year rise in sales, to about 21 billion Sri Lankan rupees, and picked up another 478,000 customers in the quarter, giving it nearly 11.1 million altogether.

At Robi, in Bangladesh, revenues fell by 4%, to around 12.4 billion Bangladeshi takas ($140 million). Subscribers numbers remained the same as in the year-earlier quarter, at around 27.4 million, but monthly ARPU fell from BDT144 ($1) to BDT135 ($0.93) due to "heightened competition."

Axiata's share price closed down 3.2% on the Kuala Lumpur Stock Exchange today, reflecting investor concern about the company's performance in its most important markets.

— Iain Morris, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, News Editor, Light Reading

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