KUALA LUMPUR, Feb 21 ― Telecommunications player Axiata Group Bhd posted a slight increase in its fourth quarter earnings and revenue, even while its Indonesian operation was going through a turbulent year.
For the fourth quarter ended December 31, 2013, Axiata recorded a net profit of RM575.63 million versus RM571 million the same quarter a year ago. During the quarter, revenue rose to RM4.51 billion against RM4.45 billion in the fourth quarter of 2012.
For the full year, revenue was up 4 per cent to RM18.4 billion while net profit was up 25 per cent to RM2.6 billion.
“Net profit increased by 2 per cent despite the performance of XL (the group’s Indonesian operation) and a foreign exchange loss of RM201 million,” Axiata president and group chief executive officer Jamaludin Ibrahim (pic) said at a briefing in Kuala Lumpur on Feb 20.
The year 2013 saw XL (or PT XL Axiata Tbk) register a 0.3 per cent gain in revenue to 21.27 trillion Indonesian rupiah (RM5.9 billion), while net profit sank 63 per cent to 1.03 trillion rupiah.
“The decline in earnings was mainly due to the full year impact of SMS interconnect, managed services fee and investments in data infrastructure. Profitability was further impacted by foreign exchange losses due to the weakening of the rupiah,” said Jamaludin.
When the rupiah weakens against the greenback, it hurts companies like XL as a substantial portion of their procurement with their vendors and suppliers are conducted in US dollars.
Jamaludin added that should the value of currency remain constant, Axiata would have managed to hit three out of its four headline key performance indicators (KPIs). The only KPI it would have missed was the revenue growth target of 7.6 per cent.
Even at constant currency rates, it would have registered a growth of 6.7 per cent.
“Again, this is also mainly because of Indonesia. Competition was very intense over the past year or so. Just imagine, at one point, our competitors were offering data rates that were up to 70 per cent cheaper than what we offered,” he said.
Jamaludin however said he was seeing this fierce competition being toned down, and it was now slightly more “rational.”
“It is because of that (toning down of the competitive landscape), and also the merger with PT Axis Telekom Indonesia, that we expect Indonesia to be one of the group’s main revenue growth drivers for 2014,” he claimed.
Under the group’s 2014 KPIs, it hopes to achieve revenue growth of 10.1 per cent, and EBITDA (earnings before interest, tax, depreciation and amortisation) growth of 1.8 per cent, among others.
Aggressive LTE rollout
The company, which spent RM4 billion on capital expenditure (capex) in 2013 (versus an initial capex budget of RM4.5 billion), plans to spend about RM4.4 billion in capex this year. A substantial portion of this would be for expanding its Indonesian network as well as the rollout of its LTE (Long-Term Evolution) network in Malaysia.
Axiata did not provide a more detailed breakdown on exactly how and where this capex would be spent during the media briefing.
According to group chief financial officer Chari TVT (pic), Axiata’s wholly-owned subsidiary Celcom Axiata Bhd plans to roll out 1,200 LTE sites by the end of June this year.
“So far, we have rolled out about 800 sites, with about 400 more sites to go. The orders have been placed. We will be very aggressive.
“By the end of this year, we will probably have the highest number of LTE sites in Malaysia,” he claimed.
No plans to list tower assets
During the briefing, Jamaludin said that the company currently does not have any plans to list its tower assets.
“Somehow, there were some impressions that we were going to list our towers, probably in the future, but for now, an IPO (initial public offering) is not even being considered.
“There’s no plan to list our tower assets. We may revisit it one year from now, or towards the end of the year,” he said.
Talks of a possible listing of its tower assets intensified last year when the company set up a new business unit dubbed e.co, headed by former Axiata Group chief financial officer James Maclaurin, will own and manage the passive network infrastructure of the Axiata Group as a business and will have subsidiaries in most of its markets.
“The prime purpose is to focus on the efficiency of the whole tower operations,” Jamaludin said.
To improve its efficiency, e.co will be looking at two areas. The first would be ways to improve the revenue, or the tenancy, of its towers. The second would be ways to reduce the capital and operating expenditures of its tower business.
Jamaludin said that Axiata’s towers, over time, could achieve a tenancy ratio of between 1.8 and 2.0. (This means, for every tower it owns, there is an average of 1.8-2 tenants using that tower).
“Right now, on average in all the countries combined, we are at around 1.3-1.4, so there’s some way to go. We have around 12,000 towers not optimised yet from the revenue perspective,” he said.
Jamaludin revealed that towers make up about 20 per cent of Axiata’s capital expenditure, while the operational cost of managing towers and the associated civil infrastructure represents about 15 per cent of operating expenditure.
“We are looking at all sort of ways to reduce operational costs ― these include the option of using solar energy, different type of batteries, and more.
“Think about it. We spend about RM4 billion on capital expenditure every year. From that amount, 20 per cent or RM800 million to RM1 billion, is tower-related. So, if I can save 10 per cent, it would be RM80-100 million already,” said Jamaludin. ― Digital News Asia
This article was first published here.
