Uncertainty for Axiata over venture

KUCHING: Analysts are uncertain over Axiata Group Bhd’s (Axiata) latest venture whereby 80 per cent- owned Nepal-based NCELL has launched 4G services and made available from today onwards.

The service – which is offered in the Kathmandu Valley, including Nagarkot, Banepa and Dhulikhel – is being launched in line with the technology neutrality permission granted by the regulator, Nepal Telecommunications Authority ( NTA) earlier this month.

This is contrary to news reports that Nepal’s parliamentary Public Accounts Committee ( PAC) had recently directed the NTA to prevent NCELL from launching 4G services until the settlement of an ongoing dispute over capital gains tax (CGT), explained AmInvestment Bank Bhd (AmInvestment Bank).

“Recall that NCELL has paid 9.9 bil Nepalese rupees ( US$ 94 million) in May 2016 to Nepal’s Large Tax Payers Office ( LTPO) for the 15 per cent deposit for the capital gains tax (CGT) payable by TeliaSonera Norway Nepal Holdings AS,” it said.

“The CGT arose from TeliaSonera’s sale of its 80 per cent stake in NCELL to Axiata for US$1.4 billion.”

With the change in the Nepali government after the CGT payment, AmInvestment Bank understood that the PAC is disputing the computation of the capital gain value, and hence, the final tax liability which should be based on the rate of 25 per cent.

An additional 10 per cent CGT translates to 23 per cent of FY17F earnings.

“As additional one- off regulatory costs and potentially operational disruptions may arise for NCELL, we expect further earnings uncertainties in Axiata’s overseas divisions coupled with the struggles in regaining subscriber momentum for Celcom to drive the path towards re-merger with Telekom Malaysia Bhd.

“We maintain our buy call on Axiata with unchanged forecasts and a fair value of RM6.30 per share, on expectations of a valueenhancing re-merger with TM which could reduce the valuation differential with its peers.”