Axiata stands to gain from edotco eyeing acquisitions to be 5th largest tower company
KUCHING: edotco Group Sdn Bhd, a subsidiary of Axiata Group Bhd (Axiata), is eyeing two major acquisitions to meet its target of becoming the fifth largest independent tower company in the world by 2021.
Axiata group president and group chief executive officer Tan Sri Jamaludin Ibrahim said edotco was set to become the world’s eighth largest independent tower company in the next one or two months, following the completion of an acquisition in Pakistan.
“Getting from the eighth spot to the fifth is steep. We probably want to look at one or two more large acquisitions,” he told reporters after the company’s annual general meeting on Thusday.
edotco currently operates a portfolio of 40,000 towers in Malaysia, Sri Lanka, Bangladesh, Cambodia, Pakistan and Myanmar.
The company secured approval to raise funds from Pakistani lenders last week to complete the US$940 million (US$1 = RM3.97) acquisition of 13,000 tower assets from Deodar Pte Ltd.
Jamaludin said among the criteria set for any potential acquisition were targeted firms having bright industry growth and operating in Asean and South Asia countries.
Meanwhile, edotco was weighing options on whether to pursue a listing via an initial public offering (IPO) or placements to fund its expansion strategy.
Jamaludin said the company, valued at US$1.9 billion by independent advisers, might not necessarily pursue an IPO and negotiations with financial advisors are ongoing.
“Last month, we talked to bankers and asked them how to fund this huge growth. We are getting the necessary advice.
“Until then, I can’t even say when will we get to the IPO track, and if we do, I cannot even say when. But we are seriously looking at all alternatives,” he added.
This comes as analysts have generally cut Axiata’s financial year 2018 and 2019 (FY18-19) earnings estimates after its results for the first quarter of 2018 (1Q18) fell short of expectations.
As per Axiata’s filing on Bursa Malaysia, the group’s 1Q18 PATAMI declined by more than 100 per cent on a year on year (y-o-y) basis to a loss of RM147.4 million, compared to a profit of RM239 million recorded in 1Q17.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) lowered FY18E-FY19E core PATAMI for Axiata by 12 per cent-seven per cent, after incorporating the tepid 1Q18 performance and revising its operating expenditure (opex) assumptions.
“Besides, we also understand that a significant technical impairment of circa RM1.2 billion to RM1.8 billion (which is a non-cash and purely accountancy adjustment) is set to arise post the proposed merger of Idea and Vodafone which is targeted to be completed by the first half of 2018 (1H18),” Kenanga Research said.
The research arm imputed a circa RM1.4 billion impairment loss into its FY18 model earlier, resulting in a loss of RM501 million at the reported PATAMI level.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) also reduced FY18 and FY19 earnings estimates by 6.1 per cent and 6.3 per cent respectively as it inputed high loss of from associates and lower contributions from Smart.
However, MIDF Research made no changes to its FY18 and FY19 earnings before interest, tax, depreciation and amortisation (EBITDA) estimates.
“The performance of the group’s main operating segments has been under pressure,” the research arm said.
Nonetheless, MIDF Research’s primary concern lies with Celcom’s future prospects mainly due to pricing pressure in view of the competitive mobile landscape and tax and regulatory uncertainties.
“Meanwhile, Idea has performed much worse than expected due to the introduction of the goods and services tax (GST) and unrelenting pressure on pricing.
“This is further impact by the sharp reduction in the interconnection usage charge rates.”
The research arm opined that with the active merger and acquisition activities the group are currently embarking on, dividend payout could be capped.