Axiata in consolidation mode, plans to exit Myanmar’s market
Major telecommunications (telco) player Axiata group Bhd (Axiata) and its portfolio of regional telcos is currently in consolidation mode with plans to exit from Myanmar, analysts at Kenanga Investment Bank Bhd’s research arm (Kenanga Research) say.
In a company update, the research arm reported that in order for Axiata’s 63 per cent owned Edotco to enhance its appeal to potential new shareholders, the telco is planning to exit its operations in Myanmar.
Edotco’s operation in Myanmar remain highly profitable with a pre-tax profit of 85 per cent, the research arm explained that the decision to exit is due to growing environmental, social and governance (ESG) concerns steaming from Myanmar’s current complicated political environment.
Recall that Myanmar is currently ruled by a military regime after its democratically elected government was overthrown in a military coup back in 2021.
The country has since been embroiled in an ongoing civil war between the Myanmar Military Tatmadaw and its allies and the overthrown National Unity Government and its allies.
While Axiata has not announced on how it plans to exit Myanmar, Kenanga Research reckoned that the most efficient route for Edotco’s withdrawal would be the disposal of its telco towers in Myanmar to local buyers.
“Hence, this would hasten the process of securing regulatory approvals and accelerate Edocto’s departure which is targeted to be in 2024,” said the research arm.
Currently, Edotco’s operation in Myanmar remains intact but it stopped further investment. It owned circa 2,000 towers and manage 1,000 sites in Myanmar, representing around three to four per cent of Axiata’s total group assets.
Should Axiata succeed in exiting Myanmar, this would be its second country exit in recent times following its successful disposal of NCell Nepal back in December 2023.
Post-disposal of NCell Nepal, Kenanga Research noted that the telco giant and its telco portfolio has been in consolidation mode as it has no immediate plans to venture into new markets and further expand its regional footprint.
Axiata has been on a targeted growth strategy where it will focus on market repair by uplifting its overall average revenue per user (ARPU), delivery of merger synergies at CelcomDigi and transformation at XL and Link Net.
“Correspondingly, AXIATA expects XL and Robi to drive near term earnings growth for the telco segment on the back of market repair.
“Nevertheless, dividends to HoldCo are expected to remain steady and sustainable at circa RM150 million per annum from each digital telco,” the research arm guided.
For Edotco, the telco is expected to further enhance its presence in Malaysia, Philippines and Bangladesh.
“In particular, Edotco may potentially gear up to fund its expansion in Philippines. To recap, it recently ventured into Philippines in Sept 2023 via the acquisition of 2,710 tower sites,” Kenanga research reported.
With intact growth prospects for its digital telcos and tower assets in emerging markets, strong asset monetisation prospects for Edotco and plans to deleverage and strengthen its balance sheet, Kenanga Research reckoned that Axiata’s growth and earnings outlook is intact.