‘Cancelled tower deal improves Axiata’s financial headroom’

PETALING JAYA: Axiata Group Bhd’s cancellation of the US$940 million (RM3.9 billion) telecom tower acquisition in Pakistan will improve the group’s financial headroom, said S&P Global Ratings.

It said in a statement yesterday that the ratings on Axiata (BBB+/Stable/--) remain unaffected.

Axiata’s 62.4% owned subsidiary, edotco Group Sdn Bhd, was to acquire Deodar, the tower unit of Pakistan Mobile Communications Ltd.

On Monday, edotco said it will not go ahead with the acquisition of 13,000 towers from Pakistan Mobile Communications Ltd, which would have made it the eight largest independent tower company globally.

The deal, which was in the works for more than a year, was terminated due to the non-fulfilment of a number of conditions within the timeframe stipulated under the sale and purchase agreement, in particular regulatory approval for change of control.

“We now project Axiata’s ratio of debt to earnings before interest, tax, depreciation and amortisation (Ebitda) to be 1.7 times to 1.8 times in 2019, better than the 1.9 times to 2.0 times we had expected with the transaction.

“Our rating on Axiata is based on a debtto-Ebitda ratio of less than two times on a sustained basis. Deodar was to add more than 13,000 towers to edotco’s portfolio for US$940 million (RM3.9 billion). The acquisition was to be funded by US$600 million of debt and the remainder by equity,” said S&P Global Ratings.

Despite the cancellation of the transaction, it believes that Axiata will continue to be interested in assets in Pakistan and regionally. edotco’s stated growth strategy is to become the fifthlargest tower company globally by 2020.

Meanwhile in a separate statement, edotco Bangladesh said it has become a wholly owned subsidiary of edotco Group with the transfer of 20% of Robi Axiata Limited shares, bringing it a step closer to securing a conditional tower sharing licence in Bangladesh.

In August, edotco announced it was selected by the Bangladesh Telecommunication Regulatory Commission to obtain a conditional tower sharing licence. The licence will allow edotco to build and manage telecommunications towers for multiple mobile network operators in the country.

As part of the conditions, edotco Bangladesh cannot retain a mobile network operator as its shareholder. With the transfer, edotco Bangladesh moves one step closer to fulfilling the conditions for tower license eligibility.