‘AXIATA REVENUE TO INCREASE 2.0-2.5PC’
Emerging, frontier market ops to help mitigate weaker performance at Celcom
DIVERSE emerging and frontier market investments will drive Axiata Group Bhd’s growth and keep credit quality stable over the next one to two years, according to Moody’s Investors Services.
Moody’s said Axiata’s revenue would grow two to 2.5 per cent this year and next year despite a low single-digit revenue decline at its domestic mobile unit, Celcom Axiata Bhd.
“Growth in its emerging and frontier market operations, including stable earnings from its subsidiary tower company edotco Group Sdn Bhd, will help mitigate revenue contraction at Celcom,” it added.
Celcom contributes 26 per cent of Axiata’s consolidated revenue and 23 per cent of consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda).
As Axiata’s investments in e m e r g i n g m a r k e t s ma t u r e, Moody’s expects them to contribute more meaningfully to overall credit quality.
“Frontier market subsidiaries are already accounting for a growing portion of Axiata’s cash flow.
“We expect Celcom’s revenue contribution to Axiata to remain around 25 per cent through this year and next year.
“Stiff mobile sector competition in Malaysia will keep Celcom’s profitability low,” it said.
Moody’s said increasing revenue and Ebitda contribution from Axiata’s 63 per cent-owned edotco would provides the group with a steady stream of contractual revenue and earnings.
Moody’s said edotco would contribute about 10 per cent of consolidated Ebitda this year and next year, which would lend a higher degree of certainty to Axiata’s revenue than its fastergrowing but potentially more volatile emerging market earnings base.
Moody’s expects Axiata to continue seeking in-country consolidation opportunities as well as smaller-scale acquisitions to grow inorganically, which if debtfunded would increase the company’s leverage.
“edotco will also continue to grow in scale through debt-funded acquisitions, which could distort leverage metrics at the consolidated Axiata group.
“However, the management remains committed to maintaining Axiata’s reported gross leverage below 2.5 times over the next two to three years,” it said.