Axiata doubles profit in Q2
Its unit edotco buys 13,000 towers in Pakistan for RM4bil
KUALA LUMPUR: Axiata Group Bhd unit edotco has emerged as the eighth largest independent global tower company after it agreed to buy 13,000 cellular towers in Pakistan for US$940mil (RM4.01bil) as Axiata’s net profit more than doubled in the second quarter from a year ago.
Earlier this month, edotco Group Sdn Bhd, 62.4% owned by Axiata, completed the purchase of 700 towers for US$89mil from Tanzanite, also in Pakistan.
With the completion of the deal for 13,000 towers, edotco would end up with more than 26,000 towers across South Asia and South-East Asia. On a multi-country basis, edotco would be the second largest global company after American Tower Company, which has 150,000 towers.
Axiata group president and CEO Tan Sri Jamaludin Ibrahim said it was a major deal for the group and the transaction would generate mid to single digit growth in revenue and ebitda for Axiata on an annualised basis.
Edotco, together with Pakistanlisted Dawood Hercules Corp Ltd (DH Corp), bought the 13,000 towers from Pakistan Mobile Communications Ltd (PMCL).
Edotco will end up with a 55% stake in edotco Pakistan Pte Ltd, and the remaining 45% will be held by DH Corp. The deal is funded by both borrowings and equity.
Asked if edotco will buy up more tower companies to grow in size since it wants to be a top five tower company, edotco CEO Suresh Sidhu said “the Pakistan deal was a huge acquisition that we need to integrate first.’’
Suresh believes edotco is paying a “fair price’’ for the acquisition based on the implied EV/Ebitda of 8.1 times. He had weighed the geopolitical risks of buying tower assets in Pakistan against the potential growth of the tower business there.
The market has 40,000 towers with several companies but as demand grows, he said there will more sharing of towers. Apart from Pakistan, edotco owns and manages towers across Malaysia, Cambodia, Myanmar, Sri Lanka and Bangladesh.
Asked if edotco would be raising more funds to grow, Jamaludin said edotco had enough funds. There are also “no firm plans’’ for an initial public offering for edotco.
Turning to Axiata’s financial performance, Jamaludin said that at the halfway mark, “we see all our operational companies performing better than the industry in terms of revenue growth, and we have set a new milestone by recording the highest quarterly (April to June 2017) revenue to date of over RM6bil.”
Its net profit more than doubled to RM407.2mil for the second quarter ending June, versus the RM188mil reported in the same period in 2016. The rise was led by improved operational performance and growth in data revenue despite intense competition in all the markets it is in.
Revenue was up 3% at RM6.1bil versus RM5.3bil a year ago.
Earnings per share was at 4.5 sen versus 2.1 sen earlier. Its Ebitda was up 5.6% at RM2.3bil for the period, and its efforts on cost and capex optimisation resulted in RM580mil savings for the group.
For the first half, Axiata’s net profit rose 15.9% to RM646.2mil on a 15.7% improvement in revenue to RM11.9bil. Its Ebitda grew 12.4% to RM4.4bil during the period.
Axiata said its group balance sheet continued to strengthen, resulting in a healthier cash balance at RM7.4bil from RM6.7bil in the previous quarter. The company declared and interim dividend of 5% per share.
Its Indonesian unit, XL Axiata was the biggest contributor towards earnings, higher than Celcom Axiata Bhd. However, he foresees high single digit growth potential for Sri Lanka’s Robi and edotco. The outlook of the second half remains challenging amid competition in most markets, although he believes there are also encouraging signs at Celcom and XL.
On the performance of Celcom, once a jewel in the group, Jamaludin said “we are never satisfied as we can do better. But in the context of the industry which has seen a weak first half with zero growth, Celcom has done a reasonably good job and we believe we can get some market share, but not all that we have lost.’’
On Singapore’s M1, in which Axiata has a 28.5% stake, Jamaludin said that after the recent talks for the sale of its stake in M1 collapsed, “we would stay until we get a compelling offer.”
As for India’s Idea Cellular in which it has a 20% stake that will be diluted to about 10% after the merger between Idea and Vodafone, Jamaludin said “we do not rule out selling out’’ even though “we are not under pressure to do so and the synergy benefits of the merger’’ have not been factored in.