Malaysia Axiata Upbeat On 2019 Operations After Swinging To 4Q Loss

© Nikkei Markets

KUALA LUMPUR (Feb 22) — Malaysia’s biggest wireless carrier Axiata Group Friday forecast strong operating earnings this year as it exited some of the non-core businesses in India and Singapore, and wrote off legacy technology assets.

Over the past several months, Axiata has been selling non-core assets as it sharpened focus on key operating markets such as Indonesia and Malaysia, and digital business. Last year, it exited the bleeding Indian venture Idea Cellular after the Aditya Birla Group-backed company merged its operations with the local unit of Britain’s Vodafone amid cut-rate competition.

Last week, Axiata sold its 29% stake in Singapore’s M1 to conglomerate Keppel Corp and Singapore Press Holdings for 1.65 billion ringgit ($404.6 million) amid stiff competition and high capital expenditure requirements. The company also booked a gain of 126.5 million ringgit from the sale.

Axiata, which has operations across multiple countries in Asia, said its immediate emphasis is to “shifting gears” towards profitable growth and cash generation.  

Across geographies, the operating companies are focusing on higher profit as against revenue growth, the company said. Axiata expects operating earnings this year to expand 5%-to-8%. That’s sharply higher than 2% increase it eked out in 2018. It expects revenue to grow between 3% and 4% in 2019, after posting a 2.1% decline to 23.89 billion ringgit last year. 

The company also plans to spend 6.8 billion ringgit in capital expenditure this year. Of this, about 2 billion ringgit will be spent to expand operations in Indonesia and close to 1 billion ringgit in Malaysia, its Chief Financial Officer Vivek Sood told reporters at a news conference.  

The strong outlook came after Axiata posted a fourth quarter net loss on a one-off asset write-off. Net loss for the fourth quarter ended Dec. 31 totaled 1.66 billion ringgit, compared with a net profit 24.73 million ringgit a year ago. Revenue marginally grew to 6.27 billion ringgit. 

Axiata said it has written off some legacy technology worth 1.82 billion ringgit, primarily in its Indonesian unit XL and Malaysian arm Celcom as part of network modernization exercise.

The company also proposed a higher full-year total dividend of 9.50 sen per ordinary share, taking the total dividend pay-out ratio to 85% in 2018.

“Barring unexpected and external factors, we are confident we will have a promising 2019,” said Chief Executive Jamaludin Ibrahim.

To be sure, Axiata is facing challenges in some of its key markets such as Nepal, where earlier this month, the top court ordered the company and its unit NCell to pay capital gains tax amounting to 2.16 billion ringgit. The tax claim stems from Axiata’s 2015 purchase of the operator from TeliaSonera Norway.

The company acknowledged the concerns surrounding a possible tax liability. “In the absence of official notification, our parties to the litigation continue to await the full judgment to gain more clarity and we will provide an update upon receiving the order,” it said.

The company also warned that it remains “cautious of the challenging industry and macro landscape,” with heightened regulatory and competitive environment expected in some of the geographies. 

– By Gho Chee Yuan and Gan Pei Ling
– Edited by Dhanya Ann Thoppil