Thursday, September 1, 2016

Is the Axiata Group of Malaysia just a smaller version of Singtel? --Part 1


--------- Preamble


 
Malaysia-based Axiata is an intriguing telecommunications company very similar in its structure and focus to Singtel but about half the size and which seems to fly below the radar in terms of international interest in the company. 

Axiata operates in about ten Asian countries and specifically has controlling interests in mobile operators in Malaysia (Celcom, 100%) , Indonesia (XL, 66.55%), Sri Lanka (Dialog, 83.32%) , Bangladesh (Robi,92.0%), Cambodia, (Smart,100%) and Nepal (60.4%) with significant strategic stakes in India (Idea,19.96%) Singapore (M1,29.12%) and Iran (NB Operating brand and percentage ownership are shown in each case). 

The Group also has stakes in non-mobile telecommunication operations in Thailand and Pakistan (Multinet,89.0%). It employs around 25,000 people and claims to serve around 290 million customers. In 2015, the company reported revenue of about $5.7 billion. The Axiata Group includes “edotco" an infrastructure company which operates in six countries i.e. Malaysia, Bangladesh, Cambodia, Sri Lanka, Pakistan and Myanmar and has amassed a portfolio of over 16,000 towers and 12,000 km of fibre. edotco claims to be the 12th largest tower company in the world. 

Axiata also has a digital services company, Axiata Digital which owns a portfolio of about 24 digital brands, operating in mobile money, mobile adverting, e-commerce, entertainment and education. From a strategic point of view Axiata looks rather more like an investment company than Singtel. On the other hand, Axiata gets a higher percentage of its total revenue from non - domestic sources than Singtel. 

------------------------Recent acquisitions 

------------Axiata enters Nepal market 

On April 12th 2016, Axiata acquired a controlling interest in Ncell Nepal's largest mobile operator by completing the acquisition from TeliaSonera UTA Holdings B.V. and SEA Telecom Investments B.V. of Reynolds Holdings Limited. The acquisition of Reynolds for the purchase price of $1.365 billion plus customary adjustments at closing, effectively secured Axiata an 80% equity interest and controlling stake in Ncell. 

Axiata enters the Nepal market with its local partner, Sunivera Capital Ventures Pte Ltd, holding 20% direct local shareholding in Ncell, as required under local law. Local partner transaction completion was a condition precedent to Axiata’s acquisition of Ncell. 
One special aspect of the acquisition is that there are apparently one million Nepalese workers in Malaysia which means the group gains whichever way calls are made. 

------------------Myanmar Tower business 

On December 4th 2015, it was announced that: Axiata Group Bhd’s telecommunication infrastructure services arm edotco had completed the acquisition of a 75% stake in Digicel Myanmar Tower Company Ltd (MTC) for $221million via MTC’s parent company, Digicel Asian Holdings Pte Ltd. 
Axiata also confirmed that Yoma Strategic Holding Ltd had signed a definitive agreement to retain its 25% effective interest in MTC. 

On January 15th 2016 edotco laid out a $200-million investment roadmap for its operations in Myanmar. The investment, to spread over five years, will include building and owning up to 5,000 towers in the country in partnership with Singapore listed Yoma Strategic. 
Speaking at the time, Suresh Sidhu, CEO of edotco Group Sdn BN said " We believe MTC is fantastic investment opportunity for edotco. We anticipate that by 2024, there could be up to 30,000 towers required in the country,” 

-------------------Other diversification 

In the half year of 2016, Axiata Digital further grew its portfolio with both investments, joint ventures and partnerships bringing the total to 26 digital brands under its management. Axiata Digital made its first investment into India through assisted e-commerce player, StoreKing in April 2016. In the mobile music space, Yonder Music is now live in three markets with over 400,000 users. Recently, WSO2.Telco, an Axiata Digital joint venture, announced that India’s six leading mobile network operators were using the WSO2.Telco digital enablement hub to deliver mobile authentication services for over 800 million consumers.  

In November 2014, Axiata set up the Axiata Digital Innovation Fund for startups and in early December 201 Intres Capital Partners, the manager of the MYR100 million ($23.38 million) Axiata Digital Innovation Fund (ADIF), committed MYR12.5 million ($2.92 million) in its first batch of investments in six digital startups. The venture firm, set up this year to manage ADIF, announced it would be disbursing that first round of investments into six technology companies domiciled in Malaysia, namely Tripfez, Maideasy, Easyparcel, Easyuni, SPOT News and Supahands. The investees were from a variety of sectors like travel, domestic cleaning services, delivery, education, media and virtual assistant services 

---------------------Last five year results (millions of ringgits) 

------------------->.    2015.         2014.          2013.            2012.           2011 
Revenue: -----        19.883         18.712.        18.371.        17,652         16,290 
EBITDA:------         7,284           6,999.          7,271.          7,424.          7,177 
PAT:--------------       2,636.          2,369.          2,739.          2,880.         2,712 
Subscribers mill :---    275.             266.              244.             205.           199 


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