Axiata says for long term in SL, no plans for exit but moots consolidation

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By Nisthar Cassim in Malaysia

Telecommunications industry giant Axiata yesterday insisted it was in Sri Lanka for the long term with no plans for exit, but called for consolidation in the mobile telecom market for the benefit of all stakeholders.

“We don’t have a desire to leave any market. Indeed on Sri Lanka we are there for the long term and will continue to maintain untitled-1majority stake,” Axiata Group President and CEO Jamaludin Ibrahim said.

“We may only consider shedding a nominal stake to increase the public float in Sri Lanka and raise cash for further reinvestment,” Ibrahim said in response to a Daily FT question about its future in Sri Lanka at Axiata’s first three-day Regional Media Summit, which kicked off in Kuala Lumpur yesterday.

Asia’s second-largest mobile telecom player with an over 300 million subscriber base holds 83.3% stake in Sri Lanka’s number one telecom firm Dialog Axiata. Axiata is also the largest foreign investor in Sri Lanka with over $ 2 billion since its inception in 1995.

Bloomberg newswires recently reported that Axiata is said to seek buyers for $ 700 million of overseas holdings in Sri Lanka, Indonesia and Cambodia. In Cambodia, Axiata holds 95% stake in its entity, 91.6% in Bangladesh and 66.4% in Indonesia.

Whilst being optimistic about its Sri Lanka operations, Ibrahim emphasised that consolidation was key for a healthier future of the mobile telecom industry.

He said that only three of the five operators were making profit. For all stakeholders to benefit, the Axiata Chief said: “From an industry perspective in most markets, the ideal mix is three operators. At Axiata we are looking at consolidation opportunities. We are also encouraging others to do the same because industry consolidation is beneficial to all.”

Ibrahim didn’t identify specific opportunities but the telecom industry has been speculating that Hutch, Airtel and Etisalat could be subject to offers from bigger players though there is no official position on this.

Dialog leads the mobile telecom industry with over 11 million subscribers within an estimated 20 million plus overall base. However, earnings have been under pressure. In the June 2016 quarter Dialog’s profit rose almost 20% to Rs. 2.3 billion from 2015, but higher untitled-2taxes and floods led to contracted earnings compared with the first quarter of 2016.

“In mobile telecoms, big is better. In most markets we can’t have too many players and consolidation is a must where it is essential for economies of scale to serve customers better and achieve profitability,” the Axiata Chief said, reiterating that it was “time for consolidation in Sri Lanka”.

He emphasised the same in most of the 10 markets Axiata serves though he said India could be an exception given its huge size.

With a growing presence in India, Indonesia, Bangladesh, Cambodia, Nepal, Myanmar, Pakistan and Singapore apart from Malaysia, Axiata has invested $ 44.5 billion as capital and operational expenditure during the past five years. In Sri Lanka last year the Dialog Group’s capital expenditure was Rs. 19.6 billion.

Axiata Group CFO T.V.T. Chari said Dialog had done extremely well despite challenges. He also said Axiata was ready to invest further in anticipation of higher growth aided by a favourable market and regulatory environment. Axiata estimates a $ 1.3 billion investment in several of its Southeast and South Asian markets in the current financial year.

Axiata said it has contributed $ 65 billion to the GDPs of seven countries it operates in over the past five years. It employs 25,000 and has provided jobs for 1.1 million people in 10 Asian markets last year.

It is the fourth-largest mobile telecom player in Asia in terms of revenue (a record $ 5 billion with 63% of revenue contributions in 2015 coming from regional operating companies including Sri Lanka).

Axiata is also the fifth largest in terms of market capitalisation (over $ 14 billion). The Group’s infrastructure arm Edotco is also Asia’s largest and the world’s 11th-largest telecom tower company with more than 17,000 installations in six countries including eco-friendly carbon fibre units. In Sri Lanka the installed base of Axiata is 2,100 towers, some of which are used by other mobile telcos as well.

At the inaugural regional media summit, Axiata highlighted its success and expansion as well as gave a sneak preview of its future strategy and industry trends.

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