Axiata Group’s revenue rebounded in Q3, with a strong performance at newly acquired Ncell offsetting continued weakness at its largest units in Malaysia and Indonesia, but its net profit dropped sharply.
The company was hit by a poor operating performance at Celcom in Malaysia, higher network modernisation costs for XL in Indonesia and Robi in Bangladesh, and forex losses from the weaker ringgit, Moody’s reported. The regional operator’s net profit for the quarter fell 69 per cent to MYR296 million ($67 million).
Its revenue for the quarter increased 7.7 per cent year-on-year to MYR5.5 billion, largely due to the acquisition of Ncell in Nepal, which it acquired in April. Excluding the contribution from Ncell, the company’s revenue fell by 3 per cent, according to Annalisa Di Chiara, a Moody’s VP and senior credit officer.
Celcom – accounting for nearly 30 per cent of Axiata’s consolidated revenue in Q3 – saw revenue decrease 9.7 per cent year-on-year. Service revenue, however, rose 1.2 per cent quarter-on-quarter, after three consecutive quarters of decline, showing signs of recovery.
XL, which also accounted for 30 per cent of the group’s consolidated revenue, reported a 5.3 per cent decline in revenue year-on-year due to a drop in service revenue and interconnect revenue.
The lower growth in these two regions was partially offset by the strong revenue growth from operations in Sri Lanka, Cambodia and Bangladesh.
Moody’s expect Axiata’s revenue to grow 8 to 10 per cent this year, supported by continued solid growth at Smart in Cambodia and Dialog in Sri Lanka, despite muted performance at Celcom and XL Axiata.
Axiata’s capex is on track to hit MYR6 billion for the full year, and Moody’s expects capex to remain elevated next year as it invests to upgrade its network.
Moody’s also expects Axiata to consider reducing its shareholdings in its subsidiaries and/or an IPO of its regional tower company edotco to reduce its high leverage.