Axiata still sees upside for loss-making Idea
Tan Sri Jamaludin Ibrahim

Its shares took a dive as the telco giant posted a net loss of RM147.4m for 1Q18

By NG MIN SHEN / Pic By ISMAIL CHE RUS

Axiata Group Bhd remains positive on the mid- and long- term prospects of its Indian associate, Idea Cellular Ltd, but has not totally ruled out the possibility of a stake sale of the loss-making affiliate.

The Malaysian telco giant posted a net loss of RM147.41 million for the first quarter of 2018 (1Q18), compared to a profit of RM239.02 million a year ago.

Investors punished the blue-chip company, sending its share price 64 sen, or 12.62%, lower yesterday to close at RM4.43. Axiata alone took about 10 points from Bursa Malaysia’s main index.

President and group CEO Tan Sri Jamaludin Ibrahim said the group is “very confident” that things will turn around for Idea in the long run, especially after Idea merges with Vodafone India and competition in India’s telecommunications market becomes more stable.

“The merger will make Idea a very strong company with economies of scale and we can invest less to get more. Together with the market consolidating from 11 players to three players, and maybe a more rational competitive environment, we believe there’ll be more than a turnaround in the next two to three years from now.

“But to be realistic, the next one year will still be a challenge,” Jamaludin said after the group’s AGM in Kuala Lumpur yesterday.

The group is open, however, to selling its stake in Idea in the future for capital allocation to fund expansion plans.

“Three years from now, there is no reason to sell — we might as well wait for when the industry and results are better. But if we were to sell, it’s because the stake is no longer strategic (after dilution, post-merger) and also because we want to invest the money and get better returns elsewhere.”

Axiata currently holds a 16.3% stake in Idea, an Indian mobile network operator which has been recording losses due to the entry of Reliance Jio Infocomm Ltd in 2016.

Jio’s offering of free voice, data and message services sparked an unprecedented price war among Indian telcos. Several players had to exit or seek consolidation.

For the 1Q18 ended March 31, Axiata’s share of business losses from Idea grew to RM124.3 million from RM25.4 million a year ago, which was one of the reasons for the group’s net loss of RM147.41 million.

Idea is currently in talks to merge with Vodafone India, a move that would dilute Axiata’s stake in Idea to about 6%.

Jamaludin said the group is awaiting two more approvals for the merger, which is expected to be completed within one to two months.

The group also attributed its poor 1Q18 to foreign-exchange (forex) losses due to ringgit’s strengthening.

“Despite the headline numbers, if you look at the under-lying numbers, most of our companies are doing very well this year. If the ringgit is still very strong by year-end, it will be tough. Therefore, barring forex issues and Idea matters, we are cautiously optimistic for this year,” Jamaludin said.

On Axiata’s subsidiary edotco Group Sdn Bhd, he said the firm is looking at “one to two more bigger acquisitions” to support its goal to become one of the five largest independent tower companies globally.

“There is no specific deadline, but we are looking at opportunities, probably in the Asean and South Asian regions,” he said.

edotco is currently the eighth biggest independent tower company worldwide, following its acquisition of 13,000 tower assets in Pakistan.

“We want to grow aggressively, organically and inorganically. We have talked to bankers about how to fund this huge growth.

“We’re getting the advice as we speak right now, so until then I cannot say whether we will undertake an initial public listing or not, but we are seriously looking at alternatives right now,” Jamaludin added.