Axiata eyes fixed broadband space

Telco has begun expanding its fixed broadband services in Malaysia, Indonesia and Sri Lanka, says president


Axiata Group Bhd has plans to venture into the fixed broadband space in Malaysia over the next three years with significant investment to take place next year.

Its president and group CEO Tan Sri Jamaludin Ibrahim (picture) said the telco has begun expanding its fixed broadband services in Malaysia, Indonesia and Sri Lanka.

“We’ve started already in Sabah where it’s less crowded, and now we’re looking at the possibility of a collaboration with Telekom Malaysia Bhd (TM).

“That’s still in discussion. We should be looking at a very significant amount (of investment into broadband) for Malaysia next year,” he told a press briefing on the group’s second-quarter (2Q) results in Kuala Lumpur last Friday.

The planned move is in line with the group’s aim to eventually transform all of its operating companies into full convergence companies that provide mobile, wireless and fixed broadband services.

“In Peninsular Malaysia, we’re talking to TM to see if we can use their network like what Maxis Bhd is doing now. It is quite possible for us to be more aggressive over the next two to three years,” Jamaludin added.

He noted that the telco is looking at both fixed wireless broadband and fibre broadband, with inclination towards the former due to lower costs.

Maxis offers high-speed home fibre broadband services that ride on TM’s infrastructure, while TM is the dominant player in the broadband space.

Now that the government is making efforts to end industry monopolies and increase broadband speed while lowering prices, the market could well open up for other players to enter as last-mile providers. Axiata sees currency and interest-rate volatility — particularly in Sri Lanka, Bangladesh and Indonesia — as a key risk going forward, although it is not overly concerned as half of its external debt is hedged, while 70% of borrowings are on a fixed interest rate basis.

Jamaludin said the foreign-exchange (forex) translation impact seen on the financials of some of its operating companies is purely an accounting issue that does not affect the underlying performance of the companies.

Of greater concern are the group’s capital expenditure and loans that are US dollar-denominated as those will be affected by US interest rates, which are expected to see a faster pace of normalisation.

Global trade tensions and a volatile Turkish lira have also sent emerging-market currencies tumbling of late, with the ringgit being no exception.

Axiata reported a net loss of RM3.36 billion for the 2Q ended June 30, 2018 (2Q18), compared to a net profit of RM407.21 million recorded last year — mainly due to a one-off non-cash impairment provision of RM3.38 billion as a result of the de-recognition and re-classification of Idea Cellular Ltd from associate to simple investment, as announced on July 27.

The group’s earnings also slipped on higher depreciation and amortisation charges attributable to aggressive investments in data over the last two years, higher tax benefits in 2017 and higher investments in digital businesses.

This was its second consecutive quarter in the red following a net loss of RM147.41 million registered in 1Q18, which was underpinned by share of losses from Idea amid intense price wars and a hyper-competitive Indian market.

Jamaludin said the group expects earnings to “return to the normalised run rate each quarter” as it has “ceased equity accounting of Idea”.

Its 2Q18 revenue slipped 3% to RM5.87 billion from RM6.06 billion the year prior as the ringgit strengthened against all foreign currencies during the quarter, leading to an adverse forex translation impact on headline performance.

The group declared a single interim dividend of five sen per share for the financial year ending Dec 31, 2018.

Shares of Axiata rose two sen, or 2.16%, to close at RM4.64 last Friday, giving it a market capitalisation of RM42.81 billion.