Axiata shares fall on RM2b CGT bill


Axiata Group Bhd shares fell 4.36% or 17 sen last Friday after Ncell Pte Ltd — and its major shareholder Axiata — were ordered by the Supreme Court of Nepal to pay capital gains tax (CGT) amounting to 61 billion Nepalese rupees (RM2.16 billion), excluding late fees and fines, for the Ncell buyout deal.

Axiata closed the trading day at RM3.73, a three-month low, as RM1.54 billion in market capitalisation was lost.

Public Investment Bank Bhd (PIBB) noted that the tax bill is a downside to headline profit and a drag to the company’s share price.

“Although we have always been wary of Axiata’s exposure to high regulatory risk at its regional operating units, this came as a negative surprise as the tax issues with Ncell were thought to have been resolved following the advance deposit payment of 13.6 billion Nepalese rupees (RM 483.61 million) by Axiata to the Nepalese tax department in 2017,” it noted in a report.

The investment bank kept its core earnings forecasts and ‘Neutral’ call unchanged, but expects Axiata’s share price would react negatively to the news due to uncertainties and the potential downside to headline profit.

In June 2017, Axiata announced it made an advance deposit of 13.6 billion Nepalese rupees to the Large Taxpayers Office (LTPO), clearing the years-long tax hurdle over its purchase of Ncell from TeliaSonera Norway in December 2015.

PIBB said including late payment fees and fines, the total amount could be 66 billion Nepalese rupees.

It added that Ncell has already paid tax installments totalling 21 billion Nepalese rupees, which means the outstanding amount could be around 40 billon to 45 billion Nepalese rupees.

Axiata, in a statement last Thursday, noted that the Supreme Court has ruled in favour of the Public Interest Litigations filed by Dwarikanath Dhungel and others broadly pleading the onus of CGT is on Ncell, Reynolds Holdings Ltd — the 80%-parent company of Ncell, formerly owned by  TeliaSonera — and Axiata Investment (UK) Ltd.

“None of the Axiata parties to the litigation has received the judgement and order of the Supreme Court following its ruling, nor does the group have any details of what was ordered by the Supreme Court.

“Ncell, Reynolds, and Axiata UK were given the full clearance by the LTPO of its obligations to withhold any CGT payment on behalf of the seller in relation to the transaction via the letter from LTPO dated June 4, 2017, following the full and final payment made by Ncell, albeit under protest on the basis that CGT is not applicable on offshore transactions and even if applicable, any shortfall on payment is the responsibility of the seller,” it noted.

Axiata said it will provide further updates upon receiving the order of the Supreme Court.