Axiata in talks with 11 players for virtual bank licence bid, says deputy group CEO

The 11 players courting Axiata include local firms, as well as domestically incorporated foreign players

by NG MIN SHEN & ASILA JALIL / pic by BLOOMBERG

AXIATA Group Bhd is in talks with 11 companies to jointly bid for one of Malaysia’s five digital banking licences.

The telecommunications company (telco) has “been pursued” by several parties, including banks and e-wallet players, its deputy group CEO Datuk Mohd Izzaddin Idris said.

“The exposure draft (for digital banking regulations) came out in December and we’ve provided our comments and have been engaging with Bank Negara Malaysia (BNM). So, hopefully we can form the partnership that’s needed to make the submission in due course,” Mohd Izzaddin said during a media briefing in Kuala Lumpur last Friday.

The 11 players courting Axiata include local firms, as well as domestically incorporated foreign players, he said without giving any names.

Optimistically speaking, the virtual bank could be established by the second half of 2021 (2H21), he added.

BNM said in December last year it plans to issue up to five digital bank licences. It’s currently seeking feedback on the exposure draft of the digital banking licensing framework, also issued at the same time.

The policy document is expected to be finalised by 1H20. Applications for licence will be open upon issuance of the document.

While BNM’s exposure draft does not specifically require bidders to partner traditional lenders, “it does make a lot of sense to partner a bank”, Mohd Izzaddin said, citing banks’ familiarity with risk compliance frameworks and the assurance to stakeholders that lenders would provide.

“What is important in this particular arrangement is the discipline that each party brings to the table.

“For example, we are very proficient with the e-wallet, micro lending and algorithmic lending, so those are the things, skillsets we bring to the table,” he said.

The telco’s partner would likely be a party with access to potential virtual banking customers, such as millennials.

Meanwhile, Axiata recorded a net profit of RM332.56 million in the fourth quarter ended Dec 31, 2019 (4Q19), versus a net loss of RM1.43 billion a year ago, attributed to better operational performance and lower depreciation and amortisation due to one-off assets written off in 4Q18.

Revenue for the period was flat at RM6.267 billion against RM6.27 billion registered the year prior, while Ebitda climbed 30.8% to RM2.73 billion from RM2.08 billion previously on cost savings.

Revenue from the group’s Malaysia business fell 10.3% year-on-year (YoY) to RM1.72 billion on lower device sales and the downward revision of domestic interconnect and domestic roaming rates.

The Malaysian business’ profit came in at RM246.6 million compared to a net loss of RM216.7 million in 4Q18 as Ebitda rose 49.6% YoY to RM697.5 million due to lower device cost and operating costs, while depreciation and amortisation fell 54.3% YoY due to oneoff assets written off in 4Q18.

For the financial year ended Dec 31, 2019 (FY19), Axiata recorded earnings of RM1.46 billion against a net loss of RM4.76 billion the year earlier.

The profit was driven by improved performances, lower depreciation and amortisation, foreign-exchange (forex) gain, discontinued losses related to the group’s India investment, and gain from divestments in M1 Ltd and digital venture assets.

Revenue rose 2.9% to RM24.58 billion in FY19 from RM23.89 billion in FY18 as data revenue grew. Ebitda increased 27.4% YoY to RM10.6 billion.

The telco has allocated capital expenditure (capex) of RM6.6 billion for FY20, to be spent on its Indonesia business, 4G network expansion in Bangladesh and acquisitions relating to edotco Group Sdn Bhd, Axiata’s tower unit.

In FY19, its capex stood at RM6.2 billion, lower than the targeted RM6.8 billion set under its headline key performance indicator for the year.

Axiata is proposing to list its 68.69%-owned subsidiary Robi Axiata Ltd on the Dhaka Stock Exchange Ltd and the Chittagong Stock Exchange Ltd in Bangladesh following a fixed price method.

Robi will issue 523.79 million new shares representing 10% of its enlarged issued and paid-up share capital. This would dilute Axiata’s shares in Robi by 6.87% to 61.82%.

The IPO will be the fourth-largest in Bangladesh, also making Robi the 11th-largest listed company in the country. The listing is expected to be completed in 4Q20.