Axiata sees better earnings in 2H

KUALA LUMPUR: Axiata Group Bhd expects to register a better earnings performance in the second half of this year, on the back of a recovery in both its mobile subsidiaries Celcom Axiata Bhd in Malaysia and PT XL Axiata tbk in Indonesia.
President and group CEO Datuk Seri Jamaludin Ibrahim said Celcom and XL's recovery will help the whole group in the second half of the year, as these two units make up 80% of Axiata's revenue. Celcom and XL are the group's growth engines over the last seven years.
"We have two to three dozen initiatives underway to recover and we're on track. We're confident that (the trajectory for) 2H is better than 1H," he told a press conference after the group's AGM here yesterday, adding that the initiatives include improving dealers' confidence as well as on data pricing.
Axiata's first quarter earnings fell 13.3% to RM584.84 million from RM674.88 million a year ago, due to a more challenging quarter at Celcom and XL, a weakening rupiah and increased depreciation costs from growth driven capital expenditure (capex). Revenue, however, was RM4.8 billion, up 5% from a year ago.
"It's premature to make a forecast for the rest of the year. We've only passed three months and we want to see what happens this quarter and next quarter. Given Celcom's issues, we think it's generally challenging but we're working hard to reverse the trend," Jamaludin said.
While IT issues have mostly been resolved, he said, Celcom has lost dealers and customers' confidence and recovering that confidence is not overnight.
On the decline in XL subscribers in the first quarter, Jamaludin said it was a deliberate situation following a shift in its strategy this year to focus on low-end subscribers, despite XL's reputation for its value offerings.
"The biggest growth in Indonesia is the emerging middle class so it's a pity for us to continue with the low-end subscribers. So we changed our strategy to go after the middle class for higher arpu (average revenue per user). XL will move from low-end to middle end while Axis will continue to be value (strategy)," explained Jamaludin.
Axiata chairman Tan Sri Azman Mokhtar said XL's core operations remains profitable and intact and the move to clean out its subscriber base is a move towards more data usage.
The group is mitigating currency risks at both the Axiata and XL level, including taking a foreign exchange coverage, a US dollar deposit as a hedge as well as other means.
Meanwhile, it expects its LTE/4G coverage in Malaysia to hit 35% of the population by year end, from 20% currently, or 3,500 sites by year-end, from 1,753 sites currently, with the investments in capital expenditure.
The group has invested over RM1 billion in capex in the first quarter, primarily towards strengthening the data network. It had allocated RM4.8 billion in capex this year.