Axiata says no re-merger talks underway with TM

TheEdge Thu, Feb 22, 2018 08:52pm - 6 years View Original


KUALA LUMPUR (Feb 22): Axiata Group Bhd president and group CEO Tan Sri Jamaludin Ibrahim said today that there is no ongoing re-merger talks between the company and Telekom Malaysia Bhd ™, despite the potential synergies.

Rather, both companies will undertake usual business collaboration to leverage on their respective strengths.

"While both parties would (stand to) gain (from a re-merger), but remember, we demerged for certain reasons and those reasons are still true until today, we wouldn't have demerged (in April 2008) if we know that it wouldn't be beneficial for us. In short, frankly I do not think that it will be something that can happen immediately, it is very complex stuff," he told a media briefing today.

"There are a few reasons why we had demerged, some of them we did not disclose. But on a business focus, you can argue that today, both companies are doing mobile and fixed line and what we have decided to do instead of a re-merger, is to collaborate," he added.

Jamaludin also said Celcom Axiata Bhd is renegotiating a 2016 collaboration agreement with TM.

"If you recall at the end of 2016, we piggy back on their (TM) fixed line, fibre-to-the-homes or HSBB (high speed broadband), they piggied back on our mobile infrastructure. That is doing reasonably well, but after we completed the agreement, the market structure changed again and today, prices have gone down on both sides, on HSBB (high speed broadband) and mobile. As such, the agreement is being renegotiated," he said.

Meanwhile, Jamaludin did not rule out a possible divestment of Axiata's 16%-owned associate Idea Cellular Ltd in India, after the latter completes its merger with Vodafone Group.

"We have been a strategic partner to Idea, although we are not involved in the day-to-day management, but we are in the board and we are kind of involved in the strategic direction of the company.

"With the significant dilution of Axiata (shareholding in Idea) from where we were — 19% then, now we become 16%, and after Idea-Vodafone merger, we will be less than 10%, our role as strategic partner will, in a way, disappear — not entirely. Because Vodafone will be their strategic partner, so we will become primarily an investment," Jamaludin explained.

"Therefore, Idea as a strategic asset for us will not diminish, but will reduce substantially. And we are not a financial investor, what these (shareholding changes) imply is that in the long run, we will be considering possible exit, but it might happen in month or even five years from now, I won't dare give you any kind of guidance in terms of timing, what I am saying is that strategically, it is effectively no longer a strategic asset to us," he added.

Nevertheless, Jamaludin said Axiata is in no hurry to make any divestment. 

"We want to, but not strictly, to be the number one or strong number two in every country that we operate in. So if we need funding, those investments that are not (core) could be a candidate (to be divested)," Jamaludin added.

Apart from Idea, Axiata's other associate is 29%-owned M1 Ltd in Singapore, which the group attempted to divest last year, but the plan was called off.

Jamaludin said M1's current market value is S$2 billion, while Idea's market capitalisation stands at US$6 billion, which means Axiata's current 16% stake is worth some US$1 billion.

"That is a lot of cash, but we don't need them. We are not under pressure (to sell) as our debt-to-earnings before interest, tax, depreciation and amortisation (Ebitda) ratio is about 2.1 times, which is a comfortable level, and we have RM6.8 billion cash in hand," he said.

On the potential public listing of Axiata's telecommunications tower building business edotco Group Sdn Bhd, Jamaludin reiterated there is no specific timeline for its initial public offering.

"Our focus right now is to complete the acquisition in Pakistan, we will be very busy with that. We might look beyond that to get strategic alternative funding, but at this point in time, everything is being discussed," Jamaludin said.
 
Jamaludin also revealed Axiata's key performance indicator (KPI) for the financial year ending Dec 31, 2018 (FY18) based on constant foreign exchange of US$1 to RM3.90, are 6.3% revenue growth, Ebitda growth of 5.8%, up to 5.5% return on invested capital, 5% return on capital employed, and capital expenditure of RM7.4 billion.

Axiata's share price closed one sen or 0.18% lower at RM5.67 today, valuing it at RM51.3 billion.

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