KUALA LUMPUR: Telecommunications giant Axiata Group Bhd foresees that business in the third quarter ending September (3QFY14) will remain challenging. Its unit, mobile network provider Celcom, has to contend with technical issues, a delayed implementation of its IT transformation project, and the temporary suspension of short codes.

Axiata president and chief executive officer Datuk Seri Jamaludin Ibrahim said it will be tough to ensure Celcom meets its key performance index on revenue but he remains optimistic.

“It is going to be tough but we have five months to make it happen. The challenge will be on the revenue side, so we are looking at costs. But on the profit side, we can still meet our KPI,” he told reporters after announcing the group’s 2QFY14 results.

Jamaludin said network issues in certain areas had affected customer and dealer  confidence, but the problem should be resolved in the third quarter of this year.

Similarly, the IT problem would take another quarter to be solved on the dealers’ side.

Although the suspension of the short codes had made a 3% dent in Celcom’s revenue, he said the group supported the suspension “to a certain extent” because some short code operations had taken advantage of consumers.

“From my personal experience, if I don’t reply to a message then I have to pay RM2. That is not fair.”

Jamaludin said Celcom’s data revenue grew by 19% year-to-date (YTD), but would have been higher at 29% if its green dongles were excluded.

Axiata’s net profit declined by 30.55% to RM447.82 million from RM644.78 million in the previous corresponding period although revenue was up 2.16% to RM4.73 billion from RM4.63 billion.

The group declared an interim dividend of eight sen per share for the financial year ending Dec 31.

Jamaludin attributed the decline to foreign exchange losses due to a weak rupiah, integration of Axis Telekom Indonesia’s business, and Celcom’s challenging quarter.

He said Axiata’s acquisition of Axis also affected the group’s results, as it had to make early payments on loans and take over a US$865 million (RM2.72 billion) debt.

Other component companies outside Malaysia performed strongly, with Cambodia’s Smart leading the pack with a 115% increase in YTD data revenue, contributing 19% of the group’s total revenue.

However, Jamaludin said despite more than a 100% gain in data traction recorded by Robi in Bangladesh, the environment is seeing “heightened competition”.

“Robi is doing extremely well but people are coming back at us. From a regulatory perspective, it also remains a challenge. Fortunately, [regulatory constraints in] India have subsided but can [still] be a challenge as well,” he said.

On Axiata’s interest in Tata Group’s Viom Networks in India, Jamaludin said the group is not participating in the bid.

“We did consider participating but now we are not. It did not meet some of our criteria, primarily on the financial front,” he said.

India’s Economic Times reported in July that Axiata, with private equity funds Carlyle and Providence as well as American Tower, was shortlisted to bid for stakes in Viom, India’s largest independent tower company.

Asked about interest in other Indian networks, Jamaludin said this is not a focus of the group at this point due to obligations on its other businesses and “because there have been no arising opportunities”.

The group’s net profit for the six months ended June 30 was RM1.12 billion against RM1.26 billion, while revenue expanded marginally to RM9.25 billion from RM9.11 billion a year ago.


This article first appeared in The Edge Financial Daily, on August 28, 2014.