This article first appeared in The Edge Malaysia Weekly on April 21, 2025 - April 27, 2025

A consortium made up of Khazanah Nasional Bhd and the Employees Provident Fund (EPF) is believed to be looking at acquiring Axiata Group Bhd’s (KL:AXIATA) 63% stake in telecommunications tower infrastructure company Edotco Group Sdn Bhd.

This comes after years of talk that Axiata would monetise its investment in Edotco, whether through a public listing or an outright sale. The latest development points to the latter.

“Khazanah is creating a consortium with EPF to buy Axiata’s stake in Edotco. This will help Axiata pare down its debts,” says a person with knowledge of the plan.

Khazanah and EPF had not replied to The Edge’s queries at press time.

According to Axiata’s 2023 annual report, Khazanah is the largest shareholder of the group, with a 36.72% stake as at end-March 2024. It is followed by Permodalan Nasional Bhd (18.34%) and EPF (18.13%). 

Axiata planning to sell its stake in Edotco is not a recent development. There has been talk of an initial public offering since 2018. In 2020, Axiata’s then president and group CEO Tan Sri Jamaludin Ibrahim said the listing of Edotco could take place in the next three to five years.

This time, amid uncertainty surrounding US President Donald Trump’s reciprocal tariffs on imported goods that rocked the capital markets, the listing route may not be a good idea.

In 2022, the political upheaval in Myanmar posed a challenge to Axiata’s plan to list Edotco. Its then president and group CEO Datuk Izzaddin Idris said it would be a bit of a challenge to list the telecom tower infrastructure company as long as the Myanmar operation was part of its portfolio.

“I think the bigger issue for me and the Edotco team is Myanmar — how that would be addressed if we were to seek a listing in any of the markets. Some markets may take a different view from the other more developed markets,” he told the media in February 2022.

This is also not the first time EPF has been associated with Axiata’s stake in Edotco. In November 2023, The Edge reported that the provident fund was considering purchasing a stake in Edotco as Khazanah and Innovation Network Corp of Japan (INCJ) were looking to exit the company.

However, INCJ sold its 21% stake in Edotco to Khazanah last month. This increased the sovereign wealth fund’s direct stake in the telecom tower infrastructure company to 32%, on top of its shareholding through Axiata.

If Axiata were to sell its 63% stake in Edotco to the Khazanah-EPF consortium, it would mean that the provident fund would have to write a bigger cheque to raise its stake to 50%. Khazanah would only have to acquire 18% of Edotco.

INCJ invested in Edotco back in 2016, with a maximum investment of US$400 million. Back then, the latter directly operated 17,100 towers, while a further 8,100 towers were managed through a range of services provided by the company. Today, Edotco has a total portfolio of more than 58,000 telecom towers in nine countries across Asia — Malaysia, Bangladesh, the Philippines, Indonesia, Cambodia, Pakistan, Myanmar, Sri Lanka and Laos.

This shows that Edotco had more than doubled in size between 2016 and 2025. While the valuation was not disclosed by INCJ and Khazanah when they announced the deal, some observers say Edotco’s valuation is about US$3.5 billion. If this is true, the 63% stake in Edotco will net Axiata US$2.21 billion.

Edotco is a major contributor to Axiata’s bottom line. In the financial year ended Dec 31, 2024 (FY2024), the telecom tower infrastructure business contributed almost 10% to Axiata’s external operating revenue of RM22.33 billion. The segment contributed 25.7% to the group’s net profit of RM1.6 billion during the year from continuing operations.

In FY2024, the infrastructure business was the third largest contributor to Axiata’s net profit from continuing operations after the Indonesian and Cambodian digital telecom and mobile business respectively.

This raises the question of whether it would be wise for Axiata to sell its stake in Edotco. “It depends on the exit valuation,” a head of research with the local arm of a Singapore-headquartered research firm tells The Edge.

He adds that Axiata’s debts are not unreasonably high at the group level as the general yardstick for telcos is an enterprise value/Ebitda (earnings before interest, taxes, depreciation and amortisation) of about three times. “I believe Axiata’s [EV/Ebitda] is below that.”

As at Dec 31, 2024, Axiata’s total borrowings stood at RM23.19 billion, with substantial foreign currency borrowings. Around RM21.5 billion of the group’s total borrowings are in foreign currency, with RM12.7 billion, or almost 55% of the total, in US dollars.

According to RHB Research, Axiata’s net debt-to-equity ratio was 66.5% as at Dec 31, 2024, while Kenanga Research calculated that its net gearing stood at 0.9 times.

Both ratios are higher than Singapore Telecommunications Ltd’s self-reported net debt gearing ratio of 28.3% as at Sept 30, 2024. SingTel is a peer of Axiata as both have major operations in a number of Asian countries.

What is clear is that Axiata has a lot of debts. In fact, its total borrowings, at RM21.19 billion, have exceeded the total equity attributable to owners of the company.

“Axiata’s debt-related concerns are well talked about, and it has been trying to address these,” says an analyst with a local investment bank who covers Axiata. “I believe talk of a potential sale of some Edotco stake to degear has been around for a while. The questions are probably how much [price and stake], when and to whom. We don’t have any answers to these.”

In September last year, Axiata’s indirect wholly-owned subsidiary Axiata Investments (Indonesia) Sdn Bhd disposed of 533.41 million shares in PT XL Axiata tbk, or about 5% of the company’s share base, to Ferrymount Investments Ltd for RM423.5 million.

Prior to that, in April 2024, Axiata announced a proposal to divest its 87.5% stake in Edotco Myanmar Ltd to an undisclosed buyer for US$150 million (RM713.03 million) cash as it exits the market of the beleaguered Asean country. However, this deal had been extended until June 30, 2025, following the deadly 7.7-magnitude earthquakes that hit Myanmar on March 28, leaving more than 3,000 people dead.

Axiata’s borrowings have decreased since 2023. In FY2023 ended Dec 31, its total borrowings stood at RM24.84 billion. This means it managed to reduce its debts by RM1.65 billion in just one year.

However, its current borrowings increased to RM4.68 billion in FY2024, from RM2.67 billion in FY2023, indicating a shift towards more short-term borrowings. Its non-current borrowings decreased to RM18.51 billion in FY2024, RM3.66 billion lower than in FY2023. 

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