Axiata Records Another Strong Quarter to Deliver on Profit and Cash YoY PAT and EBITDA up 33.5% and 29%; YTD PATAMI at RM1 billion with 1.9x Jump in Free Cash Flow

Key highlights in 3Q19

• “Shifting Gear” towards profitability and cash continued to show definitive results:
  YoY PAT and EBITDA up 33.5% and 29% on the back of cost excellence initiatives with EBITDA margin up 8.9 ppt to 45.1¹; YTD19 FCF jumped 1.9x to RM3.5 billion boosted by higher revenue and cost excellence initiatives
• Balance sheet remained strong:
  Amidst uncertain macro outlook, balance sheet held steady as the Group pared down its debt by RM2.2 billion from cash generated through operations as well as proceeds from M1 sale, bringing gross debt/EBITDA to healthy 1.9x2; cash balance at RM5 billion. Maintains credit rating
• XL’s stellar turnaround gained momentum. Fastest growing telco in Indonesia for third year running:
  Strong data monetisation delivered one of XL’s highest ARPU of IDR36,000 and revenue of IDR6.5 trillion (YTD19 up 9.7% and 10.6% respectively); returned to profit with ROIC improvement of 4.5 ppt YoY to 6.2%³
• Robi profitable post acquisition of Airtel:
  Despite new Bangladesh taxes in 2Q19, Robi returned to profit with ROIC up 7 ppt YoY to 6.4%³; recorded highest revenue at BDT19 billion in 3Q19 as ARPU rose to BDT125 (+4.2% YTD19)
• Celcom delivered:
  Amidst a challenging market in Malaysia, Celcom recorded increase in YTD19 PATAMI and FCF by 7.9% and 15.3%; EBITDA margin up 3.5 ppt to 30%²
• Double digit growth for edotco across all metrics², whilst ADA delivered maiden profit in 3Q19

KUALA LUMPUR - Axiata Group Berhad (“Axiata” or “the Group”) presented another strong set of results on the back of excellent execution of its short-term cash and profit focus and cost excellence initiatives.

For the third quarter ended 30 September 2019 (3Q19), the Group posted Year-on-Year (YoY) improvement with revenue up 3.5% to RM6.2 billion from better performance by most of its operating companies (OpCos). Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) increased 29% to RM2.8 billion driven by revenue growth as well as the Group’s cost excellence initiatives which resulted in RM816 million savings. Excluding MFRS 16 impact and at constant currency of 3Q18, Group EBITDA grew 9.8% mainly attributable to revenue growth and cost excellence initiatives.

Profit After Tax (PAT) increased by 33.5% to RM247.6 million for the quarter as a result of better topline. Profit After Tax and Minority Interest (PATAMI), however, decreased 9.4% to RM119.7 million due to the absence of M1’s⁴ contribution following its disposal, as well as higher taxes in Bangladesh.

Year-to-Date (YTD), the Group maintained momentum, as Free Cash Flow (FCF)⁵ jumped 1.9x to RM3.5 billion boosted by higher revenue and savings from cost excellence initiatives across the Group. PATAMI rose by over 100% to RM1 billion lifted by one-off gains from disposal of M1, divestment of non-core digital businesses and disposal of Idea6 rights as compared to Idea-related losses in YTD18. EBITDA grew 26.3% to RM7.9 billion YTD19 on the back of double-digit growth recorded at Celcom⁷, XL⁸, Robi⁹, Smart¹⁰ and edotco11. At constant currency of YTD18 and excluding MFRS 16 impact, Group EBITDA registered strong growth of 10.3% due to improved performance by all OpCos except Ncell¹².

Armed with cash balance of RM5 billion, Axiata strengthened its balance sheet with gross debt/EBITDA at 1.9x2 compared to 2.3x in the same quarter last year to remain financially resilient in the face of anticipated macroeconomic uncertainties. The Group successfully pared down RM 2.2 billion debt for the quarter.

Group revenue YTD19 grew 4% to RM18.3 billion as a result of strong data revenue growth, thus expanding EBITDA by 26.3% to RM7.9 billion. PAT increased to RM1.3 billion while PATAMI rose to RM1 billion. This can be attributed to better underlying performance across most Opcos, foreign exchange gain, discontinuation of losses related to its investment in India, gain on disposal of non-strategic investments and disposal of investment rights in India. All reflective of its portfolio rebalance strategy.

Digital Telco¹³

Amidst a flattish and highly competitive market in Malaysia, Celcom’s FCF expanded 15.3% to RM674 million YTD supported by EBITDA growth of 3.9%. PATAMI grew 7.9% to RM562 million YTD backed up by operational excellence initiatives. Its combined postpaid and prepaid revenue rose 0.6% YTD whilst mobile service revenue dropped 4.1% YTD impacted by the decline in wholesale revenue. Blended Average Revenue Per User (ARPU) improved by RM1 to RM52 in 3Q19 as compared to the preceding quarter. Celcom’s network leadership was retained against peers as 4G population coverage rose to 93% whilst 4G LTE-A coverage to 81% compared to 90% and 78% respectively a year ago.

XL’s stellar turnaround YTD19 was led by its data-focused strategy continuing to deliver results as market share rose 0.6 ppt to 18.3%, returning to profit with PATAMI at IDR498 billion. Revenue grew 10.6% YTD driven by strong data growth of 30.4%. XL’s FCF surged 50.9% to IDR1.8 trillion YTD on the back of cost efficiencies fueling 19.4% jump in EBITDA. YoY, data subscribers grew to capture 88% of 55.5 million total subscribers from 53.9 million in 3Q18. In support of its data strategy, XL’s 4G service is now available in 410 cities across the nation.

Dialog¹⁴ delivered stronger revenue expansion to the tune of 8.1% YTD compared to industry’s 7.3% revenue growth due to continued growth momentum across its TV (+16.6%), fixed (+8.7%) and mobile (+0.4%) businesses. FCF grew 39.5% to SLR19.2 billion buoyed by higher EBITDA and calibrated network rollout. Its PATAMI rose by 12.5% to SLR8.3 billion YTD. However, quarter-on-quarter (QoQ) performance was moderated by intense competition and gradual recovery post Easter Sunday incident.

Smart delivered double digit growth across all metrics with revenue, EBITDA and PATAMI up by 11.4%, 14.5% and 14.3% respectively, and FCF by over 200%.

Despite new Bangladesh taxes, Robi returned to profit with PATAMI at BDT1.6 billion YTD. ROIC strengthened 7 ppt YoY to 6.4%, recording its highest revenue of BDT19 billion in 3Q19 as ARPU rose to BDT125.

With international long-distance revenue dipping 10.5% YTD, Ncell’s core mobile revenue declined 3.5% as a result of intense competition by Internet Service Providers and Business Support System migration. Although PATAMI slipped 3.6%, PATAMI margin remained stable at 31%. FCF declined 42.8% due to calibrated network rollout.

Digital businesses

Boost, the homegrown lifestyle and leading e-wallet in Malaysia has 4.7 million users and 112,000 merchants as of end 3Q19. Its gross transaction value (GTV) YoY increased 13.2x.

ADA, Asia’s largest independent data-powered digital marketing agency delivered its maiden profit in 3Q19.

Apigate, Axiata’s homegrown API platform is now connected to over 140 merchants and has recorded 88% increase in GTV YoY as of 3Q19.

Infrastructure¹¹

In 3Q19, edotco posted double digit growth across all financial metrics. Revenue grew by 19% YTD with positive contributions across its major footprints. The tower company recorded adjusted EBITDA growth of 26.7% YTD, with a 3.2 ppt improvement in (adjusted) EBITDA margin driven by enhanced billing against lower maintenance costs in 2019. The improvement in EBITDA led to a 4.4x increase in FCF YTD as well as growth in PATAMI of 10.4% YTD.

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