Tan Sri Dato' Azman Hj. Mokhtar
Tan Sri Dato' Azman Hj. Mokhtar
According to the World Bank1, global growth for 2016 was an estimated 2.3%, its lowest since the 2008 global financial crisis. The regional economies of our footprint in Southeast Asia and South Asia regions mirrored the global economic struggle. Within the East Asia and Pacific region, growth reduced by an average of 2.0% to 6.3%. Heightened global unpredictability coupled with concerns of capital flight further prompted currency depreciation and higher interest rates. As a result, regional currencies, especially the Ringgit Malaysia, remained under pressure against the US Dollar.
Within our industry, the regional telecoms sector is facing less predictable regulatory and policy shifts, rapidly changing market dynamics, and cross-integration of industries and Over-The-Top (OTT) services. The disruptions brought on by the latter, coupled with hypercompetition in many markets, have resulted in the telecoms industry losing market capitalisation and value over the last few years.
Despite these compounding external and internal challenges, Axiata maintains its standing as one of the largest Asian telecommunications groups, with presence in ten countries in ASEAN and South Asia, servicing approximately 320 million customers. The Group is ranked number two in customer base, number four in revenue and number seven in market capitalisation against other regional telecoms operators.
We are now in the third phase of our journey, one that will transition the Group into a truly digital company by 2020. In building strong foundations for our New Generation Digital Champion ambition, we remain keenly focused on redefining and digitising our operating model at both Group and Operating Company (OpCo) levels to capture value from new opportunities on the horizon. Tan Sri Jamaludin Ibrahim outlines these clear strategies in his message to you on here.
Over the course of 2016, a number of key developments helped shape our Axiata 3.0 journey. We completed the acquisition of Ncell and welcomed the company into the Group, marking our entry into the fast-growing market of Nepal. As the market leader, Ncell has proven to be earnings accretive to Axiata.
Axiata led the first market consolidation of the highly competitive telecommunications sector in Bangladesh with Bharti Airtel Limited. Serving approximately 33.8 million subscribers, Robi has cemented its position as a stronger number two player post-merger.
edotco, our integrated telecommunications infrastructure services company, set a new record in the global tower industry with the sector’s largest private placement deal of USD600 million announced in 2016. At the close of the placement exercise, edotco’s final portfolio equity value was USD1.5 billion with an Enterprise Value (EV) to 2016 Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) multiple of 12.5x2.
In advancing our New Generation Digital Champion ambitions, our digital services arm, Axiata Digital, has astutely invested over USD160 million to build a portfolio of 29 digital assets with three subsidiaries and seven joint ventures. Key milestones in 2016 for Axiata Digital include the successful monetisation of two of these companies through private placements and the expansion of its footprint into the burgeoning Indian digital market.
Since 2010, the Group has maintained a progressively increasing Dividend Payout Ratio (DPR). As outlined in our dividend policy, this is subject to a number of factors including business prospects, capital requirements and surplus, growth/expansion strategy, considerations for non-recurring items and other factors considered relevant by the Board.
Having taken the uncertain investment and business climate into account, we have adopted a temporarily more prudent dividend payout to ensure the Group is sufficiently resilient while continuing to invest for the future.
Our decision on a 50% DPR for 2016 was two-fold; as a precautionary measure against unpredictable forex and market volatility as well as further spectrum costs expected within the next two years; and investments for strategic long-term benefits such as 4G networks for data leadership as well as for possible mergers and acquisitions (M&A) exercises in the areas of market consolidation.
We remain committed to delivering the value proposition of moderate growth and moderate yield to our shareholders over the longer term. Strong internally generated funds and a healthy balance sheet will support our commitment to reward shareholders.
Axiata remains dedicated to our nation building efforts, through our sustained long-term investments and contributions to communities in countries where we operate.
As a regional operator, we are a diverse Group with over 40 nationalities within our workforce. We are committed to advancing gender equality with women comprising 30% of our total workforce, of whom 16% are in senior management positions.
On the global stage, Axiata is committed to global mobile development through our role in the GSMA Foundation. We help steer mobile development towards key areas that are relevant to our stakeholders such as the Connected Women Initiative (CWI) launched in 2016. I am proud to report that our OpCos, Dialog and Robi, are among the first GSMA members to have made CWI commitments in Sri Lanka and Bangladesh respectively. We also recognise the importance of sourcing from local suppliers and each of our OpCos have invested in local vendor development programmes to stimulate economic growth. In 2016, 41% of our procurement spend was on local vendors.
As part of our commitment to mitigate climate change through greener operations, edotco leads the way in regional green operations. As a Group, we have set ambitious targets of reducing our carbon footprint in 2018 by 40% from 2013. In 2016, we saw reductions in our carbon emission of 29% and 25% in Malaysia and Bangladesh respectively.
Axiata’s full Sustainability and National Contribution Report 2016 has been made available to you together with this Annual Report. The report highlights our Group-wide sustainability goals, efforts and progress.
We continue to adhere to the highest standards of corporate governance, in the firm belief that it is the basis of a well-managed company which provides the best long-term returns for our investors and shareholders. Our efforts have earned us a number of international accolades and awards. Over the last four years, Axiata has been recognised for upholding the highest governance and compliance standards at the Malaysian-ASEAN Corporate Governance Index, Findings and Recognition event organised by the Minority Shareholder Watchdog Group (MSWG).
In 2016, Axiata’s product innovations and leadership capabilities received its fair share of international accolades. Across the Group, we received three awards at the GSMA alone, a significant acknowledgement of Axiata’s contributions to the global telecommunications industry. Our Regional CEO for South Asia, Dr Hans Wijayasuriya, was honoured with the Outstanding Contribution to the Asian Mobile Industry Award at the GSMA 2016 Mobile Asia Awards. Frost & Sullivan also recognised our regional OpCos with awards for Ncell, Smart and edotco.
For complete details of our awards, please refer to here of this Annual Report.
2016 saw some changes in our Board of Directors as we continued to strengthen our Board composition. Thus, we bid farewell to Juan Villalonga Navarro and Dato’ Abdul Rahman Ahmad from the Board. We thank them for their years of dedicated service and for sharing their invaluable insights and wisdom, helping us navigate Axiata towards the leading regional telecommunications group it is today. In their place, we welcomed two new Directors, Dato’ Mohd Izzaddin Idris and Dato Dr Nik Ramlah to the Board. We look forward to many years of strong partnership and contribution from our new Directors in helping Axiata in its forward moving trajectory.
On behalf of the Board, I would like to thank our various stakeholders for their continuous and steadfast support throughout the years. To the governments and regulators of the countries in which we operate, we thank you for giving us the opportunity and honour to provide digital and telecommunication services to approximately 320 million people.
The successes of Axiata would not be possible without the hard work and unstinting efforts of our employees and the Board extends our appreciation to each and every Axiata employee across the region. We remain grateful to our shareholders for their belief in our future growth strategy, anchored on prudent financial management and a strong business foundation.
It gives me great pleasure to present to you Axiata’s 2016 Annual Report.
1 Source : “Global Economic Prospects : Weak Investment in Uncertain Times” published by the World Bank Group in January 2017
2 Based on 2016 unaudited proforma full year financials