KUALA LUMPUR -- Axiata Group's drive to become a "regional champion by 2015" is bearing fruit, at least in terms of market presence.
The company, Malaysia's largest mobile network operator by revenue, recently announced plans to pay $125 million for a controlling stake in a Myanmar telecom tower company. Leading the charge abroad is Jamaludin Ibrahim, Axiata's president and group CEO.
Expanding outside Malaysia has been the focus since 2008, when Axiata was carved out of telecommunications company Telekom Malaysia Group to concentrate on international operations. TM Group, formerly state-owned, focused only on the domestic market.
Jamaludin was appointed the first chief executive by state investment fund Khazanah Nasional, Axiata's leading shareholder. He started his career as lecturer on quantitative research at California State University in 1980 but soon joined IBM as a system engineer. He spent 12 years at the technology company, assuming various positions, from sales to management.
Jamaludin's success in making Axiata a regional player has earned him a reputation as an agent of change. His name popped up in the media rumor mill last year, when loss-making Malaysia Airlines was looking for a new CEO. But he remains at Axiata, spearheading the company's outward march.
Jamaludin took control at a time when the government was encouraging companies -- especially state-linked ones like Axiata -- to avoid resting on their domestic laurels and become global players. He immediately laid out long-term financial and nonfinancial objectives for regional expansion.
"I am a man in a hurry," Jamaludin was quoted as saying by The Edge Financial Weekly back in 2010. Going regional meant Axiata was no longer competing against domestic rivals such as Maxis, a company he headed for eight years. Instead, it had to contend with the likes of Singapore Telecommunications, Norway's Telenor and the U.K.'s Vodafone.
Jamaludin took a two-pronged approach: expanding through acquisitions and new product offerings, and cultivating human resources. The former IBM executive raised standards for his staff because, as he put it, "the game plan has changed."
Under Jamaludin, Axiata has grown by leaps and bounds. Its market capitalization has almost quadrupled. Its subscriber base has grown sixfold to more than 260 million people. It has controlling stakes in mobile operators in Bangladesh, Cambodia, Indonesia, Malaysia and Sri Lanka. It is also a major shareholder in Indian and Singaporean wireless providers. In Pakistan, the group controls Multinet, a fast-growing nonmobile data and voice communications company.
Over the past five years, Axiata's earnings have been growing consistently, too. For 2014, it posted a net profit of 2.3 billion ringgit ($545 million at current rates) on revenue of 18.7 billion ringgit.
Room to grow
The growth has been fueled, in part, by acquisitions. Two years ago, the group bought out Saudi Telecom's 84% stake in midsize Indonesian wireless carrier Axis Telekom for $865 million. It recently announced that edotco Group, its wholly owned tower and infrastructure subsidiary, is buying 75% of Digicel Myanmar Tower, hitherto owned by Ireland's Digicel. The remaining 25% slice is owned by companies controlled by prominent local businessman Serge Pun.
Myanmar's low mobile penetration and population of over 50 million mean there is "significant potential" for edotco, the company said. The group said it may bid for a mobile license when the opportunity arises.
There are currently 8,000 cellular towers in Myanmar, which remains underdeveloped after decades of military rule. There are only around 18 million wireless subscribers in the country -- a mobile penetration rate of about 35%. Analysts say the nation needs 17,000 towers by 2017 to achieve 70% coverage.
Axiata's investment in the Myanmar tower business could lead to a spinoff in the medium term. Axiata said in the past that it may consider listing edotco, which owns more than 14,000 towers across Bangladesh, Cambodia, Malaysia, Sri Lanka and Pakistan. The acquisition of Digicel Myanmar will give it another 1,250 towers.
Even so, the Myanmar investment comes with the "usual operational challenges" faced by foreign investors: poor infrastructure, especially in rural areas, and a lack of skilled workers, according to Foong Choong Chen, an analyst at CIMB Research.
Apart from the tower business, Axiata has also diversified beyond voice and data into digital services, aiming to become a "new generation" telecom company. It teamed up with South Korea's SK Telecom to launch e-commerce businesses in Indonesia and Malaysia. Elevenia, the duo's online shopping portal in Indonesia, in January had more than 18,000 sellers offering 2 million product listings.
Jamaludin said the business has been a "huge success" since its launch last March, attracting more than 20 million visitors a month.
$150 million in savings
Jamaludin's strategy also includes centralized procurement and information technology systems, aimed at boosting efficiency and keeping costs in check. The group works with key network suppliers from around the globe, including Ericsson, Huawei, NEC and SIAE, and negotiates for group pricing. This is expected to save $150 million in the three years from 2014.
Its Indonesian unit, XL Axiata, recently signed a three-year contract with Ericsson to roll out a high-speed Long-Term Evolution, or LTE, mobile network and upgrade existing second- and third-generation networks in Jakarta and Central Java. The mobile operator reportedly aims to increase its tally of LTE subscribers to at least 8 million by the end of 2016, from the current 1.2 million.
Jamaludin has bolstered his team with executives brought in from abroad and nurtured through talent-building programs inspired by his time at IBM, according to The Edge's profile. He has promoted a 70:20:10 formula -- whereby 70% of Axiata employees should be locals, 20% foreigners hailing from group operations and 10% from anywhere in the world. "We are able to learn quickly from what others are doing and we don't have to reinvent the wheel," he said.
The chief financial officer is Chari TVT, an Indian who spent 20 years at Hewlett-Packard. He regularly flanks Jamaludin during news conferences and has a knack for memorizing financial figures.
Rene Werner, Axiata's group chief strategy officer, is German and previously worked for Deutsche Telecom.
Jamaludin believes recruiting global talent is important for injecting fresh ideas and expertise into the company. Based on his experience at IBM, he also prefers a more horizontal, rather than vertical, approach to managing human resources, so that employees can accumulate a variety of skills. This has caused some consternation among Asian employees used to being promoted vertically.
Jamaludin has developed a reputation as a frank leader who admits his mistakes. When a major IT system upgrade went sour last year, resulting in operational hiccups and revenue losses, he conceded that appointing two vendors to do the job was a poor decision.
"We split it into two companies," he told reporters in February. "Perhaps we ... should have dealt with only one company. That way, they could have coordinated among themselves better, rather than us coordinating with all the vendors."
When it comes to numbers, the push for regional dominance is still a work in progress. Axiata remains far behind regional rival SingTel. With over 550 million subscribers across Asia, Australia and Africa, and market capitalization of $41 billion, SingTel is Southeast Asia's largest mobile operator. By suscriber base, Axiata ranks second.
The latest figures demonstrate Axiata's resilience amid global economic uncertainty and currency turmoil. The company's net profit grew 6% on the year, to 1.2 billion ringgit, in the first half of 2015, on revenue of 9.4 billion ringgit.
Axiata benefited from a weaker ringgit, in terms of revenue and operational expenditures, as it conducted over 60% of its business outside Malaysia. It is nevertheless converting its dollar-denominated loans into local currencies and renegotiating contracts to reduce exposure to foreign exchange risks.
Jamaludin Ibrahim, 56, holds an MBA from Portland State University in the U.S. He was appointed Axiata's president and group CEO in March 2008; he has won several awards for his contributions to the mobile communications business.