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UPDATE: Malaysia's Axiata Swings To Profit; Warns Of Weak 2018

By Alexander Winifred
Nikkei Markets
Adds comments from CEO and CFO
KUALA LUMPUR (Feb 22) -- Malaysia's Axiata Group swung to a profit in the fourth quarter and raised its dividend for this year, but warned that revenue and operating earnings may not grow in 2018 if the Malaysian ringgit continues to strengthen.

Axiata, the nation's largest mobile phone company, Thursday reported net a profit of 24.73 million ringgit ($6.43 million) for the three months ended December, compared with a net loss of 309.50 million ringgit a year ago.

The Kuala Lumpur-based company attributed the strong performance in the fourth quarter to foreign exchange gains and robust growth in key markets.

The latest quarter had foreign exchange gains worth 140.41 million ringgit, compared with a loss of 556.69 million ringgit a year ago. Quarterly revenue rose 8.1 % to 6.26 billion ringgit, aided by strong growth in data services in Indonesia and Malaysia.

Axiata expects to increase the dividend payout to 85% this year from 64% in 2017. It also predicts revenue to grow 6.3% this year, with a 5.8% increase in operating earnings.

But if the ringgit strengthens against the dollar, "it becomes flat," Chief Executive Jamaludin Ibrahim told reporters in a press conference.

Over the past few years Axiata, which serves about 320 million subscribers across 10 countries, has been grappling with challenging operating environment across most markets in Asia amid stifling price competition.

"We hope the competitive pressure eases," said Vivek Sood, group financial chief. In case it continues it would challenge our growth targets in Indonesia and India."

Axiata last week said its shareholding in India's Idea Cellular has declined to 18% from 19.7% after the Indian company's issue of preferential shares in which the Mayalsian telecom firm didn't participate. As a result, Axiata will incur a loss on dilution of 151.5 million ringgit this year.

Idea's declining financial performance over the past few years has been a major concern for Axiata. The south Asian nation's telecom market has been roiled by a price war triggered by the entry of Indian billionaire Mukesh Ambani-backed Reliance Jio Infocomm in September 2016.

Jio's strategy of slashing prices to lure subscribers has forced incumbents such as Idea Cellular to respond with matching offers, eroding their revenue and profits.

Jio's onslaught also hastened the pace of consolidation in the industry. Idea is in the process of merging its operations with larger rival Vodafone India in a $23 billion deal that is likely to be closed later this year.

On Thursday, Axiata CEO Ibrahim said the company's holding in Idea may drop below 10% after the merger, when it proposes to exit the investment. "Effectively it's no longer a strategic asset, so it's a matter of timing" before an exit, Ibrahim said. He valued the investment in Idea between 960 million ringgit and 1 billion ringgit based on current market price.

The company also plans to exit other investments that are not strategic to its operations including in Singapore's M1. Axiata may sell its stake in M1 which is worth S$580 million, Ibrahim said, adding that it has not set a deadline for the sale.

Axiata had last year called off a review of the stake in M1, saying the parties interested in buying did not meet certain criteria.

The company is also grappling with uncertainties over subscriber identity module, or SIM registration in Indonesia, its largest market.
- By Alexander Winifred; Alexander.Winifred@nikkeinewsrise.com; +60320267363
- Edited by Dhanya Thoppil
- Send Feedback to feedback@NikkeiNewsRise.com
- Copyright (c) 2018 Nikkei NewsRise Asia Pte Ltd.

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