KUALA LUMPUR (July 29): Axiata Group Bhd is hoping that the resulting changes in consumer behaviour following the outbreak of the Covid-19 pandemic could be played to its advantage in the medium term.
In the meantime, it is positioning itself to address the opportunities that arise by providing connectivity for enterprises and in the newly-entered fixed wireless market, as well as the infrastructure segment under edotco.
For now, it is having to contend with the short-term impact of the outbreak, which has caused difficulty of physical prepaid reloads in certain markets and lower usage, as some users use fixed lines during the coronavirus-driven lockdown. This is on top of the industry offering temporary free services during that period.
“We gave a lot of freebies in the short term,” said group chief executive officer Tan Sri Jamaludin Ibrahim. “We calculated an opportunity cost of RM300 million for one month.”
“But if you think about it, the consumption of data has increased in almost all the countries [we are in] by 20%-40%.
“In the short-term, we could not charge them, but in the long-term, connectivity [is essential]. Furthermore, many SMEs are digitalising much faster than they would have otherwise as a form of survival.
“If we take advantage of these opportunities, and we do it right, when the economy grows, we will be growing faster than anybody else — both the industry and ourselves,” Jamaludin told reporters after the group’s annual general meeting here.
Overall, Axiata is eyeing growth over the next two years for its group enterprise business, tower infrastructure business under edotco, as well as the home fixed wireless business, although the latter — into which it ventured in Sri Lanka not too long ago — is still relatively small.
Stiff competition, market headwinds persist
Challenges, meanwhile, remain in terms of competition. The reduction of its subscriber base under Malaysia’s Celcom Axiata by 10.8% on-year to 7.98 million users reflects that challenge, which deputy CEO Datuk Izzaddin Idris said was a lesson learned.
“There was a lack of timely response… We have addressed that, looking at all processes to make sure we can respond faster to customer needs. Hopefully, we can report a better situation in Q2,” said Izaaddin.
“You must also add all our MNVOs (mobile virtual network operator) subscribers, which, together with Celcom, total up to 12.5 million subscribers — that's more than anyone else [in Malaysia],” added Jamaludin.
On the expansion of edotco’s footprint, Izzaidin said the business may be impacted by the pandemic, as “a handful of mobile operators” have decided to defer their network roll-out until up to 1Q21. Inorganically, the tower company has undertaken asset acquisitions in Indonesia in February, and has bid to acquire a Myanmar competitor last month.
The group is otherwise upbeat on its digital ventures under digital financial services with its e-wallet Boost and micro-lending service Aspirasi, as well as its digital advertising and analytics segment, ADA.
Touching on Great Eastern’s acquisition of a 21.875% in Boost Holdings Sdn Bhd for US$70 million last month, Izzaidin said the group is encouraged by the development and hopes it will serve as the platform for it to bid for a digital banking license.
“The idea around Boost is to develop a digital financial ecosystem, and the digital bank will provide an anchor for us to provide products like micro-insurance. The good thing is GE has also agreed for us to co-curate new insurance products that serve the [underserved] market,” he added.
Axiata invests anywhere between US$50 million to US$100 million in the digital business, which is currently loss-making.
2020 Capex guidance cut by 15%
In the meantime, Axiata is expecting to cut its RM6.6 billion planned Capex for 2020 by around 15% or around RM990 million to RM5.61 billion.
“We may be even relocating some of the budget for opportunities that may have just surfaced from the Covid-19 pandemic,” said Izzaidin.
The group announced previously that it is still scouting for smaller competitors in either Malaysia, Indonesia or Bangladesh. “It doesn’t necessarily have to be us. As long as somebody consolidates, the whole industry will benefit from the consolidation,” Jamaludin explained.
Meanwhile, Axiata aims to cut another RM1 billion in costs this year as part of its long-term strategy, with the bulk of reduction to be seen in its network and IT infrastructure, as well as digitalisation efforts.
“There is a new concept where home is the centre of gravity,” said Izzaidin. “We are [also] looking at reconfiguring our sales and distribution channels. For example, we have 60 BlueCube stores [for Celcom] and there is a clear need for that to be revamped because people no longer go out and a lot of things can be done online.”
At the time of writing, shares of Axiata rose 1 sen or 0.31% to RM3.23, valuing the group at RM29.71 billion. Year-to-date, the counter has declined 21.98%.