KUALA LUMPUR: Axiata Group Bhd has revised downward its headline key performance indicators (KPIs) for 2015, as the mobile telecommunication network provider expects the telecommunications industry to register slower growth in the low- to mid-single-digit percentages this year.

The group is expecting a revenue growth of 4% for 2015 compared with 10.1% predicted last year; a return on invested capital growth of 8.7% compared with an earlier forecast of 9.3%; and a return on capital employed growth of 7.7%, down from an earlier estimate of 7.8%.

However, earnings before interest, taxes, depreciation and amortisation for 2015 is forecast to grow faster at 4%, from an earlier estimate of 1.8%. 

“The local industry is maturing faster than we thought, and the data revenue is not compensating enough for the reduction in voice and SMS. Last year, across the three telcos’ (Celcom Axiata Bhd, Maxis Bhd and DiGi.Com Bhd) performance, there was actually a negative 2.5% growth in service revenue,” Axiata group president and chief executive officer Datuk Seri Jamaludin Ibrahim told a news conference to announce the group’s full-year 2014 financial results yesterday.

“Last year to some extent, we benefited from [acquiring] PT Axis Telekom Indonesia, plus the growth of all the countries [which Axiata has operations in] have slowed down a bit. So if you aggregate that, it would be harder for us to grow better than last year,” he said.

Jamaludin said that this year, voice is expected to experience single-digit negative growth and SMS to see a double-digit negative growth. However, data is expected to post a positive increase of between 30% and 50% year-on-year.

On capital expenditure (capex), Axiata has allocated RM4.8 billion for the current financial year ending Dec 31, 2015 (FY15) — one of the highest amounts the group has set aside. For FY14, Axiata’s capex was RM4.1 billion.

Jamaludin said Axiata (fundamental: 0.85; valuation: 0.9) is being aggressive with its capex this year by allocating the full amount to data or data-related investments.

“This will predominantly be for the setting up of more base stations, fibre optics, and upgrading our core network in most countries,” he said.

Meanwhile, Axiata reported a 3% rise in fourth quarter FY14 (4QFY14) net profit to RM594.93 million from RM575.63 million a year ago, as it posted higher revenue from most of its global operating units.

Significantly higher foreign exchange (forex) gains and lower finance cost also supported its profit growth. Revenue for 4QFY14 came in 6.7% higher at RM4.81 billion versus RM4.51 billion in 4QFY13.

During 4QFY14, Axiata registered forex gains of RM99.56 million compared with RM8.13 million in 4QFY13, while finance cost fell to RM256.95 million from RM310.23 million.

Axiata also declared an interim dividend of 14 sen a share, bringing full-year dividends to 22 sen.

For the 12 months period ended Dec 31, 2014, Axiata’s net profit declined 7.9% to RM2.35 billion from RM2.55 billion a year earlier, but revenue was 1.9% higher at RM18.71 billion versus RM18.37 billion.

“In FY15, the group will continue to face challenges and remain cautious in executing its business strategies. The key risks facing operating companies include political risks, intense competition, and foreign currency fluctuations and regulatory challenges,” said Axiata in a filing with Bursa Malaysia yesterday.

On whether the group plans to increase its dividend payout ratio, Jamaludin said the current payout of 84% seems to be the right balance between capex reinvestment and meeting the needs of the government as a government-linked company.

“It is, however, our policy to progressively increase the dividend payout, not necessarily the dividend,” he said.

Meanwhile, on the Malaysian Communications and Multimedia Commission asking service providers to lower service charges, Jamaludin said he was supportive of the measure as it would help the industry in the long run.

Axiata shares ended five sen or 0.7% higher at RM7.17 yesterday, bringing a market capitalisation of RM61.56 billion.

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This article first appeared in The Edge Financial Daily, on February 26, 2015.