• Following violent student protests over a new jobs quota system, Bangladesh’s government blocked mobile internet.

• Fixed broadband has been partially restored in select areas, but details on the full restoration of mobile internet are still pending.

• In a worst-case scenario, we think that a prolonged block on mobile internet access could reduce Axiata's earnings by a low single-digit percentage. However, we think this is unlikely as Bangladesh's government has indicated that mobile internet services might be restored by Sunday or Monday.

• Maintain a HOLD call with an unchanged TP of RM2.50. Our TP is based on sum-of-part valuation with each of the operating company valued using EV/EBITDA metric.

Bangladesh Internet Down Amid Escalating Protests

Bangladesh’s internet went dark after student protests against a new jobs quota system turned violent, leading the government to block mobile internet access, shut down news broadcasts, and restrict social media. Recently, fixed broadband was partially restored in select areas on a trial basis, prioritizing the banking, commercial, technology, exports, outsourcing, and media sectors. However, the government announced that mobile internet access will remain offline until at least Sunday or Monday, leaving most people unconnected. The Bangladesh Telecommunication Regulatory Commission indicated that full restoration across the country will follow soon but did not clarify whether access to social media will be included.

Our View

Robi contributed approximately 21% to Axiata's FY23 revenue, with mobile services accounting for around 90% of Robi's revenue. In a worstcase scenario, we opine that the government's prolonged block on mobile internet access could negatively impact Axiata's earnings, potentially leading to a reduction in earnings by a low single digit percentage. However, Bangladesh's government has indicated that mobile internet services might be restored by Sunday or Monday, with ongoing efforts to address technical issues and ensure a stable reactivation. We believe that full mobile internet access will likely receive final approvals from authorities soon, making a prolonged block on mobile internet access less likely.

Maintain a HOLD Call with TP of RM2.50.

We make no changes to our earnings forecast at this juncture, awaiting further updates from the group and information on Bangladesh's progress towards normalcy. We maintain a HOLD recommendation with an unchanged target price of RM2.50. Our TP is derived from a sum-of-parts valuation, valuing each operating company using the EV/EBITDA metric. While Axiata's prospects might be bolstered by the current demand for data, particularly from XL, we maintain our HOLD rating on Axiata due to uncertainties in regional economic growth, increased competition, and regulatory pressures from several regional operations.

Source: BIMB Securities Research - 26 Jul 2024