KUALA LUMPUR (Aug 29): Axiata Group Bhd is slightly slowing down its capital expenditure (capex) for the remainder of this year, as its management wants to be more careful about investing in the group’s presence at frontier markets, particularly those with less favourable macroeconomic situations.

Group chief executive officer and managing director Vivek Sood said the revised capex guidance was also due to the group deciding that it is “not going aggressive” on its telecommunications tower business, as management continues its efforts to reduce Axiata’s debts.

“For example, in Sri Lanka, [at] Dialog [Axiata Plc], we have been careful in terms of the current macro environment to really take a big bet on capex, and I think the good news is all operators are taking a similar kind of view in the market,” he said in a virtual briefing on Tuesday, after the group released its quarterly financial results.

Axiata revised its capex guidance lower to RM6.5 billion-RM6.8 billion for the financial year ending Dec 31, 2023 (FY2023), from the RM7.1 billion guided earlier this year.

“We are also being cautious in the tower side, Edotco [Group Sdn Bhd], on not going aggressive with acquisition of towers, so I think that the game has been relatively slow, so I think those are areas where we will be careful,” said Vivek.

“Our focus has really been around monetisation of the assets [that] we have. But there will be opportunities; for example, I talked about Link Net (PT Link Net Tbk), which is building these fibre [infrastructures] for XL (PT XL Axiata Tbk).

“Those are markets and businesses where we will continue to invest in capex. Then, we are also looking at some of the investors in the future, not immediately, on one of our fibre businesses in Indonesia,” he added.

Vivek said management is also focusing on bringing down Axiata’s net debt-to-Ebitda (earnings before interest, taxes, depreciation), which stood at 3.06 times as at the first half of FY2023 (1HFY2023).

Axiata’s short-term borrowings stood at RM3.77 billion as at 1HFY2023, down from RM7.09 billion as at end-2022, while long-term borrowings rose to RM22.27 billion from RM18.35 billion.

US dollar-denominated loans, meanwhile, were worth RM15.14 billion as at 1HFY2023, up from RM14.32 billion as at end-2022, partly due to the strengthening of the greenback against the ringgit.

“[Bringing down debt] is what we have to do. We have half a billion [ringgit to be paid] in this quarter (3QFY2023). Clearly, there are efforts to bring down the debt, but the good news is that the inherent operational growth which you have seen on Ebitda will continue.

“We are fairly confident on the operational performance of our operating companies; that growth in Ebitda should drive organic improvement in the gearing levels,” he said.

Earlier on Tuesday, Axiata reported to the local stock exchange that it slipped back into the red for 2QFY2023, after reporting profit for 1QFY2023 and 4QFY2022, due to higher finance costs, assets impairment and depreciation from its Nepal operations, arising from the unfavourable legal outcome against Axiata regarding an outstanding capital gains tax when it acquires Ncell Axiata Ltd in 2016.

The group reported a net loss of RM576.21 million, a significant jump from RM106.38 million net loss a year ago, despite revenue growing 15% year-on-year to RM5.99 billion, from RM5.2 billion.

Despite the significant impairment, Vivek said the situation in Nepal remains uncertain, and he could not commit that the impairment recorded in 2QFY2023 would be the final one involving Ncell.

“[On] Ncell, I would be cautious in saying that there will not be further impairment. At this point in time, based on the cash flow projections, we think after taking this impairment, we are sufficiently protected.

“Having said that, I think there are developments which happened in that environment, which have never been very clear to us, and the risks associated with other tax matters which are currently at the Supreme Court. For me to say that there may not be any further impairment, would not be the right statement but we are monitoring this every quarter,” he said.

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