KUALA LUMPUR (Feb 22): Having successfully disposed of its business in Nepal in December last year, Axiata Group Bhd is now working towards its Myanmar exit, citing what it described as worsening macroeconomic parameters and business conditions in the market.

edotco Group Sdn Bhd, a 63%-owned subsidiary of Axiata, is seeking a buyer for its telecommunication tower business in Myanmar, according to a Axiata’s filing following its fourth quarter results release.

An active program to seek buyers of the business has commenced, Axiata said, adding that discussions are ongoing on the sale of edotco Myanmar.

However, the group did not reveal details of the divestment plan, whether the telco is selling its effective stake in edotco’s Myanmar operation, or that edotco is disposing of its operation there.

“Tough, decisive actions were taken to exit the deteriorating operating environments of Nepal and Myanmar in the financial year ended Dec 31, 2023 (FY2023).

These decisions allow management to focus on assets that can create future value for shareholders,” Axiata chairman Tan Sri Shahril Ridza Ridzuan said in a statement accompanying its latest financial results.

Axiata had decided back in 2023 to exit the two markets, amid “uncertain and deteriorating operating environment, and risk of further value erosion,” the company said in the statement.

The progress of its Myanmar exit plan further affirmed the telco operator’s direction to scale back its footprint in the challenging emerging markets, which have yet to yield expected returns after more than a decade.

While some markets have been profitable, the regional expansion added pressure on Axiata’s working capital and cash flow, partly due to high capital investments to improve efficiency. It still has a footprint in a number of other emerging markets, including Indonesia, India, Sri Lanka, Bangladesh, Cambodia, Pakistan, Laos and the Philippines.

In the case of Nepal, Axiata entered the market in 2016 through an US$1.37 billion acquisition of Reynolds Holdings Ltd, who in turn holds 80% in Ncell Pte Ltd. A year prior, Axiata’s edotco bought a 75% stake in Digicel Asian Holdings for US$125 million for its Myanmar telco tower exposure.

Axiata had in December last year exited Nepal via a US$50 million disposal of Reynolds at a loss after seven years, due to the prolonged regulatory challenges and uncertainties related to the outstanding capital gains tax (CGT) to Ncell Axiata.

As of last year, edotco owns and manages a portfolio of 54,000 towers across nine markets: Malaysia, Indonesia, Bangladesh, Pakistan, Sri Lanka, Myanmar, Laos, Cambodia and the Philippines, its 2022 annual report showed.

According to a report by Kenanga Research dated Feb 19, edotco owns around 2,000 towers and manages around 1,000 sites in Myanmar, which it said translates to around 3% to 4% of Axiata group’s assets.

While edotco continues to record strong topline growth from its inorganic ventures in Philippines and Indonesia, profitability “was impacted by assets and goodwill impairments of Myanmar and Pakistan”, said Axiata.

At home, Axiata last year completed an exercise to merge its local mobile operator Celcom Bhd with Digi dotCom Bhd last year, leaving it with a 33.1% stake in the listed merged entity CelcomDigi Bhd.

FY2023 losses at RM2 billion, declares five sen dividend for 4Q

In FY2023, Axiata posted a net loss of RM2 billion versus a net profit of RM9.75 billion in FY2022 – the latter mainly boosted by the RM13 billion net gain on Celcom disposal as part of the merger exercise.

Full-year revenue rose 9.9% to RM22 billion, from RM20.02 billion in FY2022.

Despite the losses, Axiata declared a second interim dividend of five sen per share, bringing total dividends for FY2023 to 10 sen per share, compared with 14 sen in FY2022 which included a special dividend of 9.5 sen.

Nonetheless, Axiata has narrowed its quarterly net loss quarter-on-quarter (q-o-q) to RM695.02 million in 4QFY2023, against RM797.41 million in 3QFY2023. Revenue rose slightly by 1.72% to RM5.79 billion, as compared to RM5.70 billion in 3QFY2023.

The group attributed its improved q-o-q earnings to higher revenue from its continuing operations, save for its mobile operations in Sri Lanka and Bangladesh.

Profit after tax and minority interest for its continuing operations also doubled to RM48.5 million year-on-year (y-o-y) versus a loss of RM142.16 million last year, mainly driven by higher toplines and share of profits from associates namely CelcomDigi Bhd, partially offset by impairment of goodwill of infrastructure segment.

The group is expecting to maintain its “single-digit” revenue growth in the financial year ending Dec 31, 2024 (FY2024), said its chief executive officer and managing director Vivek Sood at a virtual press conference post-4Q results announcement.

However, Sood pointed out that Axiata has managed to exceed its growth target for earnings before interest and taxes (Ebit). The telco achieved a mid-teen Ebit growth in 2023.

“The improved performance on all our continuing businesses except Link Net. So I think we should be able to improve the performance going into 2024,” Sood explained.

Shares of Axiata settled three sen or 1.08% lower on Thursday, valuing the group at RM25.33 billion. The counter has fallen 12% in the past year.