Axiata Celcom will continue to focus on the small and middle screen consumer markets for its 4G LTE plan. The company believes that its service has a slight edge on coverage and capacity when compared to its peers. Meanwhile, it is not too confident of wining one of the two licenses up for grabs in Myanmar but nonetheless, it has planned and is ready to spend nearly USD1.0b in total over the next three years should it manage to clinch the license. On another note, Axiata believes that the recent USD718m tax demand from India’s Income Tax Department to Idea Cellular and its subsidiary is unjustified and it has made the appropriate appeal to the relevant authorities. There is no change to our Axiata’s FY13-FY14 earnings forecasts ahead of its upcoming result release. We are maintaining our Axiata target price at RM6.95 based on an unchanged targeted FY14 EV/forward EBITDA of 8.4x (+1.5 SD).
Celcom’s 4G LTE strategies are to focus on the small and middle screen consumer markets and it believes that it has a slight edge on coverage and capacity vis-à-vis its peers. The group has introduced its 4G LTE service last week under the package name called Celcom First Data Pro, which bundles 10GB of data volume with 50Mbps in speed with a price of RM138/month. Spectrum-wise, Celcom will continue to deploy its 4G LTE services under both the 1.8GHz and 2.6GHz 4G spectrums simultaneously in view of their respective unique features in terms of speed as well as coverage areas. At present, Celcom’s 4G LTE can be found at selected hotspots nationwide within the Klang Valley and in Penang, Johor Baru, Kota Kinabalu, etc. It expects the service to cover two to three million of the population by the year-end.
Investment in Myanmar remains a wild card. The group is one of the 12 bidders shortlisted by the Myanmar government on the country’s upcoming two new nationwide licenses. While the final winners are expected to be announced by 27 June, management is not too confident of winning its license bid given the highly competitive final bidder list. Nevertheless, should the group be successful, it plans to spend USD300m-USD400m in annual capex over the next 3 years here. We understand that the initial licence term will range between 10-20 years with the possibility of a future renewal. The successful bidder will need to increase the overall tele-density of the country, which has a population of about 64m, to 75%-80% by 2015-2016 from the current 9%-10%.
Unjustified tax demand from India’s ITD. Axiata’s 19.9%-owned associate company, Idea Cellular, and its subsidiary have received a tax demand from India’s Income Tax Department (“ITD”) in early April. The country’s authority has slapped Rs 3900 crore (approximately USD718m) on Idea and its subsidiary – Aditya Birla telecom, over the transfer of assets and licences between the two companies in 2009. Axiata believes the demand is unjustified and based on erroneous interpretations of the current tax practices. Both managements have appealed to the country’s Commissioner of Income Tax to challenge the demand orders. Axiata does not envisage any impact to its financials at this juncture.
Source: Kenanga
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