Published July 1, 2009

Axiata expects growth to pick up next year

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(KUALA LUMPUR) Axiata Group Bhd, South-east Asia's second-largest mobile-phone provider, said earnings growth may accelerate next year as regional economies emerge from the global slowdown and the Malaysian company cuts network spending.

Earnings before interest, tax, depreciation and amortisation may increase 6 per cent to 9 per cent in 2010, said chief executive Jamaludin Ibrahim. That compares with Axiata's estimate for growth of 4 per cent to 6 per cent this year.

'We should do better next year,' Mr Jamaludin said at the company's new headquarters in Kuala Lumpur on Monday. 'It's three things - the economy, the industry itself and consumer spending, and more importantly, internal improvements.'

Faster growth may allow Axiata, with 100 million customers across Asia, to start paying shareholder dividends in 2011, Mr Jamaludin said, and hasten expansion in India, where the company competes with Vodafone Group plc.

Economic growth in Indonesia - Axiata's biggest overseas revenue contributor - may quicken in 2010 to between 5 and 6 per cent, the government says.

'Indonesia looks quite positive,' said Khair Mirza, an analyst at Maybank Investment Bank in Kuala Lumpur with a 'sell' rating on Axiata. 'When you invest overseas, ideally you have to be among the biggest players in the market.' He expects Axiata to register 13 per cent Ebitda growth next year.

The company's shares have lost 54 per cent since it was spun off in April 2008 from Telekom Malaysia, the state-controlled fixed-line operator, to focus on mobile telephony in overseas markets including Sri Lanka and Bangladesh.

Revenue at Axiata in 2010 may grow more than 10 per cent, compared with this year's forecast of 6 per cent to 11 per cent expansion, Mr Jamaludin said.

The company expects to spend between RM3 billion (S$1.2 billion) and RM4 billion on capital expenditure next year, mostly for expansion in Indonesia and Malaysia, compared with RM4.3 billion in 2009, he said.

An economic recovery in Axiata's biggest overseas markets will help stabilise local currencies, Mr Jamaludin said.

The carrier's first-quarter profit slumped, mainly on foreign-exchange losses, after the US dollar strengthened against Asian currencies, making dollar-denominated debt repayments more expensive.

To reduce exposure to foreign-exchange fluctuations, Axiata may also convert some foreign loans to local currencies, he said. The company, with RM21 billion of borrowings at the end of March, may convert some debt to fixed-rate loans, he said.

In India, where Axiata is combining its Spice Communications Ltd unit with Idea Cellular Ltd, the Malaysian company wants a larger stake after the merger, or a bigger management role, Mr Jamaludin said. Alternatively, Idea might take part in a round of mergers in India within three to five years, he said.

'The end game is that we want to be a major player in the country,' he said. 'We could be part of a big consolidation process. India requires consolidation.' - Bloomberg