Axiata carves out infrastructure arm, may lead to listing of 19,000 tower assets

by **Cals** Thu 10 Oct 2013, 09:00

Published: Thursday October 10, 2013 MYT 12:00:00 AM
Updated: Thursday October 10, 2013 MYT 7:42:00 AM
Axiata carves out infrastructure arm, may lead to listing of 19,000 tower assets

PETALING JAYA: Axiata Group Bhd has carved out an infrastructure arm in a move that could pave the way for the much-speculated listing of its 19,000 tower assets.
The potential real estate investment trust, which would exclude Axiata’s Indonesian operations XL, was understood to be awaiting clearance from the regulators, analysts said.
The long-awaited move, if it materialises, would help unlock shareholder value, monetise its assets and provide cost savings via lower depreciation charges, although the timeline was not yet known, HwangDBS Vickers Research said in a note to clients yesterday.
“In view of difficult data pricing conditions, efficient cost management is a primary focus for Axiata,” it said.
Fibre and passive infrastructure sharing are still attractive solutions to reducing long-term capacity costs, with Celcom and DiGi having built 585km of fibre as at the end of the first quarter of 2013.
“Centralising Axiata’s procurement and treasury functions would also result in greater economies of scale as well as derive better pricing from equipment suppliers due to the collectively larger revenue footprint involved versus individual sourcing,” the local research outfit said.
Axiata’s operating expenditure and capital expenditure make up 12% and 14% of its cost and depreciation, respectively.
The regional telco would also continue to maximise the yield on its data services by targeting small and medium-screen users and introducing innovative pricing and bundling to monetise data investments, Hong Leong Investment Bank (HLIB)Research added.
“The target is to increase its 3G capacity utilisation beyond 50% for Celcom(currently about 40%), XL (about 10%) and Dialog (about 35%) in order to improve data earnings before interest, taxes, depreciation and amortisation margins significantly.
“As all markets’ smart-phone penetrations are still way below mature markets’ average rate of 56%, Axiata sees huge growth potential in data revenue and yield as they are highly correlated.
“For example, in Celcom, any increase in smart-phone penetration would lead to average revenue per user accretion by RM10-RM15,” HLIB Research said.
Still, pricing remains a key issue where data is concerned, especially in Malaysia and Indonesia, which “advocate cheap, competitive data rates over quality of service-based bundles”, according to HwangDBS Vickers Research.
“This is particularly difficult for XL, given Hutch’s resilience in offering overly competitive data tariffs compared to the market. XL is hopeful that its acquisition of Axis would instil more discipline into the market, as it removes unprofitable plans (e.g, unlimited data bundles).
“In Celcom’s case, this is more a challenge in terms of inability to raise prices than price cutting, with price-sensitive consumers and competitive players keeping data prices low without an industry-wide change,” the brokerage explained.
Axiata bought Saudi Telecom’s PT Axis Telekom Indonesia for RM2.8bil last month through XL.