Good afternoon, ladies and gentlemen. My name is Clare Chin, Head of Investor Relations at Axiata Group. Thank you for standing by, and welcome to Axiata's third quarter 2023 results brief, briefing. Firstly, to apologize for a small technical issue here. I think the video camera is not yet on, but we are fixing it, so we hope to come back online via video as soon as possible. Nonetheless, today we have present with us, Vivek Sood, Group CEO, Dr. Hans Wijayasuriya, CEO of Telecom, Lila Azmin, Acting CFO and Chief Development Officer, as well as representatives from our operating companies. There will be a short presentation, followed by a Q&A session. Without further ado, I'd like to hand the conference over to Vivek.
Thank you, Clare. Very good afternoon, good morning, depending on where you are. Welcome to the Quarter Three results call. Let me start with the first slide. I think Quarter Three was a good, strong performance, continued with the development on the revenue side and EBITDA for us, with double-digit growth coming in revenue and EBITDA. And a strong, 9% growth coming on the on EBIT line on an underlying basis. However, the impact on profitability, coming because of the Ncell impairment, which we've taken in this quarter, and also the fact that the ringgit weakened against dollars, which had a mark-to-market impact, for us on the loans which we have outstanding in the corporate center.
Of course, you're aware, after the deconsolidation of CelcomDigi last year, our share of profits from Celcom, which used to be close to MYR 300 million every quarter, is down to around MYR 250 million every quarter. So that impact has been hitting us on the profitability, but the larger part of that impact is coming from the one-off on Ncell impairment. However, on an underlying basis, continues to deliver a strong performance, partly impacted because of the high interest cost and depreciation. Just to touch upon Ncell impairment, the Board of Axiata decided made a decision to exit Nepal, as we see a telecom outlook in Nepal, and specifically challenges relating to foreign investments not very conducive.
The uncertainty around regulatory and tax matters, as well as uncertainty around the license beyond 2039, made the board decide that we should find the right buyer for the enterprise and exit out of Nepal. And that has resulted in around MYR 1.2 billion net PATAMI impact coming for us in Quarter 3. As I said, here in this presentation, most of these items are non-cash in nature. Having said that, the cash flows remain fairly strong, both on a reported basis as well as on an underlying basis, with the improved EBITDA, as well as lower, relatively lower CapEx, has resulted in better cash realization. If I go to the next slide.
So this quarter, you would see results actually split into continuing business, discontinued business, and discontinuing business. So Ncell falls under the category of discontinuing business because it's been classified as held for sale, and it's not something which the transaction has been completed. So that, I think, is something we will have to talk about. And discontinued is Celcom, which was discontinued last year. But what we report here to this time is on a combined basis, and this is to reflect how we've been performing against the KPI, which we set in the beginning of the year.
Just to quickly touch upon the reported numbers, the revenue grew by 9.4%, EBITDA at 11.5%, coming from our couple of major assets, for example, XL and Robi, which have delivered very, very strong performance in the quarter and on a year-to-date basis. And Link Net, of course, coming because it was not there in the base or was only for the three months in the base last year. EBITDA impacted, as I said, on account of impairment and further losses, I mean, profits coming from CelcomDigi lower than what it was last year. However, on an underlying basis, I think revenue, EBITDA, strong growth, partly also helped because of the currencies, but mostly coming out of the operational performance being much stronger and continuing in that trend from Quarter Two onwards.
However, profits impacted by higher D&A, specifically in Link Net and edotco, where we did invest for growth in coming years for us. Also the interest rates going up, which has impacted impacting the finance cost. Our average interest rate has moved up from 4.4% to around 5.9%, partly because of the overall interest rate increasing, also on the account of us de-risking dollar exposure in some of our frontier markets and converting that into the local currency loan, where the interest rates are higher than what the dollar interest rates were. As I said, cash flows remain strong. The debt to EBITDA moved up a little bit from 3.06 to 3.17, mainly because of the consolidation of EBITDA on Ncell.
Cash balance remains strong at MYR 5.7 billion, and partly reduced, partly due to the repayment of multi-currency loan of $100 million at the corporate center. XL, as I said earlier, strong, sustained environment with price, price stability. And in fact, sustained price environment is helping, XL deliver a strong performance of 10.5% growth, and also translating that into an EBIT improvement of 19.8%. The development on the fixed broadband side also has been encouraging, with more than 200,000 now fixed broadband connection in, in XL. Bangladesh has been a significant turnaround as we see, over the last one and a half years, and quarter-on-quarter, the operation has been delivering, growth. Robi, delivering 17%, 17.7% growth in revenue.
19% growth in EBITDA, and around 27% growth in EBIT. And coming not just from the subscriber growth as well as the maintenance of cost, but also hardening of prices in the market. We've seen the ARPU improving from 125 BDT last year, around 143 BDT, 18 BDT - 18 BDT improvement in ARPU over the last one year, and resulting in a strong profitability. Dialog. Last year, as you know, was a real tough year for Dialog with the economic crisis. And that economic crisis continued into 2023. And we've seen significant increases happening on the fuel prices and foods, and that's impacting the overall affordability of the customers.
Having said that, I think the business has done very well in improving revenue in those conditions, coming from hubbing, but also from the monetization of data, both in the mobile and fixed broadband segment. Improving EBIT by around 21.5%, mainly coming from cost reskilling exercise, which has been a substantial impact of around LKR 12.5 billion over the last 9 months. And also moderating D&A because of lower CapEx spend and managing with the existing infrastructure to deliver the revenue growth. And also we've seen some gain coming from from Forex, where Lanka rupee improving in the last quarter. However, PATAMI getting impacted, because as I said, they've been moving away from dollar debt to local debt, and interest rates have been high.
But given that, the risk associated with dollar, we think that's a good strategy to follow. Smart, I think, continues to deliver a strong performance, is the second largest profit contributor for us at this point in time, with strong cash generation. However, on a year-to-year basis, there have been some adjustments because one-off in 2022. Link Net, I think, has been a business which struggled. Having said that, I think we've seen some stability coming in the residential subscribers over the last quarter, and the business getting impacted because of the fiber rollout.
As you know, and we explained that back in May, that we are looking at Link Net, focus on, fiber wholesale and fiber build at this point in time for XL, and that's basically advancing the CapEx spend to be able to roll out the fiber, which will eventually start giving revenues, once XL starts delivering on home connects on this fiber. And, that resulting in, lower profits as well as somewhat impact from the bad debts on the enterprise business. And, the lower profits coming because of higher DNA and net finance costs from these, accelerated fiber, rollout. Boost, I think we do see, start-up costs impacting the Boost performance, while the revenue has seen an improvement.
But overall, given that we are investing on start-up of the Digi Bank, there's been upfront investments coming in. And also the attempt to build the credit book, which is currently, it's looking at around MYR 244 million, and there's been disbursement of more than MYR 1 billion loan in the last nine months. And that, in a way, is already while the costs and the impact is built into the existing business, would be something which will be accreted as and when that whole book moves on to the bank. ADA, I think, is more impacted because of the industry challenge on the A2P SMS business, which has been kind of coming down and also putting some pressure on the revenue share of this business with our partners, and that's impacted the profitability.
Having said that, the business has actually started to giving good growth momentum on data analytics business, and their recent entry into Korea and Japan on this business is something which we are looking forward with successful outcome. edotco, as you know, we acquired towers in Indonesia and Philippines. Philippines transaction got completed in the last quarter. And now we are looking at both inorganic as well as continued improvement on the colos in both Malaysia and Bangladesh, as well as new build to suit coming in our existing footprint, giving strong top line growth. However, the impact of the dollar debt borrowings for edotco, as well as the CapEx spend, resulting in D&A impacting the overall profitability.
CelcomDigi, as you would have already learned from the results announcement by CelcomDigi, I think their integration continues to be on track. They are continuing to deliver on the synergies, which is part of the business plan. The consolidation of towers, around 4,400 towers, have already been deconsolidated, and as far as we are concerned, they continue to deliver the dividend to us as per the plans. On the overall headline KPIs, we do expect ourselves to deliver what was stated at the beginning of the year. On revenue and EBIT number, we do see CapEx lower than MYR 7.1 billion, which was the projection made in the beginning of the year. The main contributors to lower CapEx would be XL, Link Net, and edotco. That's an executive summary on the quarter three performance.
Now I'll hand over to Lila, and come back in the end for our Q&A. Thank you. Lila, over to you.
Thanks, Vivek. So, as Vivek mentioned, in quarter three, the unaudited financial results, in the face of the P&L will show the continuing and discontinued, stroke, discontinuing, operations separately. I know it's going to get a bit complicated, the financial statements. So this is because we have classified, Celcom as discontinued and Ncell as held for sale. For clarity, discussions on the Q3 performance is based on the combined reported results, which continues to include Ncell as 80% subsidiary of Axiata Group, CelcomDigi as 33% associate, and Link Net of 92.83% from quarter three.
You can see on the chart, on a combined basis, there is a year-to-date loss of MYR 1.3 billion, and on continuing operations basis, year-to-date loss of MYR 141 million. So I'll go to the next slides for more details. On reported basis, year-to-date revenue stands at MYR 17.4 billion, an increase of 9.4%, due to the strong contribution from XL, Robi and consolidation of Link Net. EBITDA grew in line with revenue at 11.5% year to date to MYR 7.8 billion.
Main contributors are from XL, Smart and edotco, and of course, Link Net, three months comparative in year-to-date 2022 due to the first time consolidation in Q3 compared to the nine months in year-to-date September 2023. EBIT, you can see, was hit by impairment of asset for MCEL, whilst PATAMI was further impacted by lower share of CelcomDigi Berhad results of about MYR 366 million relative to PATAMI contribution as a subsidiary earlier of MYR 856 million. This was somewhat cushioned by a gain on disposal of Celcom from the final closing adjustment from quarter two 2023, and also, as Vivek mentioned, lower Forex losses and taxes. Next.
On underlying performance on constant currency basis, year-to-date revenue at device grew by 13%, and this is supported by the continued growth from all operators, except for ADA and Smart. ADA was impacted by renegotiation of contract with XL, and Smart top line was mainly impacted by a revision in the call rate, hitting the voice segment. Underlying EBIT continued to grow year-on-year, supported by EBITDA growth of 15.2%, which was offset by higher depreciation and amortization charge, largely from XL, edotco and Link Net. Our PATAMI, however, saw a decline of -76.6%, mainly due to increase in net finance costs of about MYR 550 million, largely from edotco, Dialog and XL.
Secondly, a smaller contribution from CelcomDigi share results, which I mentioned earlier. On the left below, the Y to date adjusted OSCF has increased more than 100%, mainly contributed by edotco, XL and Dialog. Next, on the adjusted OSCF that has increased by more than 100% to MYR 958 million, largely due to higher EBITDA from the operates, lower CapEx and lower taxation. But however, this is offset by the increase in net finance costs and ROU depreciation. On opco by opco basis, both edotco and XL saw increases of more than 100% on the back of higher EBITDA and lower CapEx. Dialog more than 100% on higher EBITDA also, and lower CapEx and taxes.
Next, the balance sheet is based on continuing operations. As you can see, the net debt to EBITDA increased to 3.17x, versus what we had in quarter two of 3.06x, due to the reduction in EBITDA, as a result of the exclusion of Ncell. Cash balance stood at a healthy MYR 5.7 billion. Quarter-over-quarter, there was a reduction due to the repayment of multicurrency loan of $100 million, and also, of course, the payment of dividends in the last quarter. Capital structure managed amidst uncertain macroeconomic backdrop. As you can see from the charts there, 34% of our foreign currency loans are hedged, and 64% of the group borrowings are on fixed rates.
Unhedged portion of the borrowings, you can see that it's from our 30-year bond, EMTN of $1 billion, and that's a 2050 expiration. edotco debt of $527 million and some debts in the frontier markets such as Sri Lanka and Bangladesh. Now I will hand over to Dr. Hans to go through the performance of the opcos, starting with XL.
Thanks, Lila. Vivek covered all the headlines pretty comprehensively. So in the interest of time and leaving time for Q&A, I'll just pick up on a few highlights. So with respect to XL, fantastic performance driven by organic growth in the market, as well as very sustained rationality in the pricing environment, of course, Lebaran as well. Revenues grew 10.5% year to date, driven by data as well as digital services. And notably, ARPU increased by 7.9%, from 38,000 IDR to 41,000 IDR. And this bears testimony to the very rational or increasingly rational pricing environment, as well as the acquisition of higher quality subscribers.
EBIT grew by close to 20%, year to date, and the EBIT margin expanded as well to 13.5%, driven by higher EBITDA growth. In the case of Axiata, growth was moderated relative to EBIT due to higher net finance costs, taxes, and the recognition of share associated losses. Cash improved by more than 100% year to date, driven by the higher EBITDA and lower CapEx. Based on XL's calibrated approach to CapEx deployment this year, resulting in a negative 12.3% in terms of CapEx. Moving on to Robi. A very strong performance again, backed by both the subscriber growth as well as ARPU growth.
So if you look at ARPU, there was a 14.4% increase from 125 BDT to 143 BDT. So this is very good news, given the combination of subscriber growth and ARPU, meaning that Robi is increasing its share of high-quality subscribers, as well as it evidences a rational pricing environment in the market. EBIT, a very impressive 27% growth year to date, and EBIT margin expansion by 1.2 points to 15.6%. Interestingly, revenue growth outpaced the increase in D&A costs, resulting in this increasing.
At cash level, however, there's an acceleration of CapEx by around 18%, to capture growth, and we see a 4.6% reduction in ACFC year-on-year, but this is a strategic application and of CapEx and acceleration of expansion to capture both the subscriber growth as well as profitability, as evidenced by PATAMI growth of over 100% year-on-year, reaching BDT 1.7 billion for the year-to-date. Moving on to Dialog. Very promising picture at Dialog with EBITDA increasing by 22.7% quarter-on-quarter basis and 7.3% year-to-date basis. Margin, however, reduced by 1.8 percentage points to 30.8. Overall, a very solid performance at EBITDA level with the cost reskilling initiatives flowing through.
If you look at a year-to-date picture, LKR 12.6 billion of savings recorded, and this has also driven an EBIT growth of 21.5% and a margin expansion of 0.6 points. That is PATAMI, likewise, more than 100% increase recorded at LKR 14.8 billion as of date return to positive territory, which is very good news for Dialog and the market overall. Of this LKR 14.8 billion, LKR 10.7 billion comes from ForEx gain, but that leaves over LKR 4 billion of organic profit increase, demonstrating Dialog's return to strong positive performance trajectory.
Cash, likewise, grew by over 100%, driven by the EBITDA improvements as well as calibrated CapEx, with CapEx being constrained to 47%, based on the calibrated approach to deploy. Smart continues to deliver steady profit and cash flow. Revenues, as reported, declined by approximately 1%, but excluding one-offs, the underlying revenue performance demonstrates growth of 5.6%, supported by growth in prepaid, international business, as well as enterprise. EBIT grew by 16.4%, due to some one-offs, as well as organic improvement at EBITDA level of 3.8%. PATAMI grew by over 100%, but excluding the one-off regulatory fees and Forex losses PATAMI in the previous year, PATAMI grew by 2% overall.
A very healthy performance and consistent performance from Smart. Link Net, as Vivek explained as well, dual businesses here, the consumer business, the residential broadband, as well as the going forward business of the fiber core. Of course, fiber provider to XL and other ISPs. The costs related to the fiber core transition have kicked in with the rollout of 1 million home passes for XL. But in this transition period, we also record the revenues from the consumer business, which are under pressure due to the market dynamics in terms of very stiff competition, ARPU, and pressure on ARPUs, as well as collections in the market on the consumer side of the business.
Notably, however, the recovery initiatives of the company with respect to capturing back, subscriber share, has, have been successful, and, at the end of the third quarter, we had the highest, level of residential subscribers, this year. Getting close to the 2022 point, or pre-crisis, point of, residential subscribers. Also, interestingly, the ARPU grew, to IDR 33 thousand and then IDR 39 thousand from IDR 334 thousand. Again, evidence saying quality is the acquisition of quality subscribers and return to strong residential performance. I pass on to Vivek to-
Mm-hmm. Yeah, so let me cover Boost first. I think, as I said earlier, Boost profitability impacted by the startup costs from Digi Bank. Just to give you an update on status of Digi Bank, I think we've submitted all the requirements to the central bank. They are going through the operational readiness review. So if we get before the end of the year, we should be up for launching the alpha version of the Digi Bank. Having said that, I think we've seen some growth in revenue coming in quarter-on-quarter, 8.2%, and year-on-year, around 16% growth. And that's mainly coming from the ability to charge MDR from merchants, and also the increased revenue coming from disbursement of loans.
As I said earlier, the teams disbursed more than MYR 1 billion. And as we speak, between both Indonesia and Malaysia put together, the loan book stats stands at around MYR 244 million. And the intention is for this loan book to move to Digi Bank, as and when the credit product is available in the Digi Bank for us to roll out there. Impacting the profitability, impacted, as I said, mainly because of startup costs. However, the ecosystem continues to grow, though we are careful in terms of being very aggressive on delivering customers or merchants, keeping in mind concerns around cash burn. Boost live users increased by 6.4%, and the merchants grew by 15.3% to 620,000 merchants.
EBITDA profit looks pretty much flat at this, but the profits does include around MYR 30 million-MYR 40 million on account of the startup costs for Digi Bank. If I go to the next one. ADA, which is the analytics data and advertising business, has seen a substantial impact coming from the the A2P SMS business, where we've seen overall challenge around the both organic growth as well as the revenue share model with the telcos, which has resulted in in somewhat drop in revenue flowing down, because this has been a high EBITDA margin business flowing down into the profitability.... And also flowing down into the EBIT, which has been negative in the first nine months of the of the year.
However, as I said earlier, that we do see traction coming in some of the new businesses under the ADA, which is specifically the data and analytics business. But early stage of that, and there are still marketing spends to build that business, hitting the profitability of the group. If I go to edotco, the next slide. I think it's a combination of inorganic as well as improvement in penetration and colo in our existing markets. As I said earlier, the colo continues to show improvement in our key markets. Malaysia, 2.31, Bangladesh reaching to 1.62. Overall, 1.65 colo, which has been a strong growth coming.
If you look at 1.65 in the context of some of the new acquisition of towers, which are just one, the overall organic improvement on the older towers has been substantial. However, profitability getting impacted by higher D&A and also the higher net finance cost. So the EBITDA growth partly moderated because of the increase in maintenance and manpower cost in Philippines and Cambodia, and also in Malaysia on account of Project Jendela. If I go to the next slide. So moving forward, I think, as I said earlier, at least 2023 on our KPIs, we will be... We are expected to stay in line with our KPIs on mid-single-digit growth in revenue and a high single-digit growth in EBIT.
In fact, revenue should be better than mid-single digit. CapEx will be moderated down. At this point in time, we are running MYR 1 billion behind, but there are still some roll outs to be completed, and some of that will be carried over to the next, next year, and we will come with the guidance on next year CapEx by February 2024. KPI, the risks and opportunities, I think this is pretty much known, nothing new to talk about. But our view is that the risks, as in a way, on the macro situation, has peaked, where the interest rates have peaked, should start seeing moderating down next year.
And also from an exchange standpoint, the impact of dollar strengthening should not continue into next year, and that should ease out a lot on the balance sheet of Axiata, because on the mark-to-market itself, we see a stress coming on the balance sheet. Geopolitical challenges, I think less impacted in our markets footprint, as we see. I think it's more the macro situation, the inflation, foreign exchange, which has been the supply chain disruptions, so far has been less impactful for us on geopolitical reasons. And that puts us relatively in a better position. Opportunities, I think we have seen, as I said earlier, two of our largest markets, Bangladesh and Indonesia, continues to have competitive rationality. In fact, in addition to that, some price discovery, which we are seeing in our portfolio.
So that's a positive sign. We do expect also that situation to continue. I think once we are able to complete the carve-out of customers as well as, you know, implement rollout of fiber by Link Net, we should see, start seeing the synergistic benefits that's still to be captured. Delayering exercise, I think, which we are doing, and which we will talk about more on our Investor Day, will also help us get better results, not only on synergies, but also on the valuations of our assets. And Dialog Airtel merger still currently being delayed because of the legal process, but we expect that to be behind us by the end of this year, and we should be able to close the transaction by first quarter of 2024. And while...
As I said, opportunities, whether it looks a risk with strengthening USD and high, but I think that should start moderating down, in our view, going into next year. And that should have a substantial relief, both on the balance sheet as well as the finance cost, for us. So I'll just go quickly, maybe touch upon the Analyst and Investor Day, which is scheduled on sixth of December. We will have a full day with our invitees there, and we are happy to inform that the participation will just not be at the group management, but we will have our OpCo leadership also talking about what they are doing in their specific markets.
The focus of the Analyst Day is really around what is our portfolio strategy, which I have talked about, the five buckets, and how do we take those each of those vectors or buckets forward in terms of the portfolio mix, as well as looking at some of these elements which Hans and Thomas, our CTO, will talk about the journey from Telco to TechCo or Telco-TechCo. What are we trying to do there? We will also cover the portfolio optimization, which is, I think, a little bit touching upon what are we doing on the de-layering of assets, specifically to start with in Indonesia, and how we were trying to look at some of these market repair in Indonesia, Bangladesh, as well as optimizing capital structure for us.
And also how do we look at growth coming from our assets, not by our own capital, by getting strategic investors coming into some of our invest assets to help us grow those assets, because we do see still growth opportunities on some of the markets. But having constraint on the balance sheet, we are looking at strategic investors to participate with us in that growth. At the capital allocation, we can talk about the principles around capital allocation and guardrails, which are there across all the the five buckets we talked about. And we will touch upon what Axiata is doing on sustainability. I think that's an important topic. Our board is quite, you know, focused on driving sustainability through our board sustainability committee, as well as board's direct involvement. So we'll touch upon that.
Maybe we've said 15 minutes here. This could be a little longer than 15 minutes, so we'll adjust it in the final agenda. And then, of course, the discussions and Q&A. So we invite all of you to come in and at least listen to what we are trying to do in the Investors Day. And this is really, as I said earlier, we'll be focused on our portfolio strategy. That's it. I hand over back to Clare.
Okay, thank you, Vivek. I think we will simply move on to the Q&A session. As a reminder to everyone on the call to ask your questions, there are two options. You may choose to do this verbally. Just raise your hand, wait for your name to be called out for your turn, and don't forget to unmute your line. Otherwise, you can type your question in the chat box as well. So, we can proceed to start with the Q&A session. Maybe we can start with Fung. Fung, please, unmute your line.
Yeah. Hi, good afternoon. Thank you so much for the conference call. Three questions from me. Firstly, on Ncell. Just wanted to understand whether, you know, Axiata, Axiata will be running a tender for it, and if so, by when? And in terms of, you know, what we are looking to sell it for, right, you know, will we be selling it at any price? I mean, the highest price in the tender, or do we have a reserve price, and if we don't meet that, then we don't sell? And also on Ncell, you know, have we written it off completely from our books by now? And if there is a sale, am I right to understand that we would then book in the net selling price as a gain later on?
So that's the first question. Second question, for the Myanmar towers, right? Do you see any potential impairment given the civil war there at this point? And, have we been able to repatriate cash back from Myanmar so far? And then, thirdly, for Link Net, losses have widened Q and Q, due to the higher D&A. Do you see this widening further in the coming quarters? And, for the 1 million homes passed that you know that has been committed for rollout for AXL, how much of it have we rolled out year to date? Yep, those are my three questions. Thank you.
Yeah, I can take the first one on Ncell, then I'll hand over to Adlan.
Adlan.
Adlan will be there to talk about Myanmar. I think on impairment I think we have decent surplus, so that's not a concern for us. But I think we can talk about the repatriation of dollars, and then maybe Hans can talk about the Link Net.
Kanishka is on the line.
Kanishka is also there. So Ncell, I think, we have taken at this point in time, the board has decided, for reasons which I mentioned, that we would like to exit. And we've also been in talk with potential buyers. Nothing very concrete at this point in time. But I intention is, given that this, the market in Nepal could be very selective interest from buyers, so we will be not running a formal tender process to invite prospective buyers. But we would look at those who would be interested, and would be able to manage the environment which they, where we struggle. So I think that's something which we look at.
As far as the estimates on profit and loss is concerned, I think we've basically looked at based on what we think would be the fair value of the assets. On that basis, we've impaired. What we've not impaired yet is any Forex reserve, which will actually flow into the P&L at the point in time when the transaction gets completed. But I think when we complete the transaction, we would get full details in the announcement on what's the overall financial impact, what's the pro forma impact, and what's the actual realization from sales. So-
... Okay, on the-
Sorry. I think also, for us, you know, given that one of the key conditions for us is a clean exit from the market. Because once we exit, we do not want any further liabilities or indemnities, et cetera, staying, because we would not have direct influence there. So I think one of the consideration, obviously, on the realization would also be on a clean exit from the market. Adlan, Adlan, I hand over to you on Myanmar.
Yeah. Okay, yeah. Okay, Fung, if you look at the towers today, I think you would see that in terms of there are a number of sites that's probably not accessible at the moment, right? So, however, I think if you look at none of the customers that to date have actually declared on a force majeure on the site. So we are still collecting money and customers are still paying their lease fee, right? Essentially, some of these sites, we have outsourced the maintenance of this to locals. And I think not entirely that they are not accessible at all, it's just that I think the period that we can access some of these sites are probably pretty limited. Yeah.
So as and when that we can do the maintenance, when it's safe, we do, right? So there is no question about impairment of towers as today, because customers are still paying their lease fee, even in a zone that probably it's probably a red zone. And I think that we're still collecting the money from our customers. Second, on repatriation of fund, I think, to date, I think, we have actually managed to repatriate in terms of our holding company charges, that we charge to our subsidiaries, as well as, we just recently got approval for dividend payment, right?
I think the key challenges in terms of repatriation, in terms of getting the approval of the regulatory, right, whether it's CBM or FESC, right, the Foreign Exchange Council. And to date, we have managed to repatriate close to about $1.7 million, right? However, recently, we have managed to get approval, right, on TSA, on our intercompany charge, on our holding company charges, as well as dividend. So small amount, I think, you would probably be able to get the approval. However, a bigger amount, I think, is where the restriction is, right? It's difficult to get the regulatory approval.
I will say all that as well, even for our intercompany, the holding company charges and dividend approval. It also came. It took some time before it was actually approved.
Thank you, Adlan.
Yeah. So, Kanishka, can you take up the Link Net question?
Yeah. Okay. So I think, Phoom, the question was related to the financing cost and the current status of the rollout of the HomePasses, yeah. So the financing cost is expected to go up as the 1 million HomePasses are funded from the external debt. And in terms of the rollout, by end of November, we will be delivering close to 85,000 HomePasses on active basis. And given the backbone is mainly under construction at this point in time, the ramp up will happen from the months December, January onwards to complete the 1 million HomePasses by sometime in June 2024.
Okay, if I can just throw in some follow-up question. Vivek, on Ncell, right? So after the impairment, what is the book value left for Ncell and for Link Net? So, basically, what you're saying is that we have only delivered 85,000 of the 1 million, is it, in terms of HomePass? And therefore, as we go towards the completion of the 1 million HomePass, the financing costs will continue to go up and the losses would widen further for Link Net. Those are my two follow-up questions. Thank you.
Okay, the first one was on the, what is the book value of... How much is it?
MYR 378 million.
MYR 378 million, right? MYR 378 million would be the book value of ringgit. And this is just based on fair value on after sale. But there, as I said earlier, there would be another Forex reserves, which is consequent to the Nepali rupee depreciating faster than ringgit, which will also be flushed out as and when the sale happens. Now, this is based on obviously our estimate of the fair value of realization, but the actuals could be different, and that difference would also come at the point in time the sale gets completed.
Phoon, could you please repeat your second question on Link Net?
Yeah. Just now it was mentioned that we have delivered 85,000 HomePass, right, on an active basis at the end of November. So I'm just trying to clarify here whether that's 85,000 out of the 1,000,000 that's been promised to or committed for XL. And therefore, only just a very small rollout has been completed so far. And therefore, as we go into completion mid of next year, there's a lot more to do, and therefore, financing costs could go up a lot more from where it is in the third quarter.
Yeah. Hi, from Kanaskia. Yeah. Sorry, Vivek, go ahead.
Oh, no, no. So, I think, yeah, you're right. There would be increase in financing cost. And then, I mean, I think, on the sixth of December, we will talk about the source of financing. But I think also simultaneously, the XL should start delivering on home connects on those home passes. As they start delivering, we will start, Link Net will also start getting revenues coming from, from XL.
Okay, understood. Thank you so much.
Okay, thanks, Fung. So let's move on. Next in line is Luis Hilado. Louis, please, unmute your mic and proceed with your question.
Hi. Thanks, for the call. I had three questions as well. Just wondering, do you foresee any more kitchen sinking exercises in the fourth quarter, or is this impairment that you've done with edotco, aside from the forex reserve, over and done with, and we should see a cleaner set of numbers in the coming quarters? Second question is, related to edotco.
Mm-hmm.
Could you give us an update on the, you know, the tenancy prospects for Philippines and Indonesia now that those assets are fully acquired? Do you see it improving, you know, going to next quarter and onwards? And related to... Last question is related to edotco as well. There is a Bloomberg article mentioning some progress and active interest in the sale. Is there any timetable for a transaction to take place? Thanks.
Well, as I said, you know, there could be two elements coming in on account of further impairment. What would be the ForEx reserve, which we talked about, and there could be... If the sale gets completed in quarter four, then we might have a difference between what we assume is fair value versus what will be the realized value. So that would come. We don't think there would be any further impairments or kitchen sink, as you call it, coming in in quarter four. However, at the end of every quarter, we do look at all our assets as well as the carrying value and what's the realizable value. So I think that exercise will be done at the end. Adlan, may I hand over to you?
Yeah. So, may I start about Philippines first. I think if you see 2023, I think the market is a little bit slow, right? For whatever event that's happening in PLDT, I think you see that Smart have not been rolling out much this year. In fact, they have taken a freeze, right, in terms of their, whether it's new rollout or in terms of co-location. I think similar approach has been taken by Globe as well. But we did see some co-location coming from Globe, right? And as far as DITO is concerned, this year, they had some shareholding issues.
However, the good news is, what we're seeing is, towards the end of the year, I think, that shareholding issue has come to the final end. So hopefully, we are starting to see now that. We are starting to see orders coming from DITO. And I think we're also starting to see that, Globe have also started to farm out new orders, right? And this is more for planning going into 2024. So it was a little bit of a slow year in 2023 for all three operators, given the various issues that each of them have. Nevertheless, having said that, I think we believe that there will be some catching up that will happen in 2024.
Hopefully, I think, with that acceleration in terms of the rollout and we hope to see some tenancy increase, right, going into 2024. As far as Indo is concerned, I think for us at the moment is, it's still very slow progress, because I think the focus on a lot of the tower co, the MNOs in Indonesia have been really focusing on co-location. And essentially our portfolio in Indonesia is relatively small, so we still have not gotten much order yet in 2023.
Having said that, I think, as you know, that we do have commitments from XL, which we think that this will probably come sometime in 2024. While working on these commitments, we are also working on some street furniture deals with local councils and all that, but these are currently work in progress. We should be seeing some results coming in 2024. On the capital raising process, I think you see, yeah, so many news in the press, right? In the papers and all that. Yes, I think the process is still ongoing for us. There are still a few interested parties, bidders. I would say that actually looking at this, we are still-...
Still probably in a due diligence process. Yeah, so once that is completed, then we have the results and all that, something that we'll probably make the announcement. Yeah. So we'll make the necessary announcements if we have something concrete and conclude with any one of the bidders. But essentially, there are a few parties that are still involved in the process.
Thanks, Adlan. Thanks, Vivek. Thanks, Clare.
Thank you.
Thanks. Okay, let's move on. I think the next one online to question is Ben Shane Lim. Would you please unmute your line?
Hi, good afternoon. Can you hear me?
Yes.
Hi, testing. Hi. Hi. Hi, thanks for the time. My first question is around Ncell. I mean, it looks like the carrying book value, you've written it down, so you've written off, what, 80% of the value? And what you've written it down to, it looks like it's not even one times, you know, EV/EBITDA. Is it fair to look at this as almost sort of a fire sale, you know, get rid of it at any price, and, you know, to look at it quite negatively, actually? Do you think that's a fair way to think about it?
Is that, is that the only question, Ben?
I've got a few more. Okay, my second question is on your digital bank. I just wanted to get an estimate for, you know, the cash burn you expect for next year, once it goes live. And I think there's some useful context because one of your competitors has launched soft launch already some of their headline, you know, products, right? They wanna do 3% daily daily rest for savings accounts. They want to do 1% cashback on a debit card, you know. So you actually have some baseline to think about what where the competition is pricing, at least, you know, in the short term, you know, how they're bringing in, you know, new users.
If you sort of think around matching that, right, do you have sort of an idea of what kind of cash burn you need, you know, to match the competition?
Sure. So the first one, let me address on the Ncell. I think, as I said earlier, one of the key conditions for us is clean exit, because we don't want any indemnities, warranties to be given to the buyer. So I think that's one of the key element of our decision would be. And to get a clean exit, I think there would be obviously compromise on the valuation, right? So I won't call it as a fire sale, but I would just say that, this is, this might have a compromise on the valuation. So in our view, the carrying value, which we said, is reflective of the fair value of what we would probably be open to sell, they, it could be a plus, minus on that, also.
But I think more important for us is clean exit from Nepal. On the second question, which was on your Digi Bank, I think our 5-year estimate before it starts breakeven, I think we're expecting breakeven of the bank in 3 years' time, is around MYR 500 million as a total spend, and as we are the 60% owner of the Digi Bank, so effectively MYR 300 million. I think the good news, as I said earlier, is that one of our first products which we will start moving on, is really the lending product. And the lending product, most of the cost actually comes on account of the acquisition of those customers. So around, currently around MYR 250.
By the time we would have the bank launched, probably will be around MYR 300 million-MYR 350 million as the book to be moved directly into the Digi Bank. So, so that would be accreted from day one, so we will not have a cash burn on that. So if you look at three years, I mean, we'll be looking at something like, spread over, you know, MYR 100 million and MYR 120 million, MYR 130 million over a three-year period, but not as high, given that, we already have an existing business which will get transferred, and, and that will be part of our contribution as shareholder, to the Digi, Digi Bank.
Having said that, I think we do expect our cash burn on the wallet side to keep coming down, and there have been some actions taken during this particular year, which at least on the EBITDA level, we should be getting to neutral in 2024. So overall, I won't see much of a shift on the overall cash burn. If any, it will come down from where we are, but the shift would happen from our wallet business into the Digi Bank.
Okay. And, if I may follow up with one more question. When we think about your broader, you know, sort of portfolio due diligence, and it does sound like, edotco is at least the one that's up for sale, and the due diligence is ongoing. And I just want to tie this back to something you said earlier, and I don't know if I misheard this, but you said there's no risk of impairment. Is there, though, no risk of impairment if you were to, once the due diligence on edotco is completed, is there a risk that you have to impair it, based on some of the findings from the due diligence? You know, and especially with the exposure, in some of the, riskier, jurisdictions?
... No, no. So, due diligence, we are not doing it. Due diligence is the new investors who would come into edotco are carrying it out. And, I think if any, if we are to get, any effect is only if we deconsolidate. But given what we expect as the valuation of this business is much higher than our carrying value, so we don't expect any – any impairment. If any, if it gets deconsolidated, there would be a gain, which we get in the books.
Okay. So there could be some, you know, findings from the diligence that's negative, but the overall, you know, your expected overall valuation will still be higher than carrying value, so that will help offset it, right? Is that the correct way to think about it?
Well, I mean, I won't say that negative. I mean, there will always be a negative or positive, but what we are saying, we are on sale, if it is less than our carrying value, right?
Okay. Okay, that's clear. Thank you. That's all the questions from me.
Okay, thank you. And just, just to be clarifying, I think it was Ben, right?
Yes.
Just to clarify, I mean, it's not Axiata. Primary focus is to issue new shares to get the primary funding for edotco and pay down their debt. So it's not us selling it, it's more primary focus is to get new shares issued for funding edotco's opportunity and grow business in Indonesia, Malaysia, as Philippines, and that's where our focus going forward is. So I think that, that too, is, is the primary focus. So it's not about, about Axiata selling stake maybe at a price which is lower than what it's carrying value.
Okay, thanks. That's, that's clear.
Thank you.
Okay, thanks, Ben. Okay, next up is Prem from CGS. Over to you, Prem.
Hi, thank you for the opportunity. Two questions from me really. Firstly, just to clarify on this edotco deconsolidation exercise. Can I clarify that it is not your intention to raise any money for Axiata from this exercise? Instead, it is just to monetize edotco. Is that right? Because I think that Bloomberg article also suggested that any old shares would come from the other shareholders and not from Axiata. Just want to understand your thought process around this.
So first of all, I think, I would put the Bloomberg article as speculative. I don't think we said anything. As Adlan briefed earlier, the process is currently on. The primary focus, Prem, for the process was to get the funding for edotco, to help them deleverage their balance sheet and also expand into the three more emerging markets, I would call Malaysia, Indonesia, Philippines. That's the primary focus. Having said that, as part of the process, if there is an opportunities for some of the existing shareholders to monetize or exit, we are open to allow those shareholders to do that, subject to who the eventual new investors would be. Third issue, as far as Axiata is concerned, I think we haven't come to a landing that there would be a outcome would be a deconsolidation.
I think it all depends on the valuations, which we will be able to get. And if deconsolidation happens consequent to us being able to monetize, value of edotco, we are open to look at it, provided the governance structure, the investor profile, all those, fit on into our requirements. So, so I would say it's speculative. It's too early for us to assume any of these things. However, as Adlan explained, the process is currently on, and the decision would take into on a few other factors, which I explained.
Perfect. And the second one, sorry to put you on the spot, but with Ncell, if there is no buyer, can we just walk away? And if we did that, or we got zero cash for it, what level of write-downs would we be looking at? And would there be any legal repercussions from us walking away?
No. So I think first of all, the intention is not just to walk away from the market. I think we would probably ensure there is a continuity of the business and hand it over to a new buyer. That would be, I think, the key condition for us. But as I said earlier, that condition also rests on clean exit, because given the environment, we would like not to be any way indemnifying for any of those, you know, the regulatory issues. The worst case, I think if we have to walk away, is really about going and handing over the license to the government, which I don't think currently the law allows us to do that. So I think we will...
That's the position, then we will have to take a call at that point in time, but that's not the position as we speak now. The position as we speak is to really get a buyer, and allow us for a clean exit. And that might, as I said earlier, put up consequences on the realized value. But, worst case, carrying value is $378, and then we have, I think, Forex reserve of $380, $280, $360, and both of them will be kind of flushed out with the PNL.
Sorry, what were those numbers? 280 and 360.
MYR 378 is the carrying value, which we said earlier.
Yes.
360 is the Forex reserve.
All right.
These are all estimated, because this, there would be an impact.
Sure.
On our-
Okay, thank you very much.
Thank you.
Thanks, Prem. Okay, moving on, we have Ranjan on the line. Ranjan, can you hear us?
Hi, good afternoon, and thank you for the presentation. A couple of questions from us. A couple of questions from my side. Firstly, on Ncell, has the guidance for the group been adjusted for the deconsolidation of Ncell or reclassification of Ncell? And I understand this is just going to be an asset held for sale, so it will also not have any impact on the PNL on the bottom line as well. Second is on Link Net. As you expand the network, what will be the overlap with IndiHome? Because if there is a sizable overlap, what will be the strategy to keep the customers away from IndiHome? And lastly, like, if you deconsolidate edotco, that also means you won't have control over the cash flow of the business.
Can you control the dividend policy of the entity? Thank you.
No, so, so the guidance on reclassification, yes, at this point in time, the. There would be no impact coming on the PNL. Excepting if we are going to revisit the fair value of the asset, right? If we say that the realizable value is not what we think is, then we will do a test every quarter, and that might have a impact on the PNL, but there's no, no organic or business PNL impact, which will come. Second question was on the... What was the second question?
Ranjan, could you repeat the second question, please?
Yeah.
On Link Net, right?
Sure.
Link Net.
Yeah, it's, yeah, it's the overlap of Link Net's network with IndiHome. What is the extent of that?
So I think, I mean, let's realize, I think the market is quite big. Our estimate is around 70 million home households are potential in Indonesia. And at this point in time, there is probably around 13-14 million home connects existing. So that's one. Second is, even if we roll it out, we... I mean, there's always an opportunity to have a second tenant or a second supplier of home connects in the markets. I mean, you see most of the matured markets also, there's no single dominant player. There are always, you know, a couple of other strong players in existence.
So we don't see, I think Indonesia is a fairly large, with around what, 14%-15% penetration at this point in time. There's a big opportunity. And as far as the jointly between XL and Link Net, they have a very strong analytics process to decide where are the opportunity markets and where should we prioritize the home passes to be able to capture. Either those markets are fairly, fairly, available as the first tenant, first home connect, but also at best, number two. So that, that analytics is used to decide where the rollout is going to happen. So it's not something where Link Net is just rolling out without any clear, you know, alignment on where to roll out from XL. Because XL also has certain commitments on minimum penetration, which they need to deliver to Link Net.
Then the last question was on edotco, right? No, so-
Yes.
Deconsolidation, I think, you know, clearly, if we end up deconsolidating, we will have certain guardrails put in place, whether it's on dividend policy, whether it is on ensuring that we have a substantial, say, in the company. And deconsolidation would not necessarily mean that we become a small minority. We would still, be a substantial, shareholder of, of edotco. So I think those things about cash flows, et cetera, would be well protected, in my view. And, as we see at this point in time, edotco is still in the expansion. I think primary focus for us priority, at least for a period of time, till it becomes a dividend yield asset, is really around, deleveraging their balance sheet.
And deconsolidation would also mean that we take away edotco's balance sheet from us, which allows them to expand further on balance sheet and deliver their growth with a much lower cost of capital. At this point in time, their cost of capital relative to the other tower companies is high, because we consolidate them. So I think that's the primary focus. But eventually, as I said, you know, we will have those guardrails put in place. So once it becomes a fairly stable yield asset, then we would have sufficient dividend flow protected through those guardrails.
... Thank you. Thanks. Okay, I just have a quick call follow-up. So my question on the guidance, right, so revenue growth of mid-single digit, EBIT growth of high single digit. I believe this is before the restructuring or reclassification of MCell as well. So, so the, how does the guidance get affected by, the MCell reclassification?
Yeah, Ranjan, can I answer that for you? I think essentially, even if we adjust Ncell out of the guidance, as in taking them out in 2023 as well as 2022, we would be looking at a revenue ex-device growth of close to 9% and EBIT growth of about 15% on a year-on-year basis. And, and this would exclude the impairment impact as well.
So actually, Ncell has been dilutive on EBIT growth for us. So 8.9% was including the Ncell, up to-
Okay.
Up to September.
Got it. And then the reclassification has happened as of what date?
Thirtieth September.
Twenty-ninth.
All right. Thank you.
By 30th, in the financials of 30th September.
But if you take continuing operation, that's good.
Thank you.
Is that clear, Ranjan? So let me just repeat. So in the slides, you would see that revenue ex-device growth is 7.7%, and EBIT growth is 15.3%. Yes, you're right, that basically includes Ncell in the mix. If we strip out Ncell for 2022 and 2023, the revenue ex-device growth is 8.9%, which is close to 9%, and EBIT growth would be 15.8%, which is slightly higher. So as Vivek mentioned just now, Ncell was a little bit diluted at the EBIT level, so therefore it is slightly higher without Ncell. I hope that's it.
Okay. Thank you. Sure.
Thanks. Okay, I think we can move on. There's a question in the chat group, essentially, from Aram. The question is: Can we have updates on the operating conditions in Sri Lanka and Bangladesh, and what is your outlook on the operating conditions for the future?
Yeah, maybe I'll take that. If we talk about the market operating conditions, both markets are, as you would have seen from the results, very conducive to growth and performance by our op cos. Backed by our op cos are performing extremely well in the market context. So the only concern in both these markets would be with respect to the macro fluctuations in foreign exchange rates, as well as the availability of foreign currency, et cetera, liquidity and so on, interest rates, as a result as well. So I would focus on the macro as which we all would have our headlights on going forward in many of these markets. But in terms of operating conditions, both very positive and conducive to our business.
In terms of outlook, we would expect both Dialog and Robi to deliver very strong fourth quarter results, and also to demonstrate a continuing positive trend that we have seen in the past quarters.
Thank you, Doctor. Okay, I don't see any further questions.
Let's check.
Oh, there's none on the chat. Okay. Can I please confirm that the group intends to pare down U.S. dollar debt and convert them to local debt?
No. So what we are doing is effectively in our operating companies. The two companies, where we have U.S. dollar debt is Robi and Dialog. We've been converting that. In case of the edotco is mostly U.S. dollar debt, but for a long duration, locked in. As far as corporate center is concerned, again we have bonds issue, which is a larger part, which is 10 years and 30 years, which will be expensive if we will convert that into... So those will remain as it is in the U.S. dollar. So it's mostly our operating companies which are in frontier markets, which have U.S. dollar exposure, and given the volatility of the currency, we prefer to them for those debt to be in local currency. Okay.
Okay. Okay, thank you. I don't believe there is any further questions. Maybe just give another couple of seconds.
One, two.
Okay. So I think, that should pretty much conclude our call. However, I, Vivek, I'll hand over to Vivek for his closing comments.
Yeah. First of all, I think thank you for joining this conference call. We look forward to your engagement on sixth of December. As I said, I think it's more around portfolio and portfolio actions. Some of them are in the pipeline, some of them are planned, and we would be quite explicit about what we are trying to do on our portfolio. As you look at the tagline, we are talking about buildup, so that would also take into account how we transition from telco to techco. Having said that, I think there is always you know, why we are monetizing or running a process in some of our assets. I think it's good to understand rationale behind each of them. Each of them would have a very different rationale behind.
For example, clearly, the alpha which we did earlier, which is monetization of ADA, was more on monetization opportunities, which is basically getting a new investor coming in, where we sell our stake and get cash off of the value which we created of $550 million on that particular asset. edotco is primarily focused on relaxing their balance sheet, paying on some of their dollar debt, and being providing the right kind of fuel for them to continue their growth trajectory, which they've been doing pretty well. Similarly, I think, if we are looking at monetization on, on the fiber side, would also be pretty much linked to getting the CapEx available for, for... or investments available for continued growth.
And Ncell has been a very different situation where it's not about monetization, it's about exiting out of a high-risk country where the regulation tax environment has been uncertain. And as you've seen, that we've had you know instances of capital gain tax suddenly being levied on us, which was never the case, and the valuations of capital gains tax has been arbitrary. Other taxes which keep coming up once in a while, there's no movement on the license which at the moment expires in 2029, how that is going to be dealt with. So I think this is more exiting of a high-risk country and that's where the rationale around the valuations would be more linked to the clean exit element, which is there.
So each of those assets will have very different, and I think as and when we conclude those exercises, which we would be explicit on what was the rationale behind we made that decision. Okay, good. Thank you very much. Thanks for joining us in the afternoon today. Thank you.
Okay, thank you.