Ladies and gentlemen, my name is Clare Chin, Head of Investor Relations at Axiata Group Berhad. Thank you for standing by, and welcome to Axiata's quarter three results briefing. Apologies for our slight delay. Today we have with us Dato' Izzaddin Idris, Axiata Group CEO, and Vivek Sood, Axiata Group CFO, as well as representatives from our operating companies. There will be a short presentation followed by a Q&A session. Lastly, two housekeeping matters. You will be on mute throughout the presentation. Also note that we will end the call promptly at 4:30 P.M. Without further ado, I would like to hand the conference over to Dato' Izzaddin Idris.
Thanks, Clare. A very good afternoon to everyone on the call. Thank you for joining us this afternoon on our announcement of our third quarter results, which the press release was issued during the lunch break earlier this afternoon. I hope you had a chance to pick it up. In terms of the year-to-date performance for all OpCos, we're happy to report a very strong performance across all OpCos. This is largely demonstrated or supported by the higher data consumption. Briefly, revenue ex-device went up by 7.7%, and EBITDA margin largely stable at about 44%. The higher underlying PATAMI of about MYR 940 million.
Now, this is supported by the improved EBITDA, lower net finance costs and taxation, but of course, partially offset it by the accelerated depreciation of 3G assets at Celcom and Robi. That's about MYR 151 million net. Now, in terms of data consumption, perhaps I should give you some color as to the higher data consumption year-on-year. For example, Celcom, to date, as of September, the blended average consumption is about 24.7 gig per subscriber per month. That's up 30.7%. Likewise, in XL, the average data consumption is about 13.8 gigabytes per subscriber per month. That's up by 34%. That's the sort of same trend you see in all the other markets. In other words, we're pretty much encouraged by the higher data consumption.
All OpCos did well except Ncell, but we'll cover that later on. In terms of reported PATAMI, we recorded a PATAMI of MYR 703 million. That's a margin of about 3.7% for the year. Of course, year-to-date, we also benefited from the strengthening of the ringgit against all our OpCo currencies. Sri Lankan rupee was the one that was affected most. Now, year-to-date operating free cash flow for the year, that declined slightly to about MYR 2.3 billion, while our balance sheet remained healthy. The slight decline in OFCF is as a result of adjustment for non-cash right-of-use depreciation. Also, the big item there is the accelerated CapEx by XL Axiata.
Now, this is to enhance our network coverage and capacity to meet the rising demand, as I've mentioned earlier, and as well improving the quality of service. Balance sheet, as I said, remain healthy. Gross debt to EBITDA of about 2.49x. Cash balance of about MYR 7.3 billion. Vivek afterwards will give a bit of a perspective on our borrowings with only two years, that's 18% of our debts maturing within two years. That's as well as something like 70% of our debts are on fixed rate. That's a pretty good balance sheet to move on with. Moving on, OpCo by OpCo. Celcom continued momentum with an addition of about 1 million subscribers year-on-year.
Year-to-date revenue is about 4.6%, and this is driven largely by the strong prepaid performance. If you remember, in the previous year, we had a charge of about MYR 101 million gross for an employee restructuring program, but that's no longer in this nine months. EBITDA rose to about 7.2%, largely attributable to better credit and inventory management, as well as cost optimization efforts around network and staff costs. Year-to-date, PATAMI went up by about 6.9%. Again, this is impacted by accelerated depreciation, which however was cushioned by lower net finance costs. For XL Axiata, the momentum post-Lebaran continued into the third quarter.
Year-to-date revenue pretty stable at 0.7%, and despite that, competitive pressures in the first quarter, as well as higher sales and marketing expenses, PATAMI is down significantly by 51%. That was a gain that was recognized in the last year. The gain on tower disposal, without which our PATAMI improved due to lower net finance costs and taxation charges. Robi recorded a very strong data revenue growth. Quite evidently our strategy there has borne good results, higher data consumption. The margin compression, however, is as a result of higher network costs and sales and marketing expenses. You can see that year-to-date revenue went up by 0.7%. PATAMI, however,
Year-to-date revenue went up by about 8.1%, as I've said, because of the higher data revenue consumption. This is in line with the higher data subscribers that Robi managed to bring on. Year-to-date free cash flow is about 12.3% on the back of EBITDA. Slightly lower CapEx. PATAMI rose by 44.3%, arising from better operational performance and lower net finance costs. Dialog continues to be the star performer, consistent performance, sustained growth momentum across all the segments, mobile, fixed and TV. Data revenue likewise went up by 15.3%. Sorry, keep missing this. EBITDA went up by 19.1%, PATAMI by 45%. As I said, driven by improved performance across all segments, mobile, fixed and TV.
Free cash flow, however, came down a bit by 23%. That's attributable to the higher CapEx spend from a decision to accelerate some CapEx in anticipation of the increased demand. As I've mentioned, we have an improved bottom line despite lower revenue excluding device. Core revenue went up by 4.4%. Now this, however, is insufficient to counter the drop in ILD of about 20.6%. Right, as a result, revenue ex device went down by about 1.1%. Year-to-date EBITDA, however, went up by about 2.7% on lower direct costs. PATAMI improved significantly as a result of the higher EBITDA coupled with lower depreciation and amortization charges. Next slide. Smart continued steady performance. Year-to-date revenue ex device grew by about 10.7%.
Now this excludes reclassification of dealers' discounts. Because what had happened is we needed to adopt the new accounting standard a dealer's revenue is accounted for the dealers' discounts that we have given. Now they are shown gross, yeah. Without this, year-to-date revenue is up by 5%, again, from higher data consumption. Likewise, free cash flow went up by about 1.9%, moderated by the higher CapEx. Year-to-date, PATAMI dropped slightly about 6.4%, mainly due to the impairment of financial services investment that we've made, i.e. PayFazz. Axiata Digital is happy to continue to report improved performance, narrowed losses. Year-to-date revenue more than doubled to MYR 643 million.
Higher revenue at ADA, Axiata Digital Advertising as a result of improvement in its customer engagement business. Net loss narrowed down by 60% to MYR 97 million. Now, just some perspective and Vivek will give the details later. Year-to-date, Boost recorded half the loss compared to last year at about MYR 110 million. ADA recognized a PATAMI of about MYR 27 million compared to a loss of MYR 6 million last year. That's the performance of the two companies. We'll continue to move in the right trajectory. Next one. As far as edotco is concerned, strong contribution from the two key markets, Malaysia as well as Bangladesh. New orders coming from Bangladesh in total for the year will be about 1,700 towers.
Year-to-date revenue went up by 3.9%, EBITDA up by 2.7%, and as a result, PATAMI rising by 19.7%, which is also supported by some unrealized Forex gain. In so far as our FY 2021 headline KPIs are concerned, we're likely to exceed the guidance that we've given earlier. For the full year, the guidance is revised upwards very, very slightly to mid-single-digit growth in revenue, ex device and EBITDA. Downside risks continue for the fourth quarter. Inflationary pressures on SIMs and delay in network equipment delivery arising from the global supply chain disruption that we're all familiar. Sri Lanka macroeconomic challenges as well as regulatory uncertainties in various markets we operate, and slower than expected recovery in Smart. You remember we talked about the spectrum that was only awarded in April.
Unfortunately, the rollout has not been as what we had earlier planned. The board of Axiata Group Berhad has also approved a pledge for the next ten years towards Axiata Foundation. We are pledging something, MYR 150 million for the next ten years. This is a continuation of the last ten years, 'cause the last ten years we pledged 100 million, sorry. So for the next ten years, it's another MYR 150 million. This is for the education pillar. It's a continuous commitment towards the education pillar, which is predominantly aimed to advance the skills and knowledge of young Malaysians for them in the digital economy.
A bit on the progress so far as Axiata 5.0 is concerned. As a part of the ongoing portfolio optimization efforts rather, as you know, we have disposed 5% stake to an Indonesian investor by the name of Ferrymount Investments, which is an SPV between Tiga Investments and Provident Capital Partners. That's for about just about $100 million. We are on track with the Celcom Digi merger. You would have read the announcement yesterday that MCMC has accepted our Form two submission. Digital banking license application, we're continuously engaging Bank Negara. We are one of the nine shortlisted parties out of the 24 earliest submitting parties.
We are moving closely to conclude the due diligence that's been undertaken for the joint acquisition with XL of Link Net, the fixed broadband business. edotco remains focused on identifying new opportunities for expansion. As far as the 5G SPV, the engagements with Digital Nasional Berhad is very encouraging developments, and we're progressing in the right direction. Perhaps I'll hand over the session now to Vivek to take us through the details of the performance of each of the businesses. Vivek?
Yeah. Thank you, Dato'. Sorry. Thank you, Dato'. A very good afternoon to all of you. Good morning to some who are sitting on the other side of the earth.
Right.
Let me start with the reported results. A strong quarter and year-to-date performance with 5.9% growth in revenue, and 5.5% growth in EBITDA. All OpCos delivered performance growth year-on-year, excepting Ncell. Ncell was impacted marginally because of the lower ILD revenue consequent to the pandemic effect this year. The PATAMI grew by 13.2%, largely coming out of higher EBITDA and lower finance costs, to some extent offset by the one-off gains. Last year, we got an XL tower sale around MYR 300 million. This year there has been an additional charge on account of accelerated depreciation, which is around net MYR 151 million.
If you adjust for these two, the performance on a year-to-date basis on PATAMI has been extremely strong. If you look at the quarter-on-quarter numbers, we've seen a 2.4% growth in revenue and 1.7% growth in EBITDA and around 26% growth in PATAMI. Next slide. On the underlying performance, underlying is based on constant currency. As Dato' alluded, ringgit strengthened across all our currencies, specifically Sri Lankan rupee. If you adjust for the currency and take it on constant currency, our underlying performance for the year-to-date grew by. Revenue grew by 7.7%, EBITDA by 7.6%, pretty much in line with the growth in revenue. EBITDA margin remains stable at 44%.
A higher PATAMI at MYR 9.14 million came from improved EBITDA, lower net finance cost and lower taxation. This was partly offset by accelerated depreciation on 3G assets at Celcom and Robi. If you recall, last year, at year-end, we did accelerate our investments in 3G with the intention of shutting down 3G in all markets by the end of this year, except Bangladesh, which would be in 2023. The execution is pretty much in plan, except Celcom may have something going into next year.
Revenue growth has been extremely good across markets, with Dialog growing at 19.5%, Robi growing at 8.1%, Celcom at 4.6%, Smart at 10.7%, and Axiata Digital more than 100%. This is coming essentially from the ADA business, which is the analytics and advertising business of Axiata. As I said, quarter-on-quarter growth at 2%, coming from across all opcos excepting Ncell and to some extent EDOTCO. EBITDA strong growth, 7.6%, coming across different markets. Celcom at 12.8%, but if you recall, last year we had the restructuring program in Celcom in quarter two. If I adjust for that, Celcom EBITDA growth is around 6.8%.
The other one to highlight is really the reduced losses coming out in Axiata Digital Business, which is both the ADA as well as the Boost business. We continue to perform well on our operational excellence program on cost saving. We've delivered for the year to date around MYR 378 million on OpEx and around MYR 815 million in CapEx. I think the question really is where does this CapEx saving go? As you know, all the markets during this period of time continue to have much greater growth in data consumption than the estimates we had.
The fact that we've been able to give that kind of a data consumption with similar kind of CapEx level is because of the substantial savings we could get on CapEx through network optimization as well as vendor negotiations. Quarter-on-quarter, EBITDA growth of 0.4% has been contributed by all OpCos except EDOTCO. EDOTCO was impacted because of restructuring program, which we carried out, of impact of around MYR 40 million during the quarter. This strong EBITDA performance, lower net finance cost and taxation benefits resulted in our underlying PATAMI on year-to-date basis growing by 74% and around 30% growth, 29% growth on quarter-on-quarter, in the underlying PATAMI. As I said, the contributors for that have been EBITDA, reduced losses in Axiata Digital businesses.
Accelerated depreciation, which has been partly in quarter three, has been offset because most of it has been already taken care of, and lower net finance cost and taxation. I talked about the quarter-on-quarter performance of 29% growth in underlying PATAMI. Next slide. This is just to depict how the underlying performance has been delivered from last year year-to-date, which is MYR 546 million, to this year, year-to-date at MYR 949 million. If you see, largely coming out of the EBITDA development, reduced losses in digital business, taxation and finance costs. D&A has been higher by MYR 373, mainly because of the accelerated depreciation, where the impact has been around, at a gross level, around MYR 200 million for year to date.
If I look at the reconciliation between the reported PATAMI versus the underlying PATAMI, it's essentially on account of Forex. As you know, Ringgit, while it has strengthened against all other operating currencies this year, has actually weakened against dollar, and that's the consequent impact has been unrealized Forex losses, which is the main contributor for the difference between the reported numbers and underlying numbers. Next slide. This is just a depiction of OS here. I think Dato' alluded to that. Our cash flows have been pretty stable. If I adjust for the lease payments, again, our cash flows generated during the three quarters is around MYR 1 billion.
Largely, the impact coming out of improved cash flows from Celcom, but reduced cash flows coming in from XL Axiata and Dialog. XL Axiata has been acceleration of CapEx investments, and Dialog is essentially a phasing issue where there have been some CapEx which has been preponed to provide better quality of service, but does not mean that full year CapEx guidance is going to be exceeded. EDOTCO, essentially because last year, because of pandemic, we could not roll out some of the towers. This year, EDOTCO has increased around close to 3,000 towers during the year, and that's one of the reasons for the CapEx increase happening on the EDOTCO business. Next slide. This is the balance sheet position. Our gross debt to EBITDA is 2.49, which is pretty much stable.
Cash at MYR 7.3 billion, which is a strong cash position resulting in net debt to EBITDA of 1.83x. Pretty stable balance sheet. We have a policy of looking at around close to 50% Forex hedging. At this point in time, we are at pretty close to that, at 48%, which is including the natural hedge of dollar reserves in some of the markets. As you know, last year, we did carry out a MYR 1.5 billion bond issuance program, which resulted in us getting a fixed interest for a period of 10 years and 30 years. Consequent to that, we have fixed our interest at 69%.
That does bring in some bit of stability given, as we see, interest rates in most of the markets are expected to go up over the next year or two. But this would cushion our position because we actually managed to get lock in our long-term debt at very attractive interest rates. Consequent to that, our debt profile in terms of maturity is also fairly strong. We have only 18% of our debt within one to two years, and majority of that actually over five years, if you look at 56% of our debt. Our cash position fairly strong across OpCos. The key holders of cash are essentially Celcom at the group level, and EDOTCO. EDOTCO is largely also gonna be used for further expansion of the tower business. Next slide.
Quickly touching on the performance of each of the OpCos. I think Celcom has delivered well, with 4.6% growth in revenue year to date, 6% growth if I consider even the devices year-on-year, which is a strong growth, mainly coming out of prepaid, as around close to 800,000 new prepaid customers and a 12% growth on the prepaid business on a year to date basis, which is a strong growth. Also contributed by the MVNO, which is equivalent to around 12% growth. I think postpaid business has been fairly stable. If any impact has come because of the interconnect and roaming revenues kind of coming down.
That's the result of around 4.6% year-to-date growth, 1.2% quarter-on-quarter growth. EBITDA margins remain fairly stable for us. In fact, improved on a year-to-date basis. A 13.4% growth in EBITDA. If I adjust for the restructuring charges last year, EBITDA growth of 7.3%, mainly coming out of improved revenue as well as better management of credit and inventory during this year compared to last year. Also a cost excellence program which has been focused on in Celcom during the year.
That has resulted in a strong cash flow generation, around close to 28% growth on a year-to-date basis, 14.7% growth for the quarter-on-quarter, and resulting in improved PATAMI of close to 7%. This PATAMI is after adjusting for around MYR 116 million of accelerated depreciation. If you adjust for that, the PATAMI growth has been fairly reflective of the EBITDA growth and the cash flow improvement there. Next slide. XL, I think our quarter's been reasonably good with 1.5% growth in quarter-on-quarter.
However, year to date has been impacted by a poor quarter one of 2021, which was impacted by high competitive intensity as well as the demand for running programs like the school program in that market. And that's the consequent result has been reasonably flat revenue compared to last year and flat EBITDA compared to last year. We've seen quarter-on-quarter progress happening in that market, which is good news. CapEx has been higher, and we are also looking at a higher guidance of CapEx for this year compared to what was earlier projected. And that's the consequent result has been lower FCF and a lower PATAMI.
Now, PATAMI looks lower because last year we did get around IDR 1.6 trillion benefit of sale of towers in the first and second quarter of last year. If I adjust for that, PATAMI growth has been fairly stable. Next slide. Robi, solid performance coming essentially out of growth in data revenue and stable to positive development in the voice revenue. 8.1% growth and quarter-on-quarter growth of 2.3%. EBITDA margins have been slightly impacted on a year-to-date basis this year because of higher spend on the network cost, because of continued expansion on coverage as well as sales and marketing expenses. Free cash flow remains stable.
PATAMI, a strong PATAMI growth of 44.3% mainly coming out of lower finance costs in Bangladesh because of the lower interest rates regime prevailing at this point in time, and then some benefits coming out of the taxes. That's the Robi performance. Next slide. Dialog continues to have very consistent performance. In fact, it's doing extremely well despite the challenging macro environment in that market. We continue to face with the macro headwinds, but company delivers very strong performance on all lines, be it mobile, fixed, TV, as well as the enterprise business, which is through a new acquisition of H One, completed last year.
That's reflective of strong EBITDA growth of 19% year-to-date, 10% growth on a quarter-on-quarter basis, with strong EBITDA margins of 42%. FCF marginally lower. As I said, this is on postponement of a CapEx spend, and it does not reflect that full-year guidance is going to be exceeded. It's just the timing of the spend, and that's to take advantage of improved quality of service for the customers there. The lower interest rates, and high EBITDA is reflective of 45% improvement in PATAMI for the year. Next slide. Ncell, I think, the core revenue has been growing at 4.4%, but it is insufficient to take care of the drop in ILD revenue.
ILD revenues dropped by around 20.6% year-to-date. One of the reasons is obviously because of pandemic, there have been the migrants back into Nepal, and that's reducing the overall traffic into Nepal. Because of the lower ILD revenue, we are seeing revenue ex-device at -1.1%. However, company manages its costs specifically direct costs pretty well, which is reflective of EBITDA growth of 3.7% and a strong PATAMI growth of nearly 70% coming in, and that's because of the lower CapEx spend relative and some impact of taxes because last year there was tax also including taxes for the previous year. Next slide. Smart continues to have very steady performance.
The performance has been extremely, kind of, predictable in that sense, because they continue to deliver in line and better than expectations, month-on-month, quarter-on-quarter. As Dato said, there is higher revenue coming essentially because of the accounting adjustments which has been done. But on a cash flow basis, marginally improvement of 1.9% mainly because of increased CapEx, specifically to cover some of the rural parts of the country. PATAMI has been fairly stable with a growth of 6.4%. Next slide. Digital business is something to highlight. As you know, we have two pillars of digital business: the analytics data business, and advertising business, and the digital financial services. Two prong actions on those.
One is the ADA business continues to deliver well on top line growth as well as profit improvement. I think this year, if you look at the PATAMI of the ADA business for the full year is around positive MYR 27 million, with a revenue, net revenue of MYR 650 million. That's continues to do well. The second is lower losses coming in the Boost business. While there has been an impact on GTV offline business, the business has been able to manage the online growth of GTV during the year so far reflective of GTV growth of 9%. The revenue growth has been fairly stable compared to last year.
Lower losses coming out with the efforts around lower marketing spend, which has resulted in overall profit improvement from last year for the digital business of nearly MYR 110 million. That's I think the direction in which we are moving ahead with these businesses, yeah. Next slide. EDOTCO continues to do well with growth coming in the key markets, Malaysia and Bangladesh, with both improved, mostly coming out of increase in number of towers, which has resulted in 3.9% growth on a year-to-date basis, and EBITDA growth of 2.7%. The impact of EBITDA has been also because of the one-off retirement benefit provision made in Malaysia in quarter three.
Free cash flow, as I said earlier, is mainly because of the increased CapEx, on account of higher site orders, which is coming, which is positive because these are basically future revenue stream, which the business should be able to capture. However, PATAMI really continues to be, well, partly also because of the unrealized Forex gains, coming from the business. Next slide. Hand over back to Dato.
Yeah.
Moving forward.
Thanks. As I've mentioned earlier, the guidance we'd like to give for the full year performance is from a low single digit for both revenue and EBITDA to a mid-single digit guidance for both revenue growth as well as EBITDA. In so far as CapEx is concerned, as both Vivek and I mentioned earlier, the higher CapEx at XL, which is for network improvement, quality and coverage, we are giving a guidance of slightly higher than the 6.5 given earlier to 6.9 billion for the full year. Yeah. Slide. In so far as risks concerned, as I've mentioned earlier on, global supply chain disruption leading to inflation and pressure on SIMs as well as delayed network delivery.
Sri Lankan macroeconomic risks, as well as a weakening Sri Lankan rupee. Several regulatory uncertainties in several of the markets we operate that continue to pose as a risk. As well as slower than expected recovery in Ncell. Same time, we see much more improved data monetization for our digital telcos, better capacity utilization. There's a lot of analytics that we've applied in the business to make sure that the capital allocation for the CapEx is money well spent. Sustained momentum for Axiata Digital, both the two businesses. Improved offline payments for Boost, synergistic benefits for ADA, as well as the digital telcos. As Vivek mentioned just now, a pickup in site rollouts for edotco, with the easing of lockdown restrictions across the various markets.
Now, I'd like to take this opportunity to also announce or inform you of our Axiata Investor Day. No?
Yes.
Yeah. Sorry. On eighth of December at 2 P.M., the formal invitations will go out shortly to all of you. I do hope that you'll be able to join us. We are going to showcase the two digital businesses, namely Boost Holdings and ADA, Axiata Digital and Analytics, to sketch for you their trajectory and their path to grow the businesses. Of course, no session would be without Celcom also to give a bit of color on the ambidextrous organization as Dato' Idham refers to Celcom these days, focusing on convergence as well as enterprise. As well as XL.
We'll also have a short presentation by XL to address you know some of the common concerns that investors and analysts have raised around the Indosat Hutchison merger and what is our strategy moving forward in Indonesia. Yeah. I think that's the presentation for this afternoon. Over to you, Clare.
Okay. Thank you, Dato'. Let's move on to the Q&A session. Just a quick reminder to all, two ways you can ask us questions. Ask the question verbally, so, click on the emoji and you can raise your hand. We will take your question. Don't forget to unmute your line. After the question, please remember to also mute your line again. The other option, of course, is via the chat group. Just type the questions in there, and we will answer that accordingly. As usual, we will also be joined by our colleagues from Celcom, CEO Dato' Idham, CFO Jennifer, as well as CMO Alan. From XL is CFO Pak Budi, and edotco, we have CEO Adlan, as well as Dr. Hans, Group EVP. Feel free to engage with them if you wish during this Q&A session.
We'll start the Q&A session now. Any first questions?
Sorry. I guess Foong is already on the call.
Yeah. We have, Foong on the line. Please, Foong from CIMB.
Yeah. Hi, good afternoon.
Hi.
Dato' and team. Thank you so much for
Hi.
Doing this quarterly conference call, as usual. A couple of questions from me. Firstly, I wanted to ask about the recently proposed tax on foreign sourced income that was in the budget 2022. If that is passed, right, what would be the impact on Axiata's earnings and cash flow going into next year? Does it change Axiata's plan to be a high dividend company by 2024? Because, you know, that really relies, right, on OpCo streaming back dividends back to MalCo. That's question number one. Number two, with regards to news recent days about the 5G wholesale pricing from DNB, mentioned by the finance minister, any thoughts on that? Is that sufficiently low enough?
What are some of the other key critical areas you think need to be sorted out before we can proceed with the commercial wholesale agreements? Or are we all set to go here? Third question, on the XL and Axiata joint acquisition of Link Net, appreciate if you can give us a bit more color as to why it has taken so long to crystallize that decision to acquire. What are some of the considerations that are currently being undertaken? Yeah. Those are my three questions. Thank you.
Okay. I'll try to respond on the first question. Perhaps Vivek can chime in. On the second question, I'll give some color, or I'll try to give some color on this. Although you would appreciate, yeah, Foong, the discussions or negotiations with Digital Nasional are ongoing. I think it'd be very premature for any of us to say anything in this forum because you know the many aspects of that process, not just the financial or commercial terms, but as well as the technical configurations that the MNOs, including us, that are in you know in discussions with Digital Nasional. Perhaps on the tax bit, yeah? Yes.
You know, Cukai Makmur and Cukai, the tax on the foreign-sourced income, well, I guess, as you qualify, if it's approved as proposed, it will have an impact. However, we are maintaining our plans based on our current looking at the initial estimates of how that would impact us to retain that plan to be the high dividend company by 2024. Now, having said that, just so you know, we're in the midst of getting our business plan for financial year 2022 approved by the board to be formally approved by the board. We are anchoring that business plan on dividend growth, well, at least from this year to next year, towards that MYR 0.20, minimum MYR 0.20 for 2024.
The short answer to your question, we still are maintaining that those plans, notwithstanding the possibility of foreign sourced income being taxed, which could have an impact on Axiata's dividend flow next year. 5G wholesale pricing, yes, as I've mentioned, discussions are ongoing. It'd be a bit premature for us to make any comments in this forum. Sorry, Vivek, you want to mention anything about the tax there?
Well, I think you covered it well. I think just on the Cukai Makmur, obviously it's one year impact so far as we read. It's not a long-term implication which is there.
Mm-hmm.
I think when we say dividend yield company, I think we are looking at a much longer-term view on that, as you've said, 2024, et cetera. I think there would be impact, but we think this is a one-time impact. As far as foreign sourced income is concerned, it's still not very clear because our dividends coming from other countries, there are most of the countries where we have operations, there are double taxation agreements except Nepal. We should be able to get certain benefits coming out of the double taxation agreement. As well as, you know, we need to understand how this dividend is going to be still a separate chapter or is it gonna be part of overall income because you know we have corporate expenses, et cetera, being incurred.
I think we need further clarity on this before we can say really how much is the impact going to be. I think yes there would be impact, but on the Cukai Makmur is more about one year impact. The other one is something which we're still evaluating and we'll wait for the details before we can comment on.
Thanks, Vivek. Dato' Idham, do you want to add anything on the 5G wholesale pricing or discussions, ongoing discussions?
Perhaps we can-
Okay.
We can move on.
On Link Net, yes, you recall we announced the intention to enter into discussions with the two vendors, CDC and Lippo. Why it's taken a bit of time is, we actually decided to do a complete due diligence exercise on the business, operational, technical, legal and so on. So it took a bit of time. We are also negotiating the sale purchase agreement. Both are at the tail ends of that exercise. We're hoping to get our formal board approvals soon and announce the transaction in due course, hopefully before the year end.
The other aspect to this is, you know, the capital markets in Asia, they have certain peculiarities, and depending on the configuration, depending on the structure, there's. We needed to look at the tax aspects of the transactions in terms of structuring as well as funding that acquisition in due course. That's why it took a bit of time. No stumbling blocks so far as I'm concerned, so far as I can see. We hope to do that in the next, you know, before year end, for sure.
Understood, Dato'. I'm not sure whether Dato' Idham is able to.
Say anything.
Say anything at this point. Yeah. Technically, I mean, I'm not sure whether he still has technical issues. But I just wanted to also. I mean, I know your point on the discussions with DNB, Dato, and you know, with regards to also the technical configurations and all that still needs to be discussed. But I just wanted to understand whether, you know, the wholesale pricing that was mentioned, right, 20 cents per GB, is that something that seems pretty attractive to you guys or not really? Because if I look at, I think the slides from last year's Investor Day, and you guys had shown, right, one of the slides, that you guys were also trying to bring down the cost per GB.
Yeah.
Is 20 cents per GB something that is, you know, very is pretty low or you think you could have also done it on your own if you had rolled out the network on your own?
Idham, can you hear me? Are you able to speak?
Perhaps I understand that it's muted on the other side. Celcom.
He can't speak.
Yeah. I think there's still a little issue over there. Can we take the next question first, and then we circle back?
Yeah.
Yeah. Give them about another two more minutes.
Just maybe a place marker, Foong. The $0.10 per gig, the $0.10 per gig we talked about is total cost. Maybe we're not comparing like for like to just look at $0.20 per gig there. There are also other aspects of that number, that it's not the one number. Yeah. It's not the total cost. Idham?
Dato, they're trying to recall on their laptop, so it takes two minutes.
Okay. Foong, if you don't mind, we park this question first. We have to get Idham connected, and we'll take on other questions first.
Okay, no worries.
Yeah, apologies. Yeah, Foong, we'll circle back. Apologies on that.
I think Chen is coming in now in the meeting.
Okay. Now, in any case, we have a question from Paul, I believe.
Yes.
From CLSA. Coming through at the group chat. May I know the reason for the lower net finance costs and taxes for the year and any guidance on normalized effective tax rate?
Mm. So-
This is for the group lower net finance costs.
Sorry, go on.
No, I think at group level, our net finance cost is down by around MYR 140 million compared to last year. Most of it is coming. Sorry. Can you hear me?
Yeah. No worry.
Most of that is coming from the borrowing which we did last year. That brings down our overall cost because we did close that last year in August, which reduces our overall group cost, as well as the lower cost coming in Celcom where they have been able to trade on some of their debt which was at a higher rate. Also coming on some of the markets like Robi where the short-term borrowing rates have been considerably lower given that there has been surplus of liquidity available, as well as the other markets, for example, Indonesia also seeing the interest rates in general coming down.
I think it's to do with the cost of borrowing at group as well as the overall interest rates environment in different markets. Having said that, I think this also does help because these are the rates, as I said earlier, pretty much larger volumes of that has been locked in for a longer period of time. As far as the tax is concerned, I think there are a couple of markets where we've had certain tax benefits coming in. One we did have in Nepal, which I talked about, because last year Nepal did have to factor in part of the tax which was relating to the previous period. That's no longer the case.
Second has been last year in Indonesia, there was impact coming in on the deferred tax, which could not be utilized within the period available. That's I think the effect which is resulting in the lower taxes coming. Our effective tax rate is being marginally lower compared to at the group level, compared to last year. Having said that, it's still-
Effective tax rate is higher than the corporate tax rate because of certain regulations in certain markets which require us to pay higher than what is the corporate tax rate in those markets.
Idham, you wanna come?
Yeah.
Dato', you have to mute one or the other. Okay?
Well, you can hear me now. Hopefully you can hear me. Some technical issue we have being muted at the system level. Okay. Paul, sorry about that. Let me just try to add on a little bit to what Dato' just said. I think what Dato' said is actually very right at this point in time. There's still a lot of discussion ongoing. It's still progressing, but it's improving as every time we discuss with the wholesale party with DNB. Besides the commercial, there's also not just the technicalities of the two networks that needs to work together, but also the kind of experience.
We want to make sure when we launch the 5G services, that the experience that the customer has, the way they come on board, the way they register, and even when they have a problem, all that is also sorted out properly. So that's something that is being worked on between the organizations. Your question around the cost per gigabyte, yes, that's something is still being worked on with them. What is good enough. We actually it all depends on the kind of traffic that we expect to come in the 5G world. We have seen well, during the 3G to 4G migration, the traffic has increased quite significantly.
Even if you have seen in the past 12 months alone in the 4G space, the traffic also, where we are today, if you go back 12, 18 months ago, we never expected for it to be where we are today. That also will continue when we, as we move into the 5G space. Some of this is still being worked on. What is the level that we're looking for? What would be the right level to say at the right cost per GB? That's something that we need to still look at. I don't think we can confirm at this point in time.
Your question whether we could have achieved the same level if we were to do it ourself, then well, there's a lot things that needs to be looked at. It's not just comparison just like that. Of course, there's a lot of collaborations happening these days on our network, even on the 4G itself. Beyond just the passive infrastructure kind of collaboration, we're also doing of the active infrastructure sharing. There are methods to reduce our the cost, but that is something, I guess, that we can't compare at this point in time. I hope that helps.
Yep, that helps.
Yep.
Thank you so much, Dato' Idham.
Thanks, Paul. Paul, sorry, jumping back to your question. Is that clarification from Vivek, is that sufficient?
He actually texted in via the group chat.
Sorry. Yeah.
So, uh-
Can he respond?
Can you respond?
Presumably that's fine.
Yep.
Yep.
Okay.
He says it's okay. Thank you.
Good. Thank you.
Let's move on. I think the next questions come from Alex from Nomura. Go ahead, Alex.
Okay. Thanks. Yeah. I've got three questions. The first, of course, is the Cukai Makmur. Just asking in a different way, given the fact that you know Celcom is really starting to improve so much, would you try to ramp up your CapEx in such a way so that you can minimize your potential tax impact from the Cukai Makmur? Also, could you give a bit of estimate on the potential quantum move in terms of the corporate tax rate overall? Would it be one or two percentage point? I know because you've got so many other operations, right? It wouldn't just be Celcom. I mean, it's just Celcom.
I'm just wondering, could you give us a bit of estimate on the potential increase in terms of your tax rate, overall tax rate? The second one is regarding Digital Nasional. Supposing Telekom Malaysia's unifi were to go ahead and take on the wholesale agreement, would that put pressure on Celcom to also jump in, even though it may not be value accretive for the group?
Okay. Those are the two questions?
Yeah. Yes.
Alex?
Yes.
I'll try to answer your first question. I mean, I don't think we want to be driven to some dysfunctional behavior by accelerating CapEx to cushion any tax benefit that we might derive from CapEx. Certainly wouldn't, you know, put anything on record. Our CapEx plan will be based on our projections looking at the quality of service, capacity, and so on. You know, the last thing on our minds would be to try to take advantage or trying to do, how shall we say, accelerate the tax planning exercise by ramping up CapEx. So that's not really gonna happen. Digital Nasional, if unifi take up a wholesale agreement, then would that put pressure on us?
I think we need to evaluate the details, and we're not quite sure what the agreements that DNB is negotiating with the other parties. I don't know, Idham, if you want to answer, try and answer this question.
Yeah, Dato'. The agreement, whatever that we're going to do with the industry will be under what they call the Reference Access Offer, which is standardized for the whole industry and which needs to be approved by MCMC. Hopefully this is a standard offer for everyone. I guess every company will have to make its own evaluation of the RAO and whether it's the right time to go in and whether to take up the wholesale agreement or not, as I think that's up to the individual companies.
Yeah. In other words, the terms of the wholesale agreement is uniformly applied, will be uniformly applied across all the industry products, yeah? We will be driven by that sort of details, the terms of that Reference Access Offer that being finalized. Yeah. Perhaps at this stage, maybe it's not appropriate to make any comments on whether we put pressure on us or otherwise. Vivek, you want to talk about the tax impact, Vivek, based on the question Alex has given?
Yeah, I think, just, as I said, you know, tax on foreign income is still not very clear, so we can't estimate it. The impact which could come on account of Cukai Makmur is expected to have around 3%-4% impact on our overall effective tax rate. Yeah.
That's wonderful. Just following up on your answer on the Digital Nasional. Can management say that you will only sign on to the wholesale agreement if it is value accretive to the group? There, you know, there would not be some national consideration or social obligation on your part to jump in.
Well, we are a listed company. Celcom is a wholly-owned subsidiary of Axiata. It is a decision that will be decided by the board. One would have thought that, yes, it would also be. We would need to take into consideration, you know, the terms of the agreement and to make sure that it is accretive and makes sense. Because if you look at the premise of DNB, the whole idea makes a lot of sense, where you share network. Even as we speak, even before this, the MNOs are very active in sharing network. Why wouldn't we, you know, from a country point of view, you save foreign exchange. It does make sense if it's accretive for us to enter into this wholesale agreement.
Again, it's certainly for the board of Celcom and the board of Axiata to take this into consideration and to decide on this. Yeah.
Okay, great. Thanks. That's all for me for now. Thank you.
Juliana, is it?
No.
No.
Who's next?
At this point, I don't see any other hands raised.
Any questions?
Someone on the chat box.
Any questions in the chat box? No?
We don't seem to have any further questions at this point in time.
What about that hand? AA. No.
What about who's on next, right?
That was Alex. Okay.
Okay. Oh, yes. I was just gonna say, going once, twice.
Paul is-
Let's see. Paul is back, I think. Paul from CLSA, please go ahead.
Yes, Paul.
Hi. Yeah. Can I just check? 'Cause the last quarter you mentioned that the Celcom Digi merger submissions have been made to MCMC. What's the difference between the announcement a couple of days ago? Just wanting to gather the stage of the merger.
Well, this is just a process that has been, that is prescribed in the you know, MCMC sort of evaluation, if you like, of the submission that we've made. Form two just confirms our submission is you know, complete and so on, and they will continue to evaluate and raise questions along the way. The good news is the MCMC has got the consultants on board. We are constantly engaging, both Digi and Celcom are constantly engaging with MCMC to try to address any concerns that they may have or even anticipate any issues or concerns that they may have. As of today, there is no issues that have been raised thus far.
You know, as I said, we working very closely with MCMC to make sure that, you know, we can address concerns they have ahead of time, if you like. Yeah. Idham, do you want to add anything?
Can't hear.
No?
No.
Oh, you're muted. Yeah.
We have new questions here.
Is that okay, Paul?
Yep. Yep. That's fine. Thank you.
Yeah. It's a process we go through, so and because it's a milestone, so that's why the announcement came out more than anything else. Yeah.
Okay. Let's move on. I think we have a question from Lonnie. Basically, any comments on the recent news report on acquisition of Touch Matrix?
Sure. edotco continues to identify opportunities to acquire assets and companies in all its operating footprint, Malaysia, especially. As you know, in Malaysia, there are several other state-backed companies that had started on this tower business, you know, easily 10, 15 years ago. We continue to look at opportunities to, if you like, you know, build up the portfolio of tower assets and, you know, relative to the other markets. Of course, Malaysia market will be much more easy for us to manage, as opposed to other potential markets like Pakistan or, you know, Laos and so on. The news on this is part of our continued sort of process of identifying opportunities.
I wouldn't want to make any comments on the news headline a few days ago, if I can, at this stage. It would be a bit premature.
Okay.
[uncertain].
Thank you, Dato'. I think that's our standard line. Okay, let's move on. We have a question on the chat group from,
Kairos
Kairos from ETF. Would the 1 million, this is basically to Celcom, 1 million additional subs sustainable and can be repeated?
Before I hand over to Dato' Idham, I think this is always a concern when we talk about additional subscribers. Let's face it, the prepaid customers, you know, there's always a churn at that particular segment of the market, and we are constantly monitoring the yield or the revenue rather, on the subscribers. The 1 million additional is, it's a good traction because if you remember, this time last year, we lost something like 1 million subscribers as well because our go-to-market strategy was not quite up to mark, our products were a bit disorganized and so on. I'd like to think that this is sustainable and perhaps, Dato' Idham, if you can respond to this question specifically.
Okay. Yeah. Well, thank you. Yes, we do hope that this, the momentum that we are experiencing now will continue. We're still seeing on the ground because this is not the momentum that we have seen in the past few quarters. It's not just about new packages, et cetera. It's a combination of many things. Of course, our prepaid offering is quite attractive and quite competitive in the market. We have done also what you call it, the transformation at the trade level on how we work with our dealers and so on and so forth. Transformation of the sales team. We're looking at different way of we do sales and marketing, so on and so forth.
We do hope at this point in time that this trend will continue. We're also not just focusing on the prepaid, we are also reforming our postpaid as well. If you have seen in the market quite recently, we introduced a very attractive new MEGA plans and new MEGA Family Plans, and we also introduced new convergence plans with Celcom MAX. Our fiber is also bringing getting well in the market. The transformation that we're doing is not just about growing purely prepaid subscriber numbers. Yes, prepaid today is the fastest growth among our products, but we are seeing good tractions on the postpaid, good traction on our convergence product as well.
It is a bit too early to talk about the other convergence and fiber so on and so forth. We're seeing good signs of those.
Okay. Thanks, Dato' Idham. I think we have a follow-up question perhaps from Foong. I see your hands are raised again.
Yeah, thanks for the opportunity. A couple of more questions from me. Firstly, for Celcom, if I heard it correctly just now from during Vivek's presentation that the MVNOs under Celcom is doing well in terms of their revenue growth. I just wanted to understand what is driving their good performance, you know, for the first nine months and also the third quarter of this year. Also on Celcom, the EBITDA margin performance have been improving sequentially in the last three quarters. Good to see that. Wanted to understand whether that's sustainable going forward. In particular, with regards to the drop in the direct cost, what was the driver in the third quarter? That's the question on Celcom. Secondly, on Ncell.
It was mentioned just now that the spectrum was awarded in April, but rollout has not been as earlier planned. Can you give us a bit more color on the issues that you are facing there? Are these still ongoing? What should we be expecting going forward? Thirdly, with regards to portfolio rebalancing, we saw that 5% reduction in your stake in XL Axiata. Any opportunities you think going forward to do more of rebalancing? You do still have very high stakes in Ncell, right? Any opportunities there as well? Those are my three questions. Thank you.
Maybe either Idham or Jennifer can address the questions on the MVNO growth as well as the EBITDA margin. I'll take the Ncell and the portfolio questions. Idham, Jennifer.
Okay. Thank you, Dato'. Thank you, Foong, for the question. Let me just touch on the MVNO, then I'll pass to Jennifer on the EBITDA and the cost management. On the MVNO, yes, we're seeing growth in parallel to Celcom's own growth. I think it has to do, of course, with the overall demand during this pandemic and during the MCO period. The MVNO, of course, when it rides on the Celcom's network, it has the coverage. What you will see also, if you have seen also, MVNO has come up with quite clever packaging and product offerings that is attractive to the segments that they're going after. As well as they also come up with new ways of going.
Of managing the trade. I guess this has contributed towards their growth, as well as, of course, we continue to support them into making sure that they are able to do the packaging that they need in our arrangement with them. Yeah. I pass to Jennifer to talk about the EBITDA.
Right. Thank you, Foong, for the question. In terms of EBITDA, we are quite happy to see that the EBITDA has been sustaining and actually inching up as we on a quarter-on-quarter basis. The main reason for the improvement is actually mainly coming from two fronts.
It's just down, isn't it? Ncell.
One is actually on the credit management, where we see that the bad debts we have actually improved in terms of the credit management. The second thing is also because of the cost optimization efforts that we have put in. Some of the structural change that we have actually put through, we are starting to see some small impacts. That is the main reason for the EBITDA margin improvement. Also, as you rightly pointed out, in terms of the direct cost, direct cost has actually dropped, mainly because of the device revenue. Device revenue in Q3 was lower as compared to Q2. That was the reason for the drop in terms of the direct cost. Otherwise, it's actually quite flattish in that sense. Hopefully that answered the question, Foong.
Yes. Thanks, Jennifer. Just maybe a follow-up question for Dato' Idham. With regards to the MVNO performance, right? Do we know, I mean, or can you share which MVNO is doing well, and who are we taking market share from?
Probably that's something that we are not able to share. It's not fair to share among and to compare among our MVNOs. Both of them, all three of them that are active, are doing relatively well. They are in their respective markets that they operate in. One is very much focused on the prepaid. The other one is very much focused on the postpaid.
Okay. Got it, Dato' Idham. Thanks.
Yeah.
On Ncell, why there's this delay in the rollout? Dr. Hans, are you on the call?
Yes, I'm. Can you hear me?
Yeah, I can, loud and clear. Do you wanna take that?
I think the reasons center on the pandemic. Nepal had one of the most enduring lockdowns when we compare with the other markets. There are actually four waves of prolonged lockdown and strict lockdown. This had two impacts. One, the actual rollout itself was indeed, I would say, offset by around a quarter and a half in terms of the actual rollout. But even more significantly, the pandemic impact on usage itself on the mobile networks, common to both Ncell and NTC, had the larger impact in terms of not being able to exploit the new spectrum as it was rolled out. I hope that answers the question.
Well, thank you, Dr. Hans. And Foong, on your last question, the recent sell-down of 5% to Ferrymount Investments. That is in a way strategic because we feel that it's good to have a local partner in that form, in that sense. Well, I mean, you might ask why only 5% if it's just a local partner. But I think, given the situation in the competitive nature rather of the industry there, you know, they are comfortable with 5% stake to start with.
Insofar as the other investment is concerned, yes, we own 80% of Ncell, but under current circumstances, I think valuations will be a bit of a challenge for us to monetize if we're even thinking of selling down the stake in Ncell. Given the circumstances around the tribunal hearing at the international arbitration for the capital gains tax issue, some tax issues on Section seven, and so on. Not quite yet. The one for XL, as I said, is a bit more strategic in the sense that we're bringing in a local partner to help us with dealing with the situation of the local issues, distribution channels, sales and marketing outlets, and so on.
We are hopeful that they would be able to assist the team that we have in XL to try to take on the market share or the opportunity that's presented with the Indosat Hutchison merger insofar as market share is concerned.
Okay, understood. Thank you so much, Dato.
Thank you.
Okay. I don't see any other raised hands or questions coming through. Perhaps I hand over to Dato' for your closing remarks.
Okay. Thanks again. So again, please put a place marker in your diary. The formal invitations will come out on December 8, 2 P.M. onwards. The current program that Clare has prepared stretches for about four hours. Whilst I don't promise you a song and dance event, I do promise a very interesting presentation by the key businesses that we have. Again, it's Boost Holdings, ADA, Celcom as well as XL. Yeah.
Edotco.
Oh, sorry, I forgot about EDOTCO as well. Yeah, EDOTCO as well. Yeah. I look forward to meeting you on eighth of December. Thank you for joining us today and have a good weekend.
Thank you.
Thank you.