Morning, everybody. Maybe I'll take my mask off first. First of all, thank you for joining the call this morning. We're here to present the first quarter results for FY 2021. I do hope that you've had a chance to view our video on sustainability. It's a program we've started to launch last week, and the idea is to inculcate all the efforts around sustainability alongside our ESG program throughout the organization.
Those actors, if you like, in the video are actually our staff. If you look in some of the other videos that we've put up, they have, on their own, actually initiated their own sustainability initiatives at their very own homes. It's quite amazing actually what the team has done. Anyway, for the first quarter results, as you would have picked up from the press release as well as the Bursa announcement on Tuesday. It was a rather encouraging start for the year, notwithstanding the challenges we continue to face.
As you would, the press release carried a reported number of MYR 76 million PATAMI, of course, after adjusting for the, if you like, the accelerated depreciation, the underlying PATAMI is actually MYR 231 million, which is rather encouraging if compared to the first quarter last year. You recall there was a Celcom employee restructuring charge in financial year 2020, that's about MYR 101 million gross. I think the point about the underlying, the accelerated depreciation, that will continue a bit, but insofar as Celcom is concerned, it will turn positive in the third quarter.
Vivek will provide more details as we go along the presentation this morning. At the same time, the ringgit strengthened across the other currencies as a result of forex translation loss, again, non-cash item, that is slightly bigger for this quarter compared to last year. Insofar as our balance sheet is concerned, you can see that our operating free cash flow, that grows to MYR 1.1 billion, and this is driven largely by higher EBITDA, lower CapEx spend. As a result, our cash balances at group level is about MYR 6.6 billion, whereas at company level, it's about MYR 1.7 billion.
The good news is our debt balance sheet, capital structure, if you like, yeah, that's at 68% of our borrowings are fixed in nature. About 25% is due within the next two years. Moving on to the digital telcos. On Celcom, yeah. Celcom achieved a very strong subscriber growth, about 1 million subscribers over the year. You can see that again, the employee restructuring program costs, that had brought down the number for 2021, and again, accelerated depreciation. Revenue excluding device remained resilient. We had a stronger prepaid performance from the enlarged subscriber base.
Insofar as Axis is concerned, despite the intense competition pressures and weak consumer spending, the margin remained strong at about 50%. Yeah, EBITDA remained strong also. This is on the back of lower staff costs as well as network expense. Robi recorded strong data revenue growth. That's about 16.3% on data alone. Overall, revenue excluding device is a positive 2.4%. Of course, at the same time, Robi benefited from the listed status. As you may recall, the listing would grant them a reduction of about 5% in the taxation rate. As a result, reported PATAMI rose to about BDT 343 million.
EBITDA margin is stable at about 41%. Now, Dialog is, as you can see there, is a star performer. A double-digit growth across all metrics. Yeah. Whether we're looking at revenue ex device, EBITDA 12.3%, PATAMI grew about 64% and free cash flow is about 10%. Yeah. This is entire contribution from all segments, as well as the consolidation of the company that was acquired, that was a cloud solution service provider that was acquired in January this year. Insofar as Ncell is concerned, spectrum constraints remain. As a result, the numbers were a bit challenging.
However, as we may have been informed that the L900 was awarded without severe onerous conditions. We think the second half of financial year 2021 will be better. Yeah. In fact, the team was preparing itself for the award of the spectrum. The equipment that's been brought in and the rollout has started in earnest. Insofar as SMART is concerned, there is an impairment of investment of about MYR 5.4 million. As a result, PATAMI came down by about 31%. ADS benefited from increasingly a cashless ecosystem. Year-over-year revenue grew by 30.5%.
Net loss has narrowed down to about MYR 29 million. That's largely because if you recall in last financial year, there was an e-Tunai program, which resulted in the loss in financial year 2020 was about MYR 52 million. That's a significant improvement from a loss of MYR 52 million to MYR 29 million. Of course, at the same time, ADA continued to record better profits. In fact, it was MYR 10 million this year compared to MYR 2 million in financial year 2020.
You will also see in the presentation today, for the first time, we're disclosing the performance of our digital businesses so that there's a better transparency in terms of the achievements of these businesses. Insofar as EDOTCO is concerned, solid EBITDA margin that continues to be sustained at about 64%. PATAMI rose to about 42%. The good news is there is right now a limited impact from the Myanmar military coup thus far. There's a caveat there. We will continue to monitor the situation, and obviously will be functions of any changes or any impact, if you like, on the business there.
Insofar as we're concerned, there is no need for any impairment of the investment that we've made in the business in Myanmar. So far as our headline KPIs are likely to be in line. We expect the EBITDA revenue growth, revenue excluding device, projected to be in line of the guidance that we've given of low single-digit % growth.
Insofar as the downside risk is concerned for 2019, in view of the continuing challenges that face as a result of COVID-19 across all our markets, the introduction of lockdown or restricted movements, we expect that this will have an impact on the economic recovery, a slower consequence of the economic recovery. That will continue to be something that will pose as a challenge to our business. Lastly, insofar as ADA is concerned, you would have picked up again the announcement we've made of SoftBank Corp investment of about MYR 250 million into ADA, valuing ADA at about MYR 1.1 billion.
I think what's important is it opens up. On top of the capabilities, the analytics tools, and AI tools that SoftBank Corp. already have, what it does is also open up the SoftBank Group ecosystem to ADA. I think that's the plan that SoftBank Corp. has for ADA to make ADA its, if you like, digital analytics and AI company in the region with this 23% stake in ADA. Now, that's in a nutshell in summary, the performance of the companies and the business for the first quarter. I'd like to hand over to Vivek to take us through the details of performance of the companies.
Thank you, Dato'. Very good morning to all of you. It's quite early for some of you who are on the call today. Let me just go through the reported numbers first, then I'll go into more details by each of the operating company. Reported performance is flat around 0.5% growth year-on-year and marginally lower -3.2% from quarter-on-quarter with the 7.5% improvement in EBITDA. The reason why this is 7.5% whereas the underlying is 10% is because Ringgit has strengthened across all operating currencies.
Consequently, the impact on translation has been negative in terms of impacting the growth for the company. EBITDA from quarter-on-quarter was marginally lower at -1.4%, mainly because last year, if you remember in quarter four, we had some GST refund coming in in Celcom, which did lift the EBITDA for Celcom in quarter four last year. PAT at MYR 187, higher than the quarter, but marginally lower than previous year. Mainly because previous year, we had this one-off gain coming from the sale of towers in Indonesia.
This year, we also had marginal negative impact coming because of the accelerated depreciation impact coming in two markets, which is Celcom and Robi. I will just briefly explain the impact which is coming and how this will be looked at going forward. If you recall last year, we did plan to shut down 3G in most of our market except in Nepal, and we did take a MYR 600 million charge in quarter four last year. In two markets, the decision was to take it forward to 2022 and 2023. 2022 in case of Celcom and 2023 in case of Robi.
These two are where the depreciation has been accelerated, we are seeing some impact on the early period. We don't expect this impact to continue specifically in Celcom. There would be some impact in quarter two, after that we should start seeing the benefit of acceleration coming into the P&L. That broadly what explains the performance even on PATAMI. If you look at last year-on-year impact is around MYR 325 million on one-off items, which is explained by around MYR 260 million coming from the gains of tower sale.
Around MYR 77 positive effect coming in from the VSS program, which we ran in Celcom. A negative impact of around MYR 126 million on account of accelerated depreciation. That's how the year-on-year performance on a reported number gets impacted. If I go to the next slide, which talks about the underlying performance, and that's where you would see the EBITDA growth year-on-year at 10.6% and the revenue ex-device growth of 2%. EBITDA margin improved by 2.9% coming to 44.4%. Partly also explained because of the ERP program, the restructuring program in Celcom.
If you look at revenue, performance came strong from Dialog, from ADS, and EDOTCO, marginally offset by lower revenue numbers coming from Nepal and Indonesia. Nepal has been, I think we'll go into more detail, but also partly explained by the continuing international long-distance revenue coming down year-on-year, which was expected and in line with our estimates. Quarter-on-quarter, if you look at our revenue, it's been marginally lower in ADS and mainly because of seasonality.
Quarter four tends to be a very strong quarter for both DFS as well as for the ADA business of ours. Smart is -11.2, and that's mainly because of change in some accounting. Earlier in the past, we used to report discounts net to the dealers, net off from the revenue, which has been changed last year. The revenue has been grossed up, whereas expenses or discount is being treated as an OpEx. That's where you see this impact coming into the revenue line, because last year in Quarter four, we did the impact for the full year. Strong performance on quarter-on-quarter coming from Robi and Dialog.
If you look at EBITDA, I think I've explained most of it. Key thing which I would highlight here is the ADS performance. The losses coming from ADS have come down by around MYR 72 million on a year-on-year basis. That's reflective of two facts. One is the lower overall losses, profitability of ADA business, which has been doing extremely well for us. Third is last year in quarter one, we had this one-off spend coming on from the e-Tunai Rakyat program in Malaysia. We continue to focus on our cost excellence program with savings around MYR 87 million.
Our target is on OpEx and CapEx put together around MYR 1 billion for this year. We're pretty much in line. We will start materializing some of these savings later, and one of the main impact would come probably on the CapEx side savings because of the recent negotiations we've closed with our major vendors. On EBITDA, we continue to be in line. Profits, I think mostly explained by contribution on higher EBITDA, low losses coming from ADS, low net finance costs. I mean, we have seen around 30 basis points overall reduction in the finance cost.
This is despite the fact we moved from short-term borrowings to further long-term borrowings at fixed interest rates, locked in at a point in time when the interest rates were very attractive for us. Underlying PATAMI, as we mentioned earlier, has been mainly impacted because of the accelerated depreciation, net impact of MYR 126 million, and relatively higher tax on a quarter-on-quarter basis in Robi and XL. Robi got the benefit last year on IPO. The tax rate came down by 5%. That had an impact for full year. Similarly, on XL, we got some benefits on deferred tax adjustments last year, which did give us a benefit.
If I go to the next slide, which is really a bridge on the underlying performance from last year to this year, I've actually explained most of it. The positive effects coming from EBITDA, from digital businesses, from lower finance costs, benefits of tax, mainly in Robi where the tax rates have come down subsequent to our listing of the company. Negative effect comes because mainly of the D&A charges and largely impact of the accelerated depreciation, which I talked about. I think that's broadly the bridge in terms of EBITDA performance from last year to this year.
If I go to the next slide. This slide talks about the operating free cash flow. One is the bars in blue is what is the reported numbers of operating free cash flow, which is the EBITDA minus CapEx. However, if you look at the adjusted, where we adjust for the actual leases paid during the quarter, you would see the numbers on the top, which is MYR 273 million last year for first quarter and MYR 710 million. Merely around close to MYR 550 million improvement in the operating free cash flow for the year.
Mostly coming from the OpCos which have delivered higher EBITDA and also OpCo like Robi where there's been some delays in the CapEx items for the quarter. If I go to the next slide, this basically gives a balance sheet. I think the actions taken by the company last year, middle of last year, when the interest rates were attractive for us and locking in debts for longer period of time helped us move a lot more from variable floating rates to attractive fixed rates for a period of time which could range between 10-30 years. 68% of our borrowings is actually fixed.
Our debt maturity has been now much longer than what used to be earlier. It's only 25%, which is one to two years. A lot of it would also be moved to long-term in the next one year. The fact that we are pretty much in line with our guidelines on the coverage, on hedging of our exposure on US dollar. Having said that, I think there is an improvement on the gross debt-to-EBITDA from 2.57 - 2.5. Cash remains strong, MYR 6.6 billion, mostly at the group level, at Celcom and at EDOTCO. If I go to the next slide, this is some details around each of the operating company.
First one, Celcom, I think strong growth year-on-year, quarter-on-quarter on subscriber acquisition. Celcom has added nearly one million customers over the last one year. In the last quarter, they added around 317,000 customers, mainly coming out of the prepaid where on year-on-year basis 893,000 new customers have been added. Having said that, I think there is a strong EBITDA performance, mainly because of the last year base having an impact of this employee structuring program. If I normalize for that, even then EBITDA performance has been 6.6% improvement on a year-on-year basis.
Quarter-on-quarter basis, you would see some lowering of EBITDA mainly because of the GST refund, which was accounted for last year in quarter four. Free cash flows remain strong for us at MYR 516 million in quarter one. Profits mainly impacted from a quarter-on-quarter basis as I explained, is because of the GST. On a year-on-year basis, mainly impacted because of the accelerated depreciation. The impact of accelerated depreciation at gross level is around MYR 166 million for Celcom.
That we expect should be marginally this quarter and would come down to a positive trend going forward in quarter three and quarter four. If I go to the next slide, which is on Axiata performance, I think we do see continuing intense competition in that market. The factor that because of the COVID-19 and its effect, there has been impact on the consumer spending and that's been reflected in terms of the overall market development. I think Axiata continues to be focused on the EBITDA through its cost initiatives, the lowering of the staff cost, that was network expenses.
The free cash flow is pretty much in line with last year, impacted marginally because of the lower EBITDA coming in. Profit lower mainly because of the last year we had one-off gain coming from disposal of towers. Other than that, if I exclude that, then the profits have actually been reasonably good because last year around MYR 1.4 trillion benefit we got from the sale of towers. If I go to the next slide, which is on Robi performance. Robi continues to do well and it's been gaining market share on data.
In fact, at this point in time on data revenue, Robi would be just around 94% of the data revenue of the largest number one operator, which is significantly higher when it comes to total revenue. They've been the strategy of putting data in the forefront and taking larger market share of 4G has been helping that company, which is reflected in a strong growth on revenue at 3.3% quarter-on-quarter, 2.4% year-on-year translating into strong EBITDA performance and free cash flow. Free cash flow mainly because of the delayed implementation of CapEx, that translating into strong profit performance.
Apart from the growth in EBITDA, profit is also reflective of much lower cost of borrowing for Robi, where they've been able to convert some of the short-term loans into very attractive rates and also the taxation impact coming because of the lower tax rate post their listing of the company. Dialog, overall excellent performance. Growth on EBITDA and revenue at 12.5%. Revenue growth mainly coming from voice, data and the fixed line business. There is the incremental gain coming from the new acquisition which we did on the enterprise side H1.
This is basically strong EBITDA growth is translated into a much stronger profit development. Dialog apart from focus on top line continues to be very focused on their cost initiatives. If I go on to Ncell, I think Ncell we had a struggling 2020. If you recall, we did see a big dip coming in quarter two last year after the impact of COVID-19. However, after that we've seen quarter on quarter improvement in performance. Ncell on subscriber numbers is pretty much back to the revenue generating subscriber numbers are pretty much back to the levels of pre-lockdown in quarter one.
However, on a revenue standpoint, there's still a catch-up to be done, which is still behind on the core revenue, mainly coming out of the fact that to attract customers, we've been moving prices to a level which is more attractive to get them to start consuming data. That's reflective in a 9.8% drop in core revenue and ILD 23%, which was, in a way, part of the plan a known item for us. However, they continue to focus on the direct cost and staff cost, which is reflective in not such a big dent on the EBITDA side and so on the profit side.
The good news, as Dato' mentioned earlier, that one of the constraints which we had was the absence of low-band spectrum to be able to roll out into the larger geography for us. That I think now that it's available for us is going to help us compete with the government-owned operator in those markets where we were not present at all. If I look at Smart, I think it continues to be strong performance.
The only item which I would highlight here is the cash flows, which is coming off the fact that they've accelerated some of the CapEx investment in moving into more rural markets, reflective of the opportunities which are staying in that market. Overall, performance continues to be fairly strong. I think this is what Dato' mentioned earlier, is the ADA. I mean, we've never been so explicit on the performance of our digital businesses, and there's been always a request from the investor and analyst community for us to be more explaining.
That's where we have come down to. If you look at performance on a revenue overall has been flat quarter-on-quarter, 15.3% higher is on the gross transaction value. If you look at the net revenue, it's up by 30.5%. If you look at net revenue quarter-on-quarter, as I said earlier, is mostly reflective of seasonality in the ADA business, where we do see quarter four always being quite aggressive. The reason for that is most of the marketing companies tend to spend most of their budget around the last quarter of the year. That gives the bump up of revenue to us.
As far as EBITDA is concerned, which is what I explained around MYR 70 million lower losses compared to the first quarter last year, and that's also reflected in improved profits or PATAMI for the digital business. The EDOTCO, I think, continues to do well. We are seeing year-on-year 4% growth, mostly coming from Malaysia and Bangladesh market. On a quarter-on-quarter, there's been a bit of a dip, and this is just more a timing issue.
If you look at the EBITDA performance, you would see a very strong performance quarter-on-quarter, mainly because last year in quarter four, we did take some impact on account of bad debts from our tier two customers. That was one-off impact which we have taken. Apart from that, there were some discounts which were given to the anchor tenants, which was also reflective in the quarter four last year's performance. You would see a strong improvement coming against that.
On a year-on-year basis, it is more like to like, it is still showing a profit EBITDA growth of 7.2% and continues to do well when it comes to profit for the quarter. That is it from me. I will hand over to Dato' to talk about what is way ahead for us.
Thanks, Vivek. As I've mentioned earlier, at the outset, our guidance, if you like, for the headline KPIs that's in line for revenue growth as well as EBITDA growth, single-digit % growth for both items for the current financial year. This is a repeat of what we've made an announcement on 8th April and 11th of May. I wouldn't belabor the point. Suffice to say that the preparation, if you like, of the definitive agreements and so far as the merger is concerned, is well on its way.
In fact, towards the tail end, we are hopeful to sign the definitive agreements very soon and subsequently make the various submissions to the regulatory authorities, namely the MCMC, as well as the Securities Commission, following which we will seek the approval of the shareholders. SoftBank, as I've mentioned, again, on SoftBank, the 32.1% stake is a platform for both SoftBank as well as ADA and Axiata. So far as SoftBank is concerned, they'd like to make ADA its digital marketing partner in Southeast Asia.
The footprint that ADA has already established in 11 countries will jumpstart, if you like, SoftBank's initiatives. From ADA and Axiata's point of view, the investment opens up the SoftBank ecosystem, all its investments in the region plus. For example, if you think about it, SoftBank Group is invested in Tokopedia as well as Gojek. That merger in Indonesia also provides an opportunity for ADA to accelerate its reach in the Indonesian market, which we all know it's a pretty sizable market.
Insofar as risks for 2021 is concerned, as I've mentioned again, resurgence of COVID-19 cases in Malaysia and in fact across all our operating markets. The reintroduction of lockdown or restrictive movements. This we believe will result in slower than expected economic recovery. There is that, of course, in Malaysia, the 5G SPV initiative. We are still in engagement. We are in engagement, constant engagements with Digital Nasional Berhad. Sorry, Digital Malaysia Berhad, I think it's called. Digital Nasional Berhad.
Yeah. Even as you all know, they are in the midst of conducting the RFP with the vendors to make submissions insofar as the equipment is concerned. We are hopeful that the commercial discussions will start in earnest. That hasn't been done yet. As Vivek talked about the 3G shutdown, that's an ongoing exercise. We are looking at how we migrate the customers from 3G so that they will be VoLTE-enabled under 4G. Of course, again, as I've mentioned, the military coup in Myanmar. It has little impact thus far to EDOTCO Myanmar.
We're continuing to monitor the situation there and, of course, making preparations and looking at the risks associated with sanctions being imposed on Myanmar. Insofar as opportunities are concerned, we talked about the spectrum that was awarded in April 2021, the L900 technology neutral spectrum that will certainly improve our network, and therefore will put us in a strong position to compete effectively with Ncell.
Of course, we think that the pending merger integration of the competitors in Indonesia will provide an opportunity for Axiata to take advantage of disruption in their network, in their distribution outlets, and so on. Of course, we are very encouraged with the strong growth momentum from ADA.
At the same time, insofar as the digital financial services are concerned, we are also making preparations for the submission for the digital bank license. As you would recall, the guideline that was issued by Bank Negara stipulated 30th June as the deadline on which submissions are to be made. Hopefully we'll make some announcements around that particular initiative as well. Thank you for the attention and I guess over to you, Clare.
Thank you, Dato'. I'm Clare Chin, the Head of IR at Axiata, and I'll be moderating the Q&A session today. As a reminder to all of you, there will be two options for you to ask your Q&A, your questions. Firstly, ask your question verbally. As you can see in the task bar at the bottom, you can choose the raise your hand icon and wait for your name to be called out, unmute your line, and ask your question.
After that, please remember to mute your line again. The second option, as always, is to click on the chat box and put your question in there, and I will read out the question thereafter. Yeah. I can see that we have three hands raised already. The first in queue is Ranjan from JPMorgan. Ranjan, please unmute your line and ask your questions.
Hi, Ranjan.
Hi. Good morning, thank you so much for the presentation. A couple of questions from my side. Firstly, on EDOTCO. You have aspirations to grow this company to be amongst the top tower companies globally with up to 70,000 towers. The growth of Digital Colony in Southeast Asia and EdgePoint, how do your aspirations get affected with new competition in the region in the tower space? Secondly, on the general initiatives of the government. If you can share, what has been the spend from Axiata, and how are you accounting for the contributions from the Universal Service Provision Fund? Thank you.
Okay. On EDOTCO, competition is always good. We like to think that we've already established a strong footprint across all the operating markets. We like to believe that the economies of scale that we can already offer on day one will make us pretty competitive. In the home country, Malaysia, we have been successful in acquiring additional towers, 250 towers, I think that was done in April. That was put on the block. We're looking at the Indonesian market, and we think that with the capital structure that we have, which could easily be geared up, we have a very strong shareholder base at EDOTCO as well.
Again, the economies of scale and know-how, we think we are a step ahead of the competition. At the end of the day, the challenges that the region provide, again, something that we're also familiar with. The new entrants to the market, if you like, no disrespect to them, it could be a different ball game altogether for those other entrants. We welcome competition in the markets. Not an issue. We are encouraged by the lifting of the ownership restrictions in Indonesia under the Omnibus Law. We're looking at that market as well.
Again, that's a pretty big market, not just where it stands today, but also the projected growth of the tower business in Indonesia and the other markets. On JENDELA and all these other initiatives by the Malaysian government, thus far, the expenses we've incurred are only in relation to the marketing cost that has been incurred by the likes of Boost, for example. The point about the first quarter results last year where the first initiative was rolled out, we had a bit of some cost that we incurred as part of that marketing cost.
Subsequent to that, the subsequent programs, we've been able to minimize the marketing spend because we brought in merchants to share some of those marketing costs. As far as USP is concerned, that is a continuing obligation under the CMA. I wasn't quite sure, Ranjan, where you're coming from on that question. The government will continue to-- They've, in fact, awarded several contracts utilizing the funds from the USP that's been built up over the years. Insofar as the MNO is concerned, we would have to contribute our share of revenue, a 6% share for the USP fund.
The understanding from the engagements currently is that if the government wants to roll out, let's say, network coverage in areas which are not profitable, the one model that has been implemented is actually the government will incur the CapEx, but the MNOs will then have to carry the O&M cost, if you like, to make sure that the business is sustainable over a five-year period, and then at the end of the five-year, the MNO will have a choice whether to continue providing coverage or not, depending on the traffic that's built up. I hope I answered that question, Ranjan.
Yes, Izzaddin. Thank you so much.
Thank you. Next.
Okay, let's move on to Foong from CIMB. Foong, please unmute your line and ask your questions, please.
Hi, Foong. You've already put up your report.
Yes.
You say it's a good start to FY 2021. Target price of MYR 420. Target price of MYR 420.
Congrats, Dato', on the good set of results for the first quarter.
Thank you.
A couple of questions from me. I wanted to ask about Celcom. Despite the encouraging revenue and subscriber trend, EBITDA was down quarter-on-quarter, and I think that was due to high direct expenses in the first quarter. Can I get more color on that cost item, what drove that up? Second question for Robi. I think Vivek mentioned earlier on that there's some delay in the CapEx in Bangladesh. What is the risk that this would impact the future growth momentum? Third question on ADS. Good to see the narrower losses in first quarter.
Should we expect that to be at least the base going forward with potential for further improvements? My last question, any initial feedback from MCMC or the government on the Celcom Digi merger and any additional conditions you think that the regulators may apply? Those are my four questions. Thank you.
Thanks, Foong. Very good questions. Celcom is on the line, but why don't I try to address question number three and number four, and then I'll invite Idham, I think. Is Idham Yes. Yeah. On the ADS, yes. In fact, the marching orders, if you like. Yeah. As you recall, there are two arms to the ADS business, the digital financial services, and then as well as the ADA. ADA, as you have seen in the news reports and what we put out there, has been making profits.
In fact, for financial year 2020, we recorded $8 million profit on the back of $137 million revenue, which is pretty decent because ADA today only came into shape in 2018. Of course, the precursor to ADA was a bunch of a few companies that we've invested in, but we bundled them together and started in 2018. Over a three, four-year period, they've done pretty well. We expect ADA to do better in quarters to come. Insofar as DFS is concerned, the marching order is for them to break even actually in 2022.
Yeah. For financial 2022. The narrowing of the losses have been along the projections we've made two, three years ago. We think that it'll be positive after 2022. Of course, that's without the digital bank sort of financials just yet. Yeah. I qualify the losses that we expect DFS to zeroize like, yeah, by 2022 is without the digital bank sort of numbers for the time being. Insofar as the digital bank is concerned, looking at the timelines that have been prescribed by Bank Negara, it'll take maybe 18 months after 30th June before the successful bidders can operationalize their banks. Yeah.
That will take us after 2022. Yeah. The first operation could be in 2023. We're looking at just 2022 for the time being, and then hopefully the team can make sure that we will be profitable, at least for 2022. Far as the initial feedback, yes, we had already several engagements with MCMC.
Very positive feedback. We have also appointed a consultant to come up with the econometric projections, the economic projections of the impact of the merger on the economy, looking at the subscriber base and so on and so forth. Feedback so far has been rather positive. We are not aware of any additional conditions that have been imposed. Of course, the big one on the table, and so far as we're concerned, is the spectrum.
We currently have articulated our position about the need to keep the spectrum to make sure that the quality of service that's going to be provided by the merged entity will be better than what it is today. Because we need that additional spectrum to make sure that the quality of service is improved, if you like, for the customers. Can I invite Idham and Jennifer to address question number one and perhaps Vivek and I can address question two?
Yeah.
Okay. Thank you. Good morning. Thank you, Foong, for the question. I'll pass to Jennifer to give you that detail on what's the difference between the QOQ, the impact of EBITDA. Overall, I think EBITDA year-on-year, we have seen improvement even at the operating level. We have seen a bit of flattish even at the quarter-on-quarter operating level. I'll pass to Jennifer to take you through the details.
Hi. Good morning, Foong. Jennifer here. I'll try to add a bit more color in terms of the EBITDA number. I think if you look at the Q4 number, the Q4 number was actually impacted by quite a couple of items. Mainly the GST recovery that we have that actually bump up the EBITDA number. If we were to take off the recovery on the GST and also some other settlements, the true-up that we tend to do at the Q4 level. On an operational basis, the EBITDA is actually kind of flattish. I wouldn't say that it has actually gone down.
If we refer back to the slides and we look at it on a year-on-year basis, taking out the one-off in Q1 last year, taking out the ERP, which is the employees' restructuring program, essentially we have actually grown by 6.6% on an operational basis in terms of EBITDA. On the QOQ, you're right, it's actually a bit flattish. That's mainly because there's another area that is also driving it as well. Because if you look at the Q1 number in 2021, we did quite a good device run. As we all know, in Q4, we had the iPhone 12 launch.
Because of that, we had quite a bit of a pent-up demand in terms of the iPhone 12, which we couldn't actually address all of them in Q4 last year because of the shortage of stocks worldwide basis as well. When we actually complete that's why when you look at the devices sale in Q1 was actually quite high. That also has driven the direct cost to be a bit higher in Q1 this year. Net net, I would say that operationally, the EBITDA is actually flattish. I hope that addressed your question, Foong.
Yes, it does.
Yeah. On Robi, I can explain, Foong. I think it's just a matter of time because we were waiting for the spectrum auction to get over, which has just got over, where we got the 7.6 MHz of spectrum. Around MYR 200 million of CapEx, around MYR 110 million of CapEx orders have already been placed, and the remaining would be going out shortly.
We don't see any risk on the top line other than what would be the market situation, et cetera, for this year. There is no restriction from our side. It's just a matter of us closing the negotiations on procurement and waiting for the spectrum to be allocated that delayed the process a bit.
Understood. Thank you so much, Dato' Izzaddin and team for the answers to my questions.
Yeah. Just a bit more on the ADS, Foong. These days, with the 236,000 merchants, we have 8.9 million users on Boost. We are able to command a better deal from the merchants. Those days, we have to carry a lot of this cost, but now our customer acquisition costs are a bit lower because we can pass some of this to the merchants, and merchants provide some rebates as well to us or give us a part of the commission as well when transactions are done. Of course, the revenue mix is now shifting towards more to be online. That will certainly help boost the performance at ADS. Yeah.
Yes, Dato'. Thank you again so much for the call. Yeah.
No worries. Thank you.
Okay. Thanks, Foong. Moving on. Our next question comes from Isaac from Affin Hwang. Isaac, please mute your line and ask your questions.
Hi. Good morning, everyone. Thank you for the opportunity. Just two questions from me. Number one is on the Celcom when it comes to the subscribers and ARPU. First, the subscribers have been growing very strongly on a year-on-year basis. Can we just hear a bit more on what's driving it and what would be the trend going forward? In contrast, the ARPU has been trending lower. When would we see a bottom and what happened? That's question number one. Question number two is when it comes to Digital Nasional, have we heard any updates? Any updates on Digital Nasional would be helpful. Thank you.
I'll tackle the second question. So far, the discussions have revolved around the technical aspects of setting up a 5G network, and the commercial discussions have not even started. We know, as I've mentioned earlier, Digital Nasional had undertaken an RFP with the vendors. You would have read that in the papers. Again, we have no line of sight as to the exact scope or the detail scope. We do know that Digital Nasional's RFP includes the O&M aspect of the network as well. We're not quite sure what the business model is at this stage.
Certainly, we will keep everyone updated if and when there's a lot more clarity on the business model that Digital Nasional wish to adopt and because that will have an impact on us, the MNOs. Yeah. Idham, Jennifer, can I ask you to tackle the first question on the ARPU?
Okay. Thank you, Isaac. There are a few factors that kind of drive the improved performance on our subscriber in the past year. Of course, the overall having the network coverage and all that really becomes very, very important during this period. As what we introduced with the new product lineups that we have, our product has become a lot more competitive than we were before. We are actually speaks better with the consumers. Most importantly, I think the improvement that we have done at the trade level.
Our active trade, the number of active trade has improved. The number of trades that the long-tail trade is also has improved. We see this as a program that is quite sustainable because we're seeing the activities and the excitement is coming up quite strong despite the lockdown, despite the lower footfall traffic that we've seen. We have seen also the investment that we have made in the digital space is starting to pay off, the improvement in terms of the digital channel. How do we help to get our trade to become active in the social commerce as well.
All these activities help in terms of bringing up the number of subscribers. In terms of ARPU, I think, yes, we've seen the industry is all industry trend, and we see the ARPU is declining. We have also seen some internal trends that help to actually sustain our ARPU level better. We have seen higher, for example, in terms of monthly subscription in our prepaid as opposed to weekly and daily.
That actually helped to sustain our ARPU and then also get a little bit more certainties in the lifetime value of our customers, which is all a very good trend. We're seeing also in terms of increase in data, adoption of data customers in our prepaid. That's also a very, very good trend that we see. Jennifer, you have anything, one or two things to add?
I think if you look at even the ARPU, the main reason why the blended ARPU is a bit slightly down, mainly because the contribution from the prepaid is a bit stronger as compared to before as well. That's the reason when we look at it in terms of ARPU. One, while we actually look at the blended ARPU as it is, we also need to analyze a bit further, in terms of the postpaid and prepaid ARPU.
If you look at the postpaid and prepaid ARPU in that sense, I think we're actually sustaining pretty well, especially from the postpaid front, because the emphasis in terms of the plans that is with the devices and the plans that is a bit on the higher side. On the prepaid, as what Idham has actually mentioned, the take-up from the monthly kind of like sustain the prepaid ARPU. Thank you.
Thank you. Just a short follow-up question. Can we hear a bit more on the subscriber for the prepaid again? Is there any particular segment that registers such a strong growth in terms of the uptake? Should we expect similar growth quantum for the next two quarters ahead? That's all of my question. Thank you.
Jennifer?
At the moment, when we actually drill down a bit further in terms of the subbase that we have, we see that in the past we appeal a lot in terms of the rural customers and the more matured customers in that sense. When we drill down a bit further this time around, we are actually approaching a bit better in terms of the segment, which is of a younger age group as compared to the previous products that we have.
Yeah. Actually, if I were to add one component on the ARPU, which is a good trend to see, is that we have seen an increased contribution of data revenue inside the ARPU. Which actually address some of the decline that we see from the voice-related contribution of the ARPU. We foresee that this data revenue will continue to grow.
Okay. Thank you, everyone.
Thanks, Isaac.
Okay. Thank you. Let's move on then. We have questions coming through from Prem Jearajasingam.
Good morning, Prem.
Prem, you want to unmute your line?
Good morning. Hopefully you can hear me.
Yes.
Thank you for the opportunity. Congratulations on a decent set of numbers. Just to continue on Celcom first. It's good. We're taking back some share and frequent for that. I think the ARPU is holding quite well. I agree with you on that one. How worried are we about the competitive response? You're obviously seeing some know how both that younger group that have grown your share in. Sorry, is this any better?
No. Can you start again? We lost some of the words.
Going back. All right. Sorry. With Celcom, we've done well. We've taken share in the younger group, but the issue is the competitive response. Why do we think that we are going to be able to withstand any competitive response going forward? What are we doing right that is going to keep this trajectory, especially in prepaid, on a positive trend? That's one.
Second question, I was just wondering, with the Celcom Digi merger, we had initially talked about a four to six-week timeframe from the announcement, before which we would have expected a definitive deal to be signed. Was that an aspiration, or has there been something that has delayed that process? If so, maybe if you could share with some color on what it is that has pushed things out a little bit.
Finally, with regards to M&A opportunities. Once we get this agreement with Celcom sorted out, would you be able to give us some feel for what you would love to do, from an M&A perspective, outside of EDOTCO over the next 12-24 months?
Okay. I'll get Idham, Jennifer again to address the first question, and I'll tackle the second and third. Idham, Jennifer.
Thank you, Prem, for the question. Yeah, a very good question, actually. The question is about whether we can sustain this if there's a reaction or response from the market. I think as I mentioned earlier, whatever that we are doing, we think so far the indication is quite sustainable because we are making transformation in terms of how we do things as opposed to just playing with price. Of course, we have now a competitive set of products in the market on prepaid, one of the biggest driver that drive the business was the transformation of our trade, as I mentioned earlier.
How we do things, how we deliver trade, how do we activate more trade to be activating the business with us. This on top of the coverage that we have, we believe this will form quite a sustainable competitive advantage. The same time, while we invested in the digital, there are many initiatives that we have done on the digital, including democratizing some of our dealer activities, using our B/OSS and the new application that we do, getting more of our customers as well to be on board of the Celcom Life app. We have seen increase in terms of adoption of the Celcom Life app, which is very good.
We think this will be something that's sustainable in the market. The same time, we do expect there'll be some response from the competition and what's important is our ability to respond correctly when that happen. What we have done also in the past six months to eight months ago, is our ability to respond a lot faster than we used to before. This will also help for us to be able to maintain our competitive level in the market. I hope I answered your question, Prem.
Yes. Thank you, Idham. That's very helpful.
Okay, Prem. On the second question, actually, if I recall correctly, in our presentation on the 8th of April, we talked about end of the second quarter to make submissions, sign definitive agreements, and what have you. What you have to remember is since 8th April, what we have been engaged in is two big work streams.
Actually, three. First is the due diligence exercise, second is the preparation of a high-level business plan, and third, the preparation of the integration teams. That's all at the work. In fact, the high-level business plan is done. We have come to landing on the aspirations for the home business, the traditional mobile business, home business, as well as the enterprise. In so far as the integration teams, we've identified the two CEOs or the would-be CEO and deputy CEO.
Alvin and Idham has landed on the team, if you like, the members to form the integration team. It's all pretty good. In so far as the definitive agreements, yeah. You would appreciate that the outcome, if you like, of the due diligence exercise will have a bearing on the definitive agreement. That's kind of been working. We've been making sure that that two are synchronized quite well. Quite frankly, we are in a good position actually to meet the six weeks or end of June or end of second quarter sort of timeline. No concerns, nothing that's been pushed back or nothing of that nature.
On the integration, I think the one big perspective I'd like to share is that the direction that's been given to the two CEOs, well, Albern and Idham, is that we should take this opportunity to transform the organization. My view, the word integration could mean putting the two together and that's it. Sometimes that may not necessarily be the best thing because you're putting two, for lack of a better phrase, whole habits together. The direction that's been given to the team is to look ahead.
What would this new organization, the merger entity, what this organization will look like in terms of the processes, in terms of distribution channels, how we do things. It's almost like a clean slate that the teams will be working on. I'd rather use the word transformation as opposed to integration. On number three, insofar as M&A opportunities are concerned, you would recall we talked about growing the enterprise segment.
We are looking at, I won't call it bite-sized acquisitions, but this is more acquisitions to augment our capabilities in the enterprise segment in Malaysia, in Indonesia, especially because these are obviously two big markets insofar as the enterprise opportunities are concerned. That's more to bolt on the capabilities that we can offer to the customers. Whether it's cloud as service, backup as service, privacy as service, all sorts of, if you like, capabilities that we wish to acquire. Sometimes it's a balance between are we acquiring talent or are we acquiring track record, customer base and so on.
Hopefully, they're both. That's one aspect of it. The other bit is Indonesia. We're looking at also potentially to mitigate the gap, if you like, because of the Indosat Hutch merger that's pending. We are reevaluating our business model there's no rocket science as to what we would plan to do because that's what potentially Indonesia offers the convergence play in a much bigger and a better opportunity. We're looking at that angle as well insofar as Indonesia is concerned. In Nepal, we're looking at how we can ensure or future-proof again the Ncell business.
The competition comes primarily from the ISPs that's over there in Nepal that's operating. Past 7:00 P.M., the streets are deserted because everyone's at home on a fixed broadband and logging onto the internet and mobile data consumption just drops. That's one segment that we would like to address as well. That's a flavor of some of the things we'll be looking at for at least the next 12 months. Prem.
Perfect. Thank you very much, Dato' and Idham. Thank you.
Good. Thank you. Thanks for the questions.
Okay, thanks. We don't see any more hands raised in the. Let's move on to the questions on the chat. Basically, we have a question from Paul. Will there be any more accelerated depreciation charges at Celcom in the coming quarters? Idham, you want to take that?
Yeah, I think as I mentioned earlier, we will have an impact coming in quarter two, which could be in the range of around MYR 60 million-MYR 70 million. After that, we should be seeing some positive effect coming in quarter three, quarter four. Effectively, I think full year would be pretty much close to what has been charged in quarter one.
We recur?
Yeah.
Yeah.
So far as AD is concerned.
Okay. I think Paul had a second question as well. Paul from CLSA. Strong net adds at Celcom over the past few quarters. What has changed to achieve this? I think that was also answered already previously, right?
I think on that one, Paul, the transformation that's ongoing at Celcom, since last year, since October last year, is bearing its results, bearing fruits. The fruits of that initiative. That is sort of full steam ahead despite the merger announcement. Out of that 70 initiatives that we identified as part of the transformation, we only sort of dropping or putting on hold four out of 70 simply because the other 66 are no regrets, sort of changes or transformations that we're doing with Celcom.
I think that it's a manifestation, if you like, of the plans that we had, and it's always about execution and the good news is it's bearing results that we were hoping to see in this quarter. All eyes on the second quarter, third quarter, fourth quarter, and so on for the rest of the coming months.
Okay. Thank you, Paul. I think the next questions we had on the chat was from Wijed in Manila. Basically, a little bit more on our depreciation policy for 3G assets. What is the current book value for 3G assets in Celcom and the market practice in terms of depreciation for 3G assets?
Vivek, can you take that?
Yeah. I think, first of all, the 3G depreciation policy, there's no policy as such. It is based on the expected remaining life of 3G assets. As I said, most of the markets, excepting Nepal, we have decided to migrate 3G- 4G. As a result, we've been accelerating in this year for most of the markets, and a lot of the charge was taken in the previous year itself. As far as two markets are concerned, which is Bangladesh and Malaysia, the plan is 2023 for Bangladesh and 2022 for Malaysia. Nepal is still continuing to use 3G.
The policy of depreciation is in line with what is the existing policy for all network assets, except where we decide to take an impact on a technology because we think that will be shut down earlier. That's, I think, how it has been done. Some of these 3G assets would be used for 4G, no doubt about it.
We also have some options from the vendor to be able to migrate some of the licenses at a very low cost or a depreciated value of 3G into 4G. That, I think, would be used. Exact value of how much is the 3G, I'll ask Jennifer to give that number. Jennifer, how much is the value of 3G assets now at the end of quarter one?
Thanks, Vivek. The net book value of the remaining 3G assets as per now is in the range of less than MYR 70 million, I would think. It's within the range of MYR 60 million-MYR 70 million at the moment. The whole point of us doing the accelerated is that we were, as part and parcel to address the JENDELA needs as well, is that we're trying to move the 3G customers to 4G. On another hand, what we are trying to do as well is that to actually bring forward the execution of moving the customers to 4G.
That's why the accelerated depreciation we started last year, as what Vivek said, till end of last year. We think that we are trying to start to shut down some of the sites potentially by end of Q2. That's the reason why the accelerated depreciation was actually done as such.
Let's move on to the next question on EDOTCO assets in Myanmar by Sean of Eastspring. The question is: Is there a need to impair EDOTCO assets there due to the recent development in Myanmar?
Well, we did an impairment testing as a result of the first quarter results insofar as Myanmar is concerned. Maybe, Vivek, you want to provide more details.
No. I think at the moment, they are revenue-generating assets. We are getting payments being made by our customers. We've also, as Dato' said, we've done the testing based on certain stress tests on the cost of capital risk factors, et cetera. We still see there is no need for us to impair those assets. However, we will continue to look at that on an ongoing basis because the developments are going to happen as we move forward. Accordingly, we will have to make those assessments on a quarterly basis.
Actually, the stress testing is pretty stretched.
Yeah.
For what's it worth, if you look at the cost of capital in war-torn countries, we're talking about the Syria and Yemen sort of environment. The numbers that's being used is around 22.5% sort of discount rate. Even at 22.5% discount rate, there's still plenty of headroom so far as our business is concerned because as Vivek said, bills are continued to be paid.
I strongly believe that the telco assets are critical for everybody, not just the population as well as the military. We will continue to monitor because as I said, it depends on the extent of the sanctions that have been imposed by other countries on Myanmar. That may have a bearing on our business, yeah.
As far as Myanmar is concerned for the group, that's less than around 5% of the total net assets are in Myanmar.
Okay. Thank you. I believe there are no more questions on the chat group as well. Perhaps, Dato', you might have any closing remarks?
Yeah. Thanks, Clare. Thank you again for joining us this morning. As we have said earlier on, it's quite encouraging first set of quarter results. We continue to push along despite giving the challenges in all the operating markets. It's a question of the third wave, fourth wave, and so on, how it affects the economic recovery in some of these countries. I know there's some literature out there about how the emerging markets may recover slower because of the access to the vaccines.
I'm pretty hopeful that notwithstanding the challenges that each of those countries may face, I'm pretty hopeful that the respective governments will make every effort to ensure businesses resume. Of course, it's all relative in terms of challenges. In Sri Lanka, it's driven by the tourism market. Likewise, in Cambodia, it's driven by the tourism industry.
I think the respective governments will make every effort to make sure that the various economies will resume as fast as they can. Thank you once again, and we'll be in touch. Please look out for the coming news insofar as the definitive agreements are concerned. Our digital bank license expirations, we're hopeful that we can close that out in the next one or two weeks. Thank you.