Earnings Call: Q1 2021

May 25, 2021

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 Q1 results for financial year 2021. And 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 the organization. Those actors, if you like, in the video are actually our staff. And if you look in some of the other videos that we 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 Q1 results, as you would have picked up from the press release as as the Bursa announcement on Tuesday. It was rather encouraging start for the year, notwithstanding the challenges we continue to face. As you would the press release carried a reported number of 76,000,000 Partime. And of course, after adjusting for the, if you like, the accelerated depreciation, The underlying part of me is actually $231,000,000 which is rather encouraging comparable to if compared to the Q1 last year. You recall there was a Cellcom employee restructuring charge in financial year 2020. That's about BRL101 1,000,000. But I think the point about the underlying the accelerated depreciation that will continue a bit, but insofar as Cellcom is concerned, It will turn positive in the Q3, and Vivek will provide more details as we go along the presentation this morning. So at the same time, the Ringgit strengthened across the OpCo currencies As a result, the ForEx translation loss, again, non cash item, that is slightly bigger for this quarter compared to last year. And so far as our balance sheet is concerned, you can see that our operating free cash flow debt rose to TWD1.1 billion, And this is driven largely by a higher EBITDA, lower CapEx spend. And as a result, our cash balances at group level is about billion, whereas at company level, it's about KRW1.7 billion. The good news is our debt balance sheet capital structure, if you like, yes, that's at 68% of our borrowings are fixed in nature, about 25% is due within the next 2 years. Now moving on to the digital telcos, on cell phone, yes, Again, the Cellcom achieved a very strong subscriber growth, about 1,000,000 subscribers over the year, you can see that again the employee restructuring program costs that had brought down the number for 21, and again, accelerated depreciation. But revenue excluding device remained resilient. We had a stronger prepaid performance from the enlarged subscriber base. And so far as XL is concerned, despite the intense competition pressures and weak consumer spending, The margin remains strong at about 50%, yes, EBITDA remains strong also. And this is on the back of lower staff costs as well as network expense. Roby recorded strong data revenue growth. That's about 16.3% on data alone. And overall, revenue excluding device is a positive 2.4%. And of course, at the same time, Ruobi benefited from listed status, as you may recall, the listing would grant them a reduction of about 5% in the taxation rate. And as a result, reported Fatami rose to about TRY 343 1,000,000. And EBITDA margin is stable at about 41%. Now Dialog is, as we can see, there is a star performer, double digit growth across all metrics, yes, Whether we're looking at revenue ex device, EBITDA of 12.3%, part time we grew about 64% and free cash flow about 10%, yes? And this 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. And so far as NCL is concerned, spectrum constraints remain. As a result, the numbers were a bit challenging. And however, as we you may have been informed that the L900 was awarded without Mr. Bir, onerous conditions, so we think the second half of financial year twenty twenty one will be better, yes? And 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. And so far as Smart is concerned, there is an impairment of investment of about $5,400,000 As a result, bartending came down by about 31%. ADS benefited from increasingly a cashless ecosystem. Year on year revenue grew by 30.5 net loss has narrowed down to about RMB 29,000,000. Now that's largely because if you recall in last financial year, there was an E29 program, which resulted into the loss in financial 2020 was about BRL 52,000,000. So that's a significant improvement from a loss of BRL 2,000,000 to BRL 29,000,000. Of course, at the same time, ADA continued to record better profits. In fact, it was RMB10 1,000,000 this year compared to RMB2 1,000,000 in financial year 2020. Now you will also see in the presentation today, for 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. And so far as EdoCo is concerned, solid EBITDA margin that's continued to be sustained at about 64%, And the good news is the there is Right now, limited impact from the Myanmar military group thus far. So that's a caveat there. We will continue to monitor the situation and Obviously, there will be functions of any changes or any impact, if you like, on the business there. But 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 and revenue growth, revenue device projected to be in line of the guidance that we've given of low single digit percentage growth. And so far as the downside risk for 2019, in view of the continuing challenges that it's faced as a result of COVID-nineteen across all our markets, The introduction of lockdown or restricted movements, this we expect that this will have an impact on the economic recovery, slower impact a slower consequence of the recovery. So that will continue to be something that will pose as a challenge to our business. And lastly, insofar as ADA is concerned, you would have picked up again the announcement we've made of SoftBank Corp investment of about RM250 1,000,000 into ADA, valuing ADA at about RMB1.1 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 also open up the SoftBank Group ecosystem to ADA. I think that's the plan SoftBank has for ADA to make ADA. It's, if you like, digital analytics and AI company in the region with this 23 percent stake in ADA. Now that's in another or in summary the performance of the companies and the business for the Q1. 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. So let me just go through the reported numbers 1st, then I go into more details by the each of the operating countries. Reported performance is Flat around 0.5% growth year on year and marginally lower minus 3.2% from on a 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 is 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 on quarter was marginally lower at minus 1.4, mainly because last year, if you remember in quarter 4, we had some GST refund coming in, in Cellcom, which did lift the EBITDA for Cellcom in quarter 4 last year. PAT at 187, higher than the quarter, but marginally lower than previous year. And mainly because previous year, we had this one off gain coming from the sale of towers in Indonesia. And this year, we also had marginal negative impact coming because of the accelerated depreciation impact coming in 2 markets, which is Cellcom and Ruby. I'll just briefly explain the impact which is coming and how this will be looked at going forward. If you recall, last year, we did shut down plan to shut down 3 gs in most of our market except in Nepal. And we did take a €600,000,000 charge in Q4 last year. And in 2 markets, The decision was to take it forward to 2022 and 2023, 2022 in case of Cellcom and 2023 in case of Robi, now these 2 are where the deposition has been accelerated. So we are seeing some impact on the early period. We don't expect this impact to continue specifically in Cellcom. There would be some impact in quarter 2. But after that, we should start seeing the benefit of coming into the P and L. So that broadly what explains the performance even on Patami. If you look at last year, year on year, Impact is around €325,000,000 on one off items, which is explained by around €260,000,000 coming from the gains of tower Sale, around 77,000,000 positive effect coming in from the VSS program, which we ran in Cellcom. Negative impact of around $126,000,000 on account of accelerated depreciation. So 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 revenue ex device growth of 2%. EBITDA margin improved by 2.9% coming to 44.4% and partly also explained because of the ERP program, the restructuring program in Cellcom. But if you look at revenue, performance came strong from Dialog from ADS and e.co, 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 revenue coming down year on year, which was expected and in line with our estimates. Quarter on quarter, if you look at our Revenue has been marginally lower in ADS and mainly because of seasonality. Quarter 4 tends to be a very Both for DFS as well as for the ADA business of ours. Smart is minus 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 netted off from the revenue, which has been changed last year. So the revenue has been grossed up, whereas expenses or discount has been treated as an OpEx. And that's where you see this impact coming into the revenue line because last year in quarter 4, we did the impact for the full year. And strong performance quarter on quarter coming from Ruby and Dialog. If you look at EBITDA, I think I've explained most of it, but key thing which I would highlight here is the ADS performance. The losses coming from ADS have come down by around €72,000,000 on a year on year basis. And that's reflective of 2 facts. 1 is the lower overall losses, profitability of ADA business, which has been doing extremely well for us. And third is last year in quarter 1, we had this one off spend coming on from the Etonai Raquel program in Malaysia. We continue to focus on our cost excellence program with savings around €87,000,000 Our target is on OpEx and CapEx put together around €1,000,000,000 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, lower losses coming ADS, low net finance cost, I mean, we have seen around 30 basis point 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 X rated depreciation, net impact of $126,000,000 and relatively higher tax On a quarter on quarter basis in Roby and XL, Roby 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 kind of a bridge On the underlying performance from last year to this year, and I've actually explained most of it, the effect positive effects coming from EBITDA, from digital businesses, from lower finance cost and benefits of tax, mainly in Roby where the tax rates have come down subsequent over listing of the company. Negative effect comes because mainly of the B and A charges and largely impact of the accelerated depreciation, which I've talked about. So I think that's broadly the bridge in terms of EBITDA performance If I go to the next slide, this slide Talks about the operating free cash flow. Now one is the bars on 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 one numbers on the top, which is 2.73 last year for Q1 and 7.10, so nearly around close to 5.50 1,000,000 improvement in the operating free cash flow for the year, mostly coming from the OpCos, which have delivered higher EBITDA and also OpCo like Roby, where there's been some delays in the CapEx items for the quarter. If I go to the next slide, this basically gives our balance sheet. I think the actions taken by the company last 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 years to 30 years. So 68% of our borrowings is actually fixed. Our debt maturity It's been now much longer than what used to be earlier. It's only 25% which is 1 to 2 years. A lot of it would also be kind of moved to a long term in the next 1 year. And the fact that we are pretty much in line with our guidance our guidelines on the coverage on hedging of our exposure on U. S. Dollar. Having said that, I think there is an improvement on the gross debt to EBITDA from $2,570,000,000 to $2,500,000,000 Cash remains strong, €6,600,000,000 mostly at the group level at Cellcom and at e.co. If I go to the next slide, this is some details around each of the operating company. So first one, Cellcom, I think strong growth Year on year, quarter on quarter, on subscriber acquisition, Cellcom has added nearly 1,000,000 customers over the last 1 year. And in the last quarter, we 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 will See some lowering of EBITDA mainly because of the GST refund, which was accounted for last year in quarter 4. Free cash flows remain strong for us at BRL516 1,000,000 in quarter 1. Profits mainly impacted from a year on year basis or 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 is around our gross level is around $166,000,000 for Cellcom. And that we expect should be marginally this quarter and would come down to a positive trend going forward in quarter 3 and quarter 4. If I go to the next slide, which is on XL performance, I think we do see continuing intense competition in that market. Also the fact that because of the COVID and its effect, there has been impact on the consumer spending, and that's been reflected in terms of the overall market development. However, I think XL continues to be focused On the EBITDA towards cost initiatives, the lowering of the staff costs, that was the 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 We've been reasonably good because last year around €1,400,000,000,000 benefit we got from the sale of Tawazoo. 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, Roby would be just around 94% of the revenue of the largest number one operator, which is significantly higher when it comes to total revenue. So there have been the strategy of putting data in the forefront and taking larger market share of 4 gs has been helping that company, which is reflected in a into strong EBITDA profit performance. Apart from the growth in EBITDA, profit is also reflective of much lower Cost of borrowing for Roby, 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 the listing of the company. Dialog, overall excellent performance. Growth on EBITDA and revenue at 12.5 percent. Revenue growth mainly coming From voice, data and the fixed line business, and there is a one off or the incremental gain coming from the new acquisition, which we did on the enterprise side H1. And this is basically strong EBITDA growth is translated into a much stronger profit development. So Dialog, apart from focus on top line, continues to be very focused on their cost initiatives. If I go on to EnCell, I think EnCell, we had a struggling 2020. And if you recall, we did see a big dip coming in quarter 2 last year after the impact of COVID. However, after that, we've seen quarter on quarter improvement in performance. Ncell on subscriber numbers is Pretty much back to the on revenue generating subscriber numbers, they're pretty much back to the levels of pre a lockdown in quarter 1. 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 our 9.8% and core revenue and ILD 23%, which is in a way part of the plan unknown item for us. However, they continue to focus on their direct cost and staff cost, which is reflective in not such a big dent on the EBITDA side and so on the Profit said. But 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, moving into more rural reflective of the opportunities which are staying in that market. So overall, performance continues to be fairly strong here. I think this is what Dato mentioned earlier, is the ADS, I mean, we've never been so explicit on the performance of our digital businesses. And there's been always a request for from the investor and analyst community for us to be more explaining. So that's where we have come down to. So if you look at Performance on our revenue overall has been flat quarter on quarter, but 15.3% higher is on the gross transaction value. But if you look at the revenue, net revenue, it's up by 30.5 person. Now 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 4 always been quite aggressive and the reason for that is of the marketing companies tend to spend most of their budget around the last quarter of the year, and that gives the bump up of revenue to As far as EBITDA is concerned, which is what I explained, around €70,000,000 lower losses compared to the Q1 last year, and that's also reflected in improved profits of autonomy for the digital business. The e.co, 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 bit of a And this is just more a timing issue. If you look at the EBITDA performance, you would a very strong performance quarter on quarter mainly because last year in quarter 4, we did take some impact On account of bad debts from our Tier 2 customers, so that was one off impact which are taken. Apart from that, there were some discounts which were given to the anchor tenants, which was also reflective in the quarter 4 last performance. So you would see a strong improvement coming against that. But on a year on year basis, which is more like to like, it's still showing a EBITDA growth of 7.2% and continues to do well when it comes to profit for the quarter. So that's it from me. I'll hand over to Dato to talk about what's way ahead for us. Thanks, Vic. Yes. As I've mentioned earlier, at the outset, our guidance Slide for the headline KPIs, that's in line for revenue growth as well as EBITDA growth, a significant percentage growth for both items for the current financial year. This is a repeat of what we've made at the announcement on 8th April 11th May. I wouldn't belabor the point. Suffice to say that the preparation, if you like, of the definitive agreements, so far as the merger is concerned, is well on its In fact, it's 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 this commission and following which we will seek the approval of the shareholders. And SoftBank, as I've mentioned again, On SoftBank, the 22.1% stake, it's a platform for both SoftBank as well as ADA and Asiata. So far as SoftBank is concerned, they like to make ADA, it's digital marketing partner in Southeast Asia. The footprint that ADA has already established in 11 countries will jump start, if you like, SoftBank's initiatives. And from ADA and Arziatas point of view, the investment enables opens up rather the SoftBank ecosystem, all its investments in the region plus plus For example, if you think about it, SoftBank Corp or SoftBank Group is invested in Tokopedia as well as Gojek. So that merger in Indonesia also provides an opportunity for ADA to accelerate its reach in in the Indonesian market, which we all know is a pretty sizable market. And so far as risks for 2021 is concerned, as I've mentioned again, resurgence of COVID-nineteen cases in Malaysia and in fact across all our operating markets, the reintroduction of lockdown movements, this we believe will result in slower than expected economic recovery. Then there is that, of course, in Malaysia, the 5 gs SPV initiative, we are still in engagement we are engagement constant engagements with Digital National Brahad, Sorry, Digital Malaysia Bharat, I think it's more National, Digital Bharat, yes? And even the 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. But we are hopeful that the commercial discussions will start in earnest. So that hasn't done yet. And as we've talked about the 3 gs shutdown, that's an ongoing exercise. We are looking at how we migrate the customers from 3 gs so that they will be VoLTE enabled under 4 gs. And of course, as again, as I've mentioned, the military coup in Myanmar, It has little impact thus far to e.co, e.co 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. And so far as opportunity is 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, we're put in a strong position to compete effectively with The Netball Telecoms Company. Of course, we think that the impending merger integration of the investors in Indonesia will provide an opportunity for XL to take advantage of disruption in the in the network, in the distribution outlets and so on. And of course, we are very, very encouraged with the strong growth momentum from ADA. And at the same time, and so far 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 Bannegar is stipulated 30th June as the deadline which submissions are to be made. So hopefully, we will make some announcements around that particular initiative as well. So thank you for that thoughtful attention. And I guess over to you, Claire. Thank you, Dato. I'm Claire Chen, the Head of IR at Axiata, and I'll be moderating the Q and A session today. So as a reminder to all of you, there will be 2 options for you to ask your Q and A your questions. Firstly, ask your question verbally. As you can see in the taskbar 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, yes? So I can see that we have 3 hands raised already. The first in queue is Ranjan From JP Morgan, Ranjan, please unmute your line and ask your questions. Hi, Ranjan. Hi, good morning and 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 our Digital Colony in Southeast Asia and Edge Point, how do your aspirations get affected with new competition in the region in the tower space? Secondly, On the gender initiatives of the government, if you can share like what has been the spend from Axiata And then how are you accounting for the contributions from the Universal Service Provisions Fund? Okay. On Edutto, competition is always good, but we like to think that we've already established a strong across all the operating markets. We like to believe that the economies of scale that we can already offer on day 1 will make us pretty competitive. So in the home country Malaysia, we have been successful in acquiring towers, 250 towers, I think that was done on 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 EdoCo as well. And again, the economies of scale and know how, we think we are a step ahead of the competition. And at the end of the day, the challenges that the region provide, Again, something that we are also familiar with. The new entrants to the market, if you like, no disrespect to them, but it could be a different ballgame altogether for those other entrants. But we welcome competition in the markets, Not an issue. We are encouraged by the lifting of the ownership restrictions in leisure Under the omnibus law, so we're looking at that market as well. And again, that's a pretty big market, not just where it stands today, but also the projected growth of the tower business in Asia and the other markets. On GENDELA And all these initiatives by the Malaysian government, I mean, 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. So the point about the Q1 results last year where the first initiative was rolled out, we had a bit of some cost that we incur as part of that marketing cost. But 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. But as far as USP is concerned, that is A continuing obligation under the CNA. So I wasn't quite sure, Arunjan, where you're coming from, from that on that question because 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. But insofar as the MNO is concerned, we would have to contribute our share of revenue, a 6 percent share for the USB fund. So 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 and M costs, if you like, to make sure that the business is sustainable over a 5 year period. And then at the end of the 5 year, the M and A will have a choice whether to continue providing coverage or not depending on the traffic that builds that's built up. So I hope I answered that question, Arunjan? Yes, yes, Sridhar. Thank you so much. Thank you. Thanks. Okay. Let's move on to Phuong from CIMB. Phuong, please unmute your line and ask your questions, please. Hi, Phuong. You've already up your report. Yes, I am. This is a good start to FY 'twenty one. Yes. Tugger price for 'twenty. Tugger price for 'twenty. Congrats, Dato, on the good set of results for the Q1. And thanks for taking the call. A couple of questions from me. Firstly, I wanted to ask about Cellcom. Despite the encouraging revenue and subscriber trend, EBITDA was down Q on Q and I think that was due to high expenses in the Q1. Can I get more color on that cost item? What drove that up? Second question for Roby. 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. 3rd question on ADS, good to see the narrower losses in Q1, should we expect that to be at least the base going forward with potential for further improvements? And my last question, any initial feedback from MCMC or the government on the Cellcom DG merger? And any additional conditions you think that But why don't I try to address question number 3 and number 4, and then I'll invite Idaham, I think, is online. Is Idaham in general? Yes. Yes. On the ADS, yes, in fact, the marching orders, if you like, for As you recall, Yaron, there's 2 arms to the ADS business, the Digital Financial Services and then as well as 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 USD 8,000,000 profit on the back of USD 137,000,000 revenue, which is pretty decent because ADA today only came into shape in 2018. Of course, the precursor to ED was a bunch of a few companies that we've invested in, We bundled them together and started in 2018. And over a 4 year 3, 4 year period, they've done pretty well. So we expect it to do better in quarters to come. Now as far as DFS is concerned, the marching order is for them to be Well, to be to breakeven actually in 2022, yes, so for financial 2022. So the losses are The narrowing of the losses have been along the projections we've made 2, 3 years ago. And And we think that it will be positive so far after 2022. Now of course, that's without The digital bank sort of financials just yet, yes. So I qualify the losses that we expect DFS to 0 rise, right, yes, by 2022 is without the Digital Bank sort of numbers for the time being. Now so far as the digital bank is concerned, looking at the timelines that have been prescribed by Werner Garra, it will take maybe 18 months After 30th June before the banks, the licenses can be or the banks, the successful bidders can operationalize their banks, yes? So that will take us after 2022, yes? So the first year operation could be in 2023. So we're looking at just 2022 for the time being. And then hopefully, that the team can make sure that we will be profitable at least for 2022. So far as the initial feedback, Yes, we have 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 merger and the impact of the merger on the economy, this growth looking at the subscriber base and so on and so forth. And the Feedback so far has been rather positive. We are not aware of any additional conditions that has been imposed. And of course, The big one on the table and so far as we're concerned is the spectrum. We definitely 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, yes, because we need that additional spectrum to make sure that the quality of service It's improved, if you like, yes, for the customers. So can I invite Idam and Jennifer to address question number 1 and Perhaps Vivek and I can address question 2? Yes. Okay. Thank you. Good morning and thank you Phong for the question. I'll pass to Jennifer, but on to give you that detail on what's the difference on that between the Q on Q, the impact of EBITDA. But overall, I think EBITDA year on year, we have seen improvement even at the operating level. We have seen a bit flattish at the even at the quarter on quarter at operating level. But I'll pass to Jennifer to take you through the details. Hi, good morning, Phong. 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, right, mainly the GST recovery that we had that actually bumped 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. But 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. But on the Q on Q, you're right, is actually a bit flattish. That's mainly because there's another area that is also driving it as well is 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 iPhone 12 launch. And because of that, we had quite a bit of 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. So when we actually complete that, that's why when you look at the devices yield in Q1 was actually quite high. And that also has driven the direct cost to be a bit higher in Q1 this year. So net net, I will say that operationally, The EBITDA is actually flattish. I hope that address your question, Phong. On ruby, I can explain, Pong. 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 megahertz of spectrum. So around $200,000,000 of CapEx, around $110,000,000 of CapEx orders have already been placed and the remaining would be going out shortly. So we don't see a risk, any risk on the top line other than what would be the market situation, etcetera, for this year. And 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. Yes. Just a bit more on the ADS phone. These days, with the 236,000 merchants, We have 8,900,000 users on Boost. We are able to command a better deal from the merchants. Those days, we had 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 rebates as well to us or share some of the give us part of the commission as well when they when transactions are done. And of course, the more the revenue mix is now shifting towards more to become to be online, That will certainly help boost the performance at ADS. Yes. Thank you again so much for the call, No worries. Thank you. Okay. Thanks, Phong. Moving on, our next question comes from Isaac from Afin Huang. Isaac, please Meet your line and ask your questions. Hi, good morning everyone and thank you for the opportunity. Just two questions for me. Number 1 is on the Cellcom. When you come to the subscribers and ARPU. 1st, the subscriber 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 will be the trend going forward? And on the in contrast ARPU has been trending lower. When this year autumn and what happened? That's question number 1. Question number 2 is when it come to Digital National, have you hear any updates And any of this on Digital National will be helpful. Thank you. I'll tackle the second question. So far, the discussions has revolved around the technical aspects of setting up a 5 gs network. And the commercial discussions have not even started. We know, as I've mentioned earlier, the Digital National had undertaken an RRP with the vendors. You would have read that in the papers. But again, we have no line of sight as to the If like scope or well, the detailed scope, we do know that Digital National's RFP includes the O and M aspect of the network as well. We're not quite sure what the business model is at this stage. But certainly, we will keep Everyone updated if and when that becomes when there's a lot more clarity on the business model that Digital National wish to adopt and because that will have an impact on us, the MNOs, yes? Edam, Jennifer, can I ask To tackle the first question on the ARPUs? 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. But as what we introduced with the new product lineups that we have, our product has become a lot more competitive than we were before. So we are actually speaks better with the consumers. But 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. And 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 traffic, footfall traffic that we have 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. And also how do we help to get our trade to become active in the social commerce as well. So all these activities help in terms of bringing up the number of subscribers. In terms of ARPU, I think, yes, you've seen the industry is industry trend, as we said, ARPU is declining. But we have also seen some internal trends that help to we 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. So there's also a very, very good trend that we see. Jennifer, you have anything 1 or 2 things to add? Yes, I think the if you look at even the ARPU, right, 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. So that's the reason when we look at it in terms of ARPU. 1, we whilst we actually look at the blended ARPU as it is, we also need to analyze a bit further in terms of the postpaid and And if you look at the postpaid and prepaid output in that sense, I think we're actually sustaining pretty well, especially from the postpaid front Because they emphasize in terms of the plans that is with the devices and the plans that is a bit on the higher side. Whereas on the prepaid, as what Idam has actually mentioned, the take up from the monthly kind of like sustained the prepaid output. Thank you. Thank you. Just a short follow-up questions. Can we share a bit more on the after subscriber for the Repeat again. Is there any particular segment that registers such a strong growth in terms of the uptake? And should we expect similar growth content for the Next two partners ahead and that's all my questions. Thank you. Jennifer? At the moment, when we actually drill down a bit further in terms of the sub base that we have, we see that we are actually In the past, we appealed a lot in terms of like 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. Yes. Rashid, if I were to add one component on the ARPU is which is a good trend to see is that we have seen an increased contribution of data revenue inside the ARPU. So which actually address some of the decline that we see from the voice related contribution of the ARPU. So 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 Macquarie. Good morning, Prem. Prem, you want to unmute your line? Good morning. Hopefully, you can hear me. Yes. Yes. Thank you for the opportunity, and Congratulations on a decent set of numbers. Just to continue on Cellcom first. It's good. We are taking back some share in pretty good for that. I think the ARPUs are holding quite well. I agree with you on that one. But how worried are we about the additive risk Because you're We know how both that younger group that has grown your share in Sorry, is this any better? No, no. Can you start again? Because we lost some of the words. So you sounded like So going back All right. Sorry. So with Cellcom, we've done well. We've taken share in the younger group. But the issue is the competitive response. And what 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. 2nd question, I was just wondering with the Cellcom DG merger, We had initially talked about a 4 to 6 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? And if so, what if you could share with us some color on what it is that has pushed things out a little bit. And finally, with regards to M and A opportunities, Once we get this agreement with Cellcom sorted out, would you be able to give us some feel for what you would love to do from an M and A perspective outside of e.co over the next 12 months 12, 24 months. Okay. I will get Idan, Jennifer again to address the Thank you, Prem, for the question. Yes, a very good question actually. I mean, question is about whether we can sustain this if there is 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. But one of the biggest driver that drive the business was the transformation of our trade, as I mentioned earlier. So how we do things, how we deal with trade, how do we activate more trade to be activating the business with us. And this on top of the coverage that we have, we believe this will form quite a sustainable competitive advantage. At 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 BBORs and the new application that we do, getting more of our customers as well to be on board of the Cellcom Live app. We have seen increase and increase in terms of adoption of the Cellcom Live app, which is very good. So we think this is will be something that's sustainable in the market. At the same time, we do expect there will be some response from the competition. And what's important is our ability to respond correctly when that happened. And what we have done also in the past 6 months to 8 months ago is our ability to respond a lot faster than we used to before. So this will also help to for us to be able to maintain our competitive level in the market. I hope that answered your question, Prem. Yes. Thank you, Edam. That's very helpful. Okay, Prem. On the second question, actually, if I recall Correctly, in our presentation on 8th April, we talked about end of the second quarter to make Submissions, signed definitive agreements and what have you. Insofar as we're concerned, things are actually proceeding quite well. But what you have to remember is since 8th April, what we have been engaged in is 2 big work streams, Actually, 3. 1st is the due diligence exercise. 2nd is the preparation of a high level business plan. And third, the preparation of the integration teams. So that's all that was In fact, the discipline is the highlight of this plan is done. We have come to a landing on the aspirations for the home business, the mobile traditional mobile business, home business as well as the enterprise. And so far as the integration teams, we've identified the 2 CEOs The would be CEO and Deputy CEO, Alban and Ida Ham has landed on the team, if you like, to form The integration team, the members who formed the integration team, so it's all pretty good. And so far as the definitive agreements, yes, and you would appreciate that the outcome, if you like, due diligence exercise will have a bearing on the definitive agreement. So that's We've been making sure that that too are synchronized quite well. Quite frankly, we are in a good position actually to meet the 6 weeks or End of June or end of second quarter sort of time line. No concerns, no nothing that's been pushed back or anything 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 2 CEOs, well, Alvin and Nederham, is that we should take this opportunity to transform the organization. My view, the word integration could mean putting the 2 together and that's it. And sometimes that may not necessarily be the best thing because you put into, for lack of better phrase, all habits together. So what the team has been the direction has been given to the team is to look ahead. While with this new organization, the merger entity, what this organization will look like terms of the processes, in terms of distribution channels, how we do things. So it's almost like a clean slate that the teams will be working on. So rather use the word transformation as opposed to integration. On number 3, insofar as M and A opportunities are concerned, You would recall, we talked about doing the enterprise segment. We are looking at, I won't call it bite sized acquisitions, but this is more acquisitions to augment our capabilities and enterprise segment In Malaysia, in Indonesia, especially because these are obviously 2 big markets and so far as the enterprise opportunities are concerned. And 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 a service also. So if you like capabilities that we wish to acquire. And sometimes it's a balance between are we acquiring talent or are we acquiring track record, customer base and so on. And hopefully, they're both. So that's one aspect of it. The other bit is Indonesia. We're looking at also Potentially to mitigate the GAAP, if you like, because of the IndoSet a hutch merger that's pending. We are reevaluating our business model there, And there's no rocket science as to what we would plan to do because that's quite potentially Indonesia offers the convergence play in a much bigger and better opportunity. So we're looking at that angle as well as so far as Indonesia is concerned. In Nepal, yes, we're looking at how we can ensure or future proof again The business, the end cell business, the competition comes primarily from the over there in the port that's operating. Past 7 p. M, the streets deserted because everyone's at home on the fixed broadband and logging on to the Internet and mobile data consumption just drops, Yes. So that's one segment that we would like to address as well. So that's a flavor of some of the things we'll be looking at for these next 12 months. Graham? Perfect. Thank you very much, Doctor. And Ira. Thank you. Good. Thank you. Thanks for the questions. Okay. Thanks. I think let's move on to we don't see any more hands raised So 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 Cellcom in the coming quarters? Vivek, you want to take that? Yes. I think as I mentioned earlier, we will have impact coming in quarter 2, which could be in the range of around €60,000,000 to €70,000,000 After that, we should we've seen some positive effect coming in quarter 3, quarter 4. Effectively, I think full year would be pretty much close to what has been charged in quarter 1. [SPEAKER PIERRE ANDRE DE CHALENDAR:] So we neutral that? [SPEAKER PIERRE ANDRE DE CHALENDAR:] Yes. Yes. So far as AD is concerned. Okay. I think Paul had a second question as well. Paul from CLSA, strong net adds at Cellcom over the past few quarters. What has change to achieve this, I think that was also answered already previously, right? I think on that one, Paul, the transmission is ongoing at is ongoing at Cellcom since last year, since October last year, it's bearing its results, bearing fruits the fruits of that initiative. So that is sort of whose team has hit despite the merger announcement. Out of that 70 odd initiatives that we identified as of the transmission, we only sort of dropping or putting on hold 4 out of the 70 simply because the other 6 are no regrets sort of changes or transformations that we're doing with Cellcom. So that I think that's 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 been a very good result that we were hoping to see in this quarter. All eyes on the Q2, Q3, Q4 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 Weetik in Manu Life. Basically, a little bit more on our depreciation policy for 3 gs assets. What is the current book value for 3 gs assets in Cellcom and the market practice in terms of depreciation for 3 gs assets. Vivek, do you want to add? Yes. So I think, first of all, the 3 gs Depreciation policy is not there's no policy as such. It is based on the expected life, remaining life of 3 gs assets. So as I said, most of the markets, except in Nepal, We have kind of decided to migrate 3 gs to 4 gs. And as a result, we have been accelerating in this year for most of the markets and lot of it charge was taken in the previous year itself. As far as two markets The concern which is Bangladesh and Malaysia, the plan is 2023 for Bangladesh in 2022 for Malaysia. And Nepal is still continuing to use 3 gs. So it's not 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. So that's, I think, how it has been done. Yes, some of these 3 gs assets would be used for 4 gs, no doubt about it. I mean, we also have some from the vendor to be able to migrate some of the licenses at a very low cost or a depreciated value of 3 gs into 4 gs. So that I think would be used. Exact value of how much is the 3 gs, I'll ask Jennifer to give that number. Jennifer, how much is the value of 3 gs assets now at the end of quarter 1? Thanks, Vivek. The net book value of the 3 gs the remaining 3 gs assets as per now is in the range of less than 70,000,000, I would think. It's within the range of 60,000,000 to 70,000,000 at the moment. The whole point of us doing the accelerated is that we As part and parcel to address the GENDELA needs as well is that we're trying to move the 3 gs customers to 4 gs. So but on another hand, what we are trying to do as well is that to actually bring forward the execution of the moving the customers to 4 gs. That's why the accelerated depreciation we started at last year as what we've said till end of last year. And we think that we are trying to start to shut down some of the sites potentially by end of Q2. So that's the reason why the accelerated depreciation was actually done as such. Okay. Let's move on to the next question on EdoCo assets in Myanmar by Sean of eSpring. So basically, the question is, is there a need to impair EdoCo assets there due to the recent development in Myanmar? Well, we did an impairment testing as a result of the first quarter as far as the Myanmar is concerned. So maybe Vivek, you want to provide one? No. So I think at the moment, they are revenue generating assets. We are getting payments being made by our customers. And we've also, as Dato said, We've done the testing based on certain stress tests on the cost of capital risk factors, etcetera. We still see there is no need for us to impair those assets. However, we will continue to look at that on a going basis because the developments are going to happen as we move forward. And accordingly, we will have to make those assessments on a quarterly basis. Actually, the stress testing is pretty stretched. My for what is worth, if you look at the Cost of capital in war torn countries, we're talking about the serious and Syria and Yemen sort of environment. The numbers that's been 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, I mean, our bills are continued to be paid. I strongly believe that the telco assets are critical for everybody, not just the whole vision as well as the military. So we will continue to monitor because as I said, it depends on the extent of the sanctions that's being posed by Other countries on Myanmar, that may have a bearing on our business, yes? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] And as far as Myanmar is Concern 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, Doctor, you might have any closing remarks. Yes. Thanks, Claire. Thank you again for joining us this morning. As We have said earlier on, it's quite encouraging for the Q1 results. We continue to push along just given the challenges in all the operating markets. But it's a question of the 3rd wave, 4th wave and so on, how it affects economic recovery in some of these countries. I know there's some literature out there about how emerging markets may recover slower because of the access to the vaccines, but I'm pretty hopeful that notwithstanding the challenges that each of those countries may face, I'm hopeful that their respective governments will make every effort to ensure businesses resume. Of course, there are It's all relative in terms of challenges. In Sri Lanka, it's driven by the tourist market. Likewise, in Cambodia, it's driven by the tourism industry, but I think respective governments will make every effort to make sure that the various economies will resume as fast as they can. So thank you once again and we'll be in touch and Please look up for the coming news. And so far as the definitive agreements are concerned, our digital bank license