Earnings Call: Q1 2020

May 21, 2020

Ladies and gentlemen, thank you for standing by, and welcome to the AxiATA's Group First Quarter 2020 Results Briefing. Throughout the presentation, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. Firstly, 3 housekeeping reminders. Please mute your telephone during the presentation and kindly avoid using wireless headsets. Also note that the call duration will be for a maximum of 90 minutes. I would now like to hand the conference over to your speaker today, Pam Souri, Jonaluddin, President and group CEO. Thank you, sir. Please go ahead. Thank you very much. This is Jamal, the group CEO. Today will be, I will be announcing our 2nd first quarter 2020 results. As she have seen from the Busaw. So we're going through the presentation, but before I do that, just quickly introduce, another, speaker, which is, that's who is the group Deputy Group CEO. This is his inaugural event of the IR conference. So he will be also speaking this time around together with Vivek, who's our group CFO. So without further ado, let me go to slide the second slide these are the key messages from the first quarter results. So in general, overall, as a limited impact on revenue and EBITDA, from COVID 19, for the 1st Q. Of course, you will see later on that, the impact will be more, second half of March. 2020. Having said that, the impact varies from country to country, from marginal in the case of Indonesia and Excel and SMART to quite significant, especially in South Asian countries and to some extent, Malaysia towards the last 2 weeks. The of FCW, our free cash flow grew 25 percent to $1,200,000,000. From that respect, we have a pretty good cash as you can see from the, the results. But together with that also, we have been, we've been an early drawdown of USD 300,000,000 to edge up our gross debt EBITDA to 2.6, but without that, our balance sheet is still very strong at 2.51x. Now on top of that, in early May, we secured $800,000,000 syndicated facility to strengthen our liquidity position for financing and bill a war chest, so to speak, for opportunities in the new norm. This is the, the one that we just announced, a lead last a lead this month. Now on the performance side, we have a mixed performance across the group. On one hand, we have cell will be e.co and Smart performed very well, extremely well. Dialog performed reasonably well. However, Cellcom and Intel didn't perform as well, and to some extent, it's appointing. If you look, specifically, Cellcom performance affected by delayed product launches, However, EBITDA grew nicely. Now with a lot more would be down in Stockholm, which we'll explain later on. Oh, and as I said earlier, apart from e.coandsmart, Exelion will be did extremely well last year. Already last quarter. And again, we will be explaining exactly in more detail. And so it's a bit tricky. The for the last three quarters, we have been having a huge competition, not just with the mobile operator, but also with the ISP players. To the extent that we could not really, react, mainly because, effectively, because of the lack of spectrum, which we, we're working with the government. We got a spectrum, but we're it's very onerous in terms of the terms. We're trying to work out the terms. Now until then, however, and unfortunately, we're we cannot react the way we should be given that there's a huge demand for data and mostly at home where we cannot really, our capacity doesn't allow us to compete fully. So that's been a quite a challenging moment for himself. On the CSR, we have done quite a lot, and I think when compared to many others, we are proud of ourselves that our focus on our customers, our, dealers, and our partners have been taken a test of stage in how and how we work in first quarter and especially in second quarter. So there are a lot of programs that we are we have announced and plan to announce to take care of, like, say, our customers and the community a lot, that will be presented by, Doctor. He's adding shortly. Left but not least, given the huge uncertainty, like many other companies, we are withdrawing our 2020 headline KPIs. Again, we can discuss, and we will discuss that shortly, during this presentation by Vivek, our group CFO, That's basically the key messages. As you can see, if I can, in a nutshell, as well, generally it's a good performance, but it kind of makes some being extremely well and some not as well. With that, I'll pass to that regarding the Deputy Group deal. That is that in? Yes. Thank you, Tanshi. Good afternoon, everybody. In so far as our business is concerned, because the lockdown impacted the prepaid reloads and SIM activations, But, and correspondingly, there was a lower direct cost as well as sales and marketing costs. I think, as potentially related to just now, the first quarter impact is not as, as, would not be representative of the pandemic, situation, we are thinking that we are expecting the 2nd quarter results to be much more representative Now insofar as this flight gen is concerned, the good news is we've managed to, bring the vendors on our side in terms of making sure that we are our equipment deliveries are not affected. We are looking also at identifying new growth areas so far as CapEx requirements are concerned. So the good news is, you know, the vendors are also, agreeing to some of the requests that we're making in terms of referral payments and discounts. In terms of employee wellness, we like to find ourselves, having, make sure that the employees well-being are taken care of. We've provided help lines, our counseling services, continuous engagement, I've actually now done several town halls. We've, the employees at large as well as the leadership team of all the opening companies. Happy to report that, everyone's actually in a very upbeat mood and, frame of mind. You know, I I even got reports that they think that productivity has gone higher over this last couple of weeks. In terms of CSR, I have another slide, after this to elaborate on that. And so far as technology and cyber resilience, our networks remain resilient, although despite the traffic surge in big data traffic about 2 to 2 to 12% network utilization has increased some areas as a result of redistribution traffic as they would appreciate. And we're taking, very active steps to make sure that, we will detect and accordingly respond promptly to cyber attacks that we have seen activity that's gone up. And so far as BCM response, all non essential employees are still working from home. In fact, Cellcom has only started on 13th May to come back well, the team at Cellcom's come back to office on 13th May, early this week. Even that we've adopted many safety measures to make sure that the staff safety is insured. For 1, there's 2 teams that are operating to HNB. Whereas the other operating companies in Malaysia, we have expanded the work from home arrangement until 1st June. Of course, it goes without saying that this is thing that we pride off. And given the fasting month, Ramadan and Haraya, along the corner, everyone's trying to make sure that you know, every the the the staff is continuously engaged and remain, upbeat Next slide, please. Now, in terms of the CSR initiatives that were done, and let's just say that we are very supportive of our vendors, of our customers, the SMEs are as SMEs in particular because these are very, very challenging times. As you all know, in Malaysia, we have of we are part of that government initiative for 1 gigabit ISB daily from 8 AM to 6 PM. Now, that certainly will have an impact also to our top line but we feel that there's something that we should avail to the customers. In addition, we're providing unlimited WhatsApp services as well as free unlimited access to Microsoft Office 365 on a weekday. Of course, the other operating companies as well, have been doing the same thing. We like to pick freight that in Cambodia, we sponsored or we've contributed USD 1,000,000 to the government's initiative to cater to counter the, COVID-nineteen pandemic. As well as in dialogue, dialogue in Sri Lanka has contributed $1,000,000 to upgrade several ICU facilities or to equip 2 hospitals with IECU facility. And that has gone down quite well with the president and the government. NCELL as well as provided similar packages, table impacts, and, bonus for every recharge. As in in initial, not forgetting in Asia, they've also done the same thing. They're asking the things in terms of providing online learning portals, access to online learning portals, government websites and similar to Malaysia access to Microsoft Office 365. In fact, XL is contributed $650,000 to the National Disaster Management Agency as part of the ECSR initiative. Next slide? Now, this is just a summary of the EBITDA, but I mean, free cash flow metrics for the first quarter measured against the first quarter of 2019, double digit growth and single digit growth. The shifting gear momentum continues in this first quarter. As country explained just now, the WGG growth in EBITDA and Parqaman is in Nepal. Intel is the result of the constraints in the spectrum that has been made available to us. And in fact, we are still in discussions with government with the regulator to regularize the conditions to change the conditions that's been imposed on us. In so far as Smart is concerned, you can see double digit growth in EBITDA, apart from these free cash flow as E.co. E.co is certainly proving to be resilient. And we expect that to be the, if you like, the other core, profits and, and, and, amongst all the operating companies within the stable of Aljeta. I think, head over now, the slight the presentation to Vivek to take us through the first quarter of 2020 results. Please? Thank you, Rato, and very good afternoon to all of you. If I can go to slide number 9, which is, that's the financial presentation. First slide is on quarter 1 reported results, we had a fairly good 1.5% growth in revenue, but much better, EBITDA growth of 3.4%. Partangi was impacted largely on a couple of factors, which is one was employee restructuring program, which is net 7 7,000,000 drops is 101,000,000. So net amount is, post of tax, and some forex losses of around 130,000,000. And then we also had one time, gaining sale of towers around 1,000,000. But if you look at the numbers, on revenue, negative 3.7 percent on quarter on quarter, it's very stable if you factor in the of lesser number of days as well as seasonality, but on a year on year basis, a 1.5% growth. EBITDA looks slow minus 8.1% on quarter on quarter, partly because of the restructuring program, which we did in, cell comp. But on a year on year basis, a 3.5% growth on EBITDA, but fairly stable compared to last quarter. Down because on, on the year on year, mainly because of the one time gains we got in, 2019 when we actually sold M1 stake. As well as divested some of our digital ventures. Patami is down on quarter on quarter, and also on year on year. So I'll go through more details on pertaining my subsequent, slides. If I go to the next one, which is really talking about underlying performance, which excludes some of the, elements leading to restructuring as well as, the M and A, or etcetera. OnterBank performance, excluding devices, 1.5% growth year on year, EBITDA of 2.5% year on year, whereas, our focus on operational excellence has kept our costs back. Ptang is being impacted because of which does contribute to our profits, and also higher losses in digital business, and digital businesses mainly because of some program on, targeting the, targeting the lower end customers, in quarter 1, which did cost us some fund marketing spends and obviously I'm continuing higher D and A expenditure. But if you look at the revenue 2 of those did extremely well. Mine and our person grew pixel and Bovie 7 person. Telecom and Ansell were, down, and go through some more details, in subsequent slides. But however, our program on cost efficiency does continue to give us benefits on of EBITDA development. Year on year, 2.5 percent, if you exclude the impact of a one time restructuring, for any structuring program and Cellcom, EBITDA growth has been 6.7 percent and we have 4 off course actually giving double digit, including RODI, which is the 9.1% EBITDA growth. Double digit. And our costs have remained fairly flat with an EBITDA margin uplift of around 0.8 percent, to 41.5 But Tami, as I said, did get impacted because of the charges on, on, continuing charges on depreciation. Part of it is also explained through the adoption of IFRS, on those, the increase, lower contribution from NCELL, the, the e tonight, which is what I was talking about, which was, where we partnered with the government, opening accounts for for some of the lower and the middle income segment, consumers and taxes in Bangladesh. Now if you tax, in quarter 2 coming in end of quarter 2 coming in Bangladesh. Now this, because it started from quarter to 2019, like to like, this impact would not have been there in the previous, year. If I can go to the next slide, basically giving a waterfall on how the Fatami development from last year, $209,000,000, we got an $187,000,000 uplift coming from EBITDA improvement. Digital businesses, which I explained that higher cost mainly in digital financial services, $160,000,000 on the depreciation, all of it, which is around $45,000,000 is on count of ROU assets, which is the, the amortization of lease liabilities, and finance costs $30,000,000 largely on account of, again, relating to the lease interest expenses. Tax is mostly coming from Rovi which I explained earlier. And that's how the 121, comes as the underlying, for the quarter. But if you look at the actual, from 188, which is what we've reported as actual to 120 on, most of it is on account of, the XL, DARO game, for the year and also a negative impact on account of, Forex 123. Most of it was unrealized loss at the end of the quarter, but part of it did get realized subsequently off of it. I'll go to the next slide. I think from a cash, which I think is critical at this point in time, given where we are, so our key focus remains on preserving cash. And I'm happy to say, both from an FCF as well as OCF, we've done, we've done well, partly on account of improved EBITDA, partly also on account of, attempts to, to rationalize the, CapEx spend. So our FCF yield is around 20.4% for the quarter, and the OLC fee is 10.5%. By going through the next one. Operational excellence, I think has been something which we've been focusing around specifically on the cost side for the last 3 years. And if you recall, we had set up a target of 5,000,000,000, gross, costs to be taken on both on CapEx and OpEx. I'm happy to say we are still on that target. Hopefully, by the end of this year, we would have achieved that $5,000,000,000. And then we have new programs to continue subsequently. But that said, we have, some increase in network costs, compared to last year, mainly in Excel where we had new, managed services contract starting from April. IT expenses has come down mainly in So again, mainly because of the revised managed service contract and, which is, which is benefiting us, savings on account of sales and marketing finiture on 56 and other largely on account of the, restructuring expense, which we have in, Belkom. So overall, if you exclude the restructuring spend, the costs have remained, flat, what has increased is just on account of, new Tahoe's investment sites course, which has been added mainly in Excel and, OB. If I move to the next one, which is maybe around the balance sheet, I think very strong balance sheet, one time impact coming on account of the borrowing of $300,000,000, which we did for the repayment on in April subsequent period of time. Taco to the next slide. Let me quickly run through some of the performance of those cellcoms. I think we did have an impact on prepaid, largely other other lines of revenue. Very stable and prepared is mainly on account of daily product launches and also on the, acquisitions flow and slower pre to post, migration. However, that said, I think EBITDA based on the cost initiatives, which was one of the objectives in self harm to drive EBITDA margin improvement. I'm happy to say that, 7.8% improvement on EBITDA, if I exclude the one time restructuring, then a restructuring cost during quarter 1. FCS, a positive 34.7 percent. But, I mean, if I the restructuring of 31.6 percent improvement in the, profit from compared to last year. So Cellcom, I think some challenges on the revenue side, how we'll go from a cost profit standpoint, a good But to itself, I think that's all along a strong story, except 8.8% growth in revenue, 39.7% in EBITDA, but this also partly explained by the IFRS adoption. In Indonesia from this year. But if I exclude that IFRS impact, we have a very strong 17.3% improvement in, EBITDA. And a strong, cash flow improvement of 1.4. This cash flow excludes the, the realization cash received of nearly $3,400,000,000 from the sale of dollars. And, but again, stable, but if you include the gains coming from, from the dollar sale, looks in reporting. So strong performance in Excel, if I were to go be again another quarter of continuous improvement in Bangladesh, with service revenue growing 7% year on year. EBITDA grew 10.1% with EBITDA margin crossing 40% for us. This used to be, if you recall, used to be around 22, 23 percent, just 1 year after we have merged Airtel and Ruby. And from that level, the company continues to deliver extremely good on top line as well as managing their costs, taking EBITDA to around over 40%. Free cash flow, I think, lower this quarter, mainly because last year, we could not import the equipments because of the restrictions imposed by BTRC regulator there in 2019, a strong predominantly quarter of positive Pathami Development. And this is after increased, taxes, increased taxes in Bangladesh. If I go to dialogue, I think as, as, Punshri said, the moderate performance in, in dialogue, mainly on account of, the, Tokyo imposed in the middle of the year. There was middle of the month of March where there was no movement alone. So that had some significant impact in the second half of, March 2020. If I go to the next one, which is answer, I think, as Banfri explained, the core revenue, at minus 9.7 and I'll be of 16% I'll be was expected in line with the continued, lowering of highly, highly revenue. Our core revenue, mainly getting impacted because of the capacity constraints from lack of spectrum, which hopefully we should be able to resolve, soon, and that leading to the EBITDA drop as well as for timing drop. Mark continues, is journey towards, double digit development on profits as well as EBITDA, and the strong performance in that market. ABS, I think, we've been doing well on boost, specifically, with this government led program, we did see, boost 401, GTV, as well as number of subscriber base improving, digital advertising business continues to do well with new customers, new clients being taken, and the focus now is how to strategize during this period of COVID. Aspirazi, which is the, microfinancing, micro insurance business, of ours has been doing well. We have, around 15% of, loan being disposed so far. We've also launched a specific program for the COVID-ninety assistance, for the micro businesses, Micressing, an APCATE, which is the, platform for, the corporate billing and A2P that again continues to develop well with improved increased, gross transaction value. E.co, as Dopro said, continues to have a good performance, specifically on the EBITDA side, even if you exclude some one off M and A, impacts, 19.1% growth in data reflective and strong cash flow and profit development business. Considering all the uncertainties around the financial, act of COVID-nineteen, it's difficult. I mean, someone really has to have a very good crystal ball to be able to predict, which I am not sure anyone can do it at this point in time. So given that uncertainty around surrounding the pandemic, we have decided to withdraw in guidance on 2020, headline KPA. That said, our focus at this point in time is on, cost management, CapEx Efficiency, and consolidation of cash to be able to build a good strong balance sheet, and capitalize on the opportunities new norm, which hopefully should count, in some period of time. The last slide, I think, is talking about a little bit about opportunities. I mean, it's early stage, but we do see opportunity in some market that fixed virus access is there. And that helps because it allows us to do a much faster rollout and give the opportunity for our consumers on to access, work from home. Digitization, specifically on the price side. I think there's of a small and middle segments. I think it's something where we're looking at as opportunities. And overall, digital experience customer interactions with the channels, which has grown quite significantly over the last, 2 months since the blockchain in different markets, additional cost. I think we have already a plan of $900,000,000 or $1,000,000,000, nearly a $1,000,000,000 of cost to be taken out. CapEx, we typically While we announced CapEx to the markets beginning of the year, we do not release 100% of the CapEx to our operations, and we keep fifteen person to decide based on opportunities. This is still not being released. We will probably not spend this, maybe if required selectively depending on opportunities, markets. And obviously, focus continues to be on the, on the costs, which are directly related to the impact on revenue. Liquidity, having lots being managed through the early drawdown or, facilities being put in place. At the group level and including in operating companies, XL would have $4,000,000,000 coming from the cash from the sale of towers as well as, you know, the markets like Bangladesh, and, and dialogue. We are ensuring that we have a fair good liquidity available to deal with, even worst case scenarios, cost management. So that's it for me. I'll hand it over to back to you. Thank you. Unshares. Sorry. I was on mute. So thank you Vivek. So before I proceed with the next topic, which is quite interesting by itself, I just wanted to summarize are the key things that, from my perspective, we are happy about. Obviously, the performance of, we're happy with the performances of Excel Robbie, Indochuan, not only for the 1st Q, but we can see a nice trajectory. Of course, then in fact, all of them will be affected one way or another by COVID, but we from a short term perspective, yes, but as we could see from a long, mid term perspective, a longer term, we are on the right track. So we're happy with that. We're also happy with the operational excellence and within that, the cost management that we have done across the whole group. And, and also Salkom itself have done quite a lot in reducing its costs. A lot more to be done, but we are so happy with the progress. And within that also, we are quite happy with what we have done on the recent VSS program that, they, to the tune of about 300 people that have been reduced very nicely and very, humanely to the Turner people on a because voluntary, and that will give us a tremendous, rich innovation possibility as we bring in new people and as we go into next year, our cost structure will be also improved. We're also happy with the balance sheet. It's a pretty strong balance sheet and with a strong liquidity and a wall chest is presented. Not mentioned so far. We're also happy with synergies that we will be talking about in next quarter, where there's a lot of new ways of working with the group, and of course that has resulted in high potential savings We're also happy with the, huge interest in the new investors, any dot co and ADS to be more specific Again, it's been affected by COVID, but hopefully, within the next two quarters or so, there could be some movement in the area. And last but not least, we're very happy with the new that we are preparing beyond the top down and to get to support and to help us in the medium term in the future. Obviously, on the flip side of it, we are, quite disappointed with, performance of cell, cell company revenue, market share and sell. And also on the second part, the, regulatory, the taxes, that we incurred by, the at Robbie, has been quite disappointing because we could have shown a much better result on a profit wise and also the spectrum constraint and sell. So that's how I would summarize the first quarter. Now coming to the topic on bot and management refresh, that's an interesting topic by itself. This is a with a special topic because we've been asked a few times by our shareholders and analysts and from others. About how how are we looking into the board refresh management, especially given our new challenges every time, but also we want to make this between continuity and, and a fresh leadership. So if you look at the following slide, You can see, you know, don't worry about the names. Of course, the names are the are initials, but worry about the fact we'll focus on the fact that the we have a nice program, of, with, board members retiring every year. Just one point, you should note. And as you can see over the next, over the last 3 years, 2017 2020, we have been quite we are accelerating new fresh board members to come in to the board so that we are doing a lot of refresh given I said new challenges facing the company, but also take note of how we look at things. It's not by chance, by very specific purpose and by design, we we always have a combination of people with general management skills finance accounting skills, regulatory, legal skills, strategy, human resource, and, more macro economy and international relations. So you can see how we are replacing one another, someone with a certain skills replaced by someone else with us in other skills. So for example, legal regulatory, we have a very strong someone, that's as that very strong legal background replaced, recently about 2 years ago by Doctor. Nick and Strategy, back in 2016, Juan Villalona retired. He was, as you know, the ex, Telefonica CEO. He retired 2016. And a year or so after that, it's been replaced by David Dean, who was the BTG Global Head and Global Head of this sector, which will be a TMT sector. So, and I can go on the rest, but you can see how we look at things. And it's been purposeful. The board takes, serious, measurable focus on all this fresh leadership like I said, by design, not by chance. So if you look at this, follow-up, well, not this point's life, just just a picture in case you're interested to know who or how we look like. If you look at the following slide, next slide. Next slide. Yeah. So Again, to summarize, to summarize, we retire about at least 1, what, member per year, over the last 3 years plus, 2017 to 2020 and have retired. At the same time, we, injected or we brought in 1, at least one board member, a new board member per year, to correspond with the skills that we, we had mentioned, I had mentioned earlier. So, in that respect, about it and join or to join us within this year, as new members. So if you look at our the way we look at more, we do, we are diversity extremely important for us, not just at management level, which we are very proud of, but also at a board level, we look at skills, get gender, nationalities and, of course, very important, the independent. So as mentioned earlier, these are the skills, general management all the way to economy and international relations that we are very, very purposeful to make sure that we have the diversity in all the skills. As you know, we also have, take pride at the last few years. We have one third of the board members, female members, I accept recently when one of them retired early this year, we intend to replace that very soon with another female board member. We also make sure that at least 1 or better 2 are non relations because of the international exposure that we have and re regardless, majority of award members have significant, not minor, but significant international experience. And last but not least, at least 50% or more about members have always been independent. As you can see, the framework below, that's our guiding principle also that we have published. Now the default pass to Doctor. Is that a Google to you more about the management refresh, we, as you know, at the CEO level itself, we are transiting between myself and not presenting who will take over from me, January 1, 2021. So I will retire by end of this year. But, just a quick note before I pass to him, We are tech pride that compared to so many companies that we know of, we have a very structured and systematic program of transition It's not done, like, you know, within 1 day or 1 month and all that because the complexity of our business, we will do it over a period of time in terms of processes and time itself. Even processes is very structured. We look at the business transition. We look at external relationship transition, people transition, and personal transition. And there are programs generally and some specific programs that allow us to work on the transition. And net net, Doctor. Is that in, as mentioned in the during the last, our presentation, we are trying to balance between continuity and also fresh leadership. So that is why they represent both being with us as a board member for the last 3 years plus. And also being new as an executive who can provide us a fresh leadership, to not again, if I can say it not to be beholden to all the things they have done in the past, to question while we are in the past so that we can move a better job given the challenges in the future. So with that, I'll pass to Datto Zayeden who will take it from here. Thank you. Thanks, Rui. Yes, hopefully, the, the, you know, so far as the transition concerned. You know, it's been, what, 118 days to date. I've been very happy to, you know, get deep dives, if you like, with the teams, and, and, you know, the, the, the, the, certainly, if you, it's a, certainly, welcoming feeling that I have. And getting a lot of support and cooperation from the team, happy to also inform all of you that that the engagements have been very constructive looking at things differently. And hopefully, And and the new, the new norm as it were, yeah, will certainly provide us a bigger challenge in terms of tweaking our business model moving forward. Can I have the next slide? At Cellcom, we've announced 2 recent appointments. If you wanna close-up with me, you wanna explain the previous slide? Oh, I see. You want me to go in detail? Okay. Yeah. Sure. Sure. I mean, from the left, Tallinn, the incumbent has recently retired that in Badunice after serving Aljeta since day 1. We are in the market to look for a person who will carry the flag would be able to also champion the talent development program that we are proud of. Yes. So That's a work in progress. In the M and A slot, the incumbent will be assuming the position of CFO of E.co, Anes, you may know him from your previous engagements. And the since the successor will be announced on shortly. Insofar, his strategy is concerned, Dominic Arena, now he had originally decided to relocate to Kuala Lumpur from his wife's home country. But, as it turns out, in the last Christmas holidays, he decided to relocate back to Sydney. And the reason for that is been away for the last 12 years and he on a personal reason wants to spend a lot more time with his parents. So his last day is actually tomorrow. But, you know, we, certainly a friend that we have, you know, in years to come. In his replacement, we have appointed Nick Swuzzi, who has been with the organization for the last 4 years in the capacity of helping out the M and A team, as an advisor to Tanswari Jamal himself. Yeah? So he he has his background is, not quite remember, his qualification country, but he has served in Ouro as well as in Intelsat, in Indonesia. And we believe that he's still set in terms of relationships with the various stakeholders, various counterparties we have, in the region as well as globally would certainly, help us of course, I risk you in compliance. We have appointed Avid Adam, who was previously our C store at to see the group chief risk and compliance officer, technology, as you know, almost hunt, who is also the CEO for Smart. He is responsible for the IT and network functions. And of course, on the telco side, there'll be a new CFO, CTO, Extell. There's a new chief commercial officer in the form of David Olmes who's been with the organization for some time now. And, you know, of course, we are looking to as appointing a new CEO, given that Suresh has retired to pursue his, his own personal interests. So you can see that, sorry, forgot to add on enterprise, we've also appointed dot group, who was previously from Accenture to hit the group enterprise function, yeah? So you can see that we're continuously refreshing the organization as well and bringing new, perspectives to the organization. Physically on Cellcom on to the next slide. Yeah. I'll repeat 2 announcements or 2 appointments either on first me. This one is, Emery Moksha as the chief operations officer. And, he is responsible for the technology aspect of the business covering network, IT, and so as well as various functions, various other functions, which includes legal, regulatory, enterprise program management, so on, you may be familiar with him. He was previously from telecom Malaysia. He has over 24 years of experience in the sector. This last position was COO at Telecom Malaysia, overseeing the business operations of Unified Tier 1. The M Global Clusters and the IT network. And he also served as the acting group CEO of GM between November 18, 2019. Now Alan Bunker shouldn't be a new face out to all of you. It's not some of you, certainly. He was previously with Extero, He has been appointed as the Chief Commercial Officer effective 1st May, and we'll provide leadership to all the generating units, including customer service, and focusing on Qualcomm's value proposition and effectiveness in the market. And this is something that we've recognized, to be a well, not necessarily weak, but certainly a gap that needs to be filled in. And we believe that Alan with his vast experience in senior sales and marketing rules in DTAC in Framingham and so on, which certainly all go well for Cellcom. So these are the 2 appointments. So I'll come now just a bit more on the Circum Transportation. We've alluded to some of the work that we're doing at Cellcom. Now just to put things in perspective, it is not, it is something that we have just passed at. Yeah, if you look at this chart here from phase 1 in 2017, 2018, phase 2, last year and moving forward between 2020, the next 3 years, There's various areas that we've already addressed, in terms of headcount, in total, for the 3 VL steps, including the one that was just complete that, we reduced the hate come by a thousand people. Now insofar as the recent, VSS program is concerned. It was more of, making sure we have the right skill set, you know, the classic square packs, round holes. So, 303 people have left us. There's a charge of 101,000,000 ringgit. You will see in the numbers. But what's important is the people that we're bringing in, we've identified something like 76, individuals, 7 six positions that needs to be filled in. So basically re grouping some of the functions so that we become a bit more efficient in the processes. Hopefully, the targeted savings or the estimated savings per year is about $35,000,000 a year. Now that number may not seem big I think what's important is, as I've said, making sure we have the right skillsets in the various functions. So in terms of, in 2019, the operational excellence at the core, yeah, EBITDA margin has improved. That shows up in the numbers. Task cost, per revenue has also reduced by 0.8 percentage points. So moving forward, yes, the areas that we're looking at are those business areas of enterprise home device We're even looking at our MVNO strategy to relook at that, that commercial and business arrangements that we have with the MVNOs under us. And of course, with the new norm, we need to reengineer our network operations, our business processes to make sure that we are ready to, take advantage of when the pandemic subsides and we go back to the new way. Now this means reconfiguring work, I'm sure you're also manually, I'm sure you're all going through the same experience in your respective organizations, but it's important that we as an organization, position ourselves to take advantage of the businesses that will flourish post COVID-nineteen. Yes. So the work is ongoing, and hopefully the results, I will be able to articulate the results come the next quarter. And targeted results, targeted cost savings and so on. Yeah. So on that note, I think that's the last slide, yeah? Is it possible? Yep. That's right. Yeah. Thank you. So can I hand over to the moderator then? Yes. Your first question comes from Arthur Penida from Citi. Please go ahead. Hi. Thanks for the opportunity. Several questions, please. Firstly, what's the digital loss booking for this quarter versus the prior period. Just wanted to clarify that. Second question I had is with regard to the comments on Telkom. You mentioned delayed product launches impacting revenues. What was the cost of that? And it seems like the revenue even though revenues were much, softer, you've actually seen a big jump in the normalized profits. Is there any items on the cost side, which you should be aware of. Thank you. Can you clarify the first question? What do you mean? Sorry. The first question is on the digital loss bookings, for ADA. I'm just wondering what was the booking for On the side of digital? Yes. For ADS? Okay. So, Vivik, can you answer the question? And then, The first, I mean, if you want to go back to the waterfall, I had shown the 34,000,000 increased digital losses. Most of it is in digital financial services. And then the reason for that is essentially the, the type program, which is a government led program where we did invest in, customer acquisition because these particular quarters are in customer base where we did invest in these, acquiring these customers. So during that program, we acquired around 1,900,000,000 customers, lower end of which 1,500,000,000 customers remain active And we did have a cross transaction value of $40,000,000, I think it coming out of that, activity. So it's While it was positive from the perspective of new customer acquisition as well as, transaction value, it did not, it did cost us some money, and cash burn. So it's primarily on account of that and also somewhat in that digital advertising business because given the COVID impact, we did see the advertising spend of some of the, some of the, counseling of our, accounts. Coming down. However, there are certain fixed costs. These were the 2 main reasons for for higher losses Jennifer, I'm I'm over to you on Hi. Good afternoon. This is, from Cellcom. Just to comment a little bit on the product launch. Yes. Last we did a few product launches in June on prepaid. In June, we did a product launch on our Ultra Hour and was supposed to be followed by another a major, product around October or by mid October. Somehow the the challenges is a couple of challenges. Number 1, of course, trying to quickly adapt to what is happening in the market. But the main reason is the sum of the new configuration that we're doing has some challenges on the on the system. So we managed to set up October that, product was actually launched only in January. So similarly on postpaid, We did launch something in December, for the lower end market, but there was another major products supposed to be launched before the around November, which come only around February. Both of these products are now in the market where unfortunately when the thing happened happened, when something goes wrong, it doesn't go on just one. So after February, after we launch in the market by the time it's about to get some traction that we would hit by the COVID-nineteen and also the MCO so the market did not move as much. But fortunately, in the past, since the NCO has been move to become CMCO and the trade starting to open again. We are seeing some positive early indication on these two products that we have launched in the past 10 to 14 days. It's very early days. On the yes, so it goes division despite the reduction in terms of the revenue, the softening in the company, the revenue we did manage to grow our cost in terms of profitability. To the some of the cost structure that we have changed, we have improvement that we are building 2019 as we focus more on the operational excellence last year. I'm going to ask pass on to our CFO, Jen, to just explain which area that we have managed to take out some of these costs. Yeah. I think the system of others, yes, there are any one offs that we have actually put in in Q1 this year, Q1 we feel the other than the, employee restructuring program that we have achieved in quarter 1 that creates the sequence in terms of the, There's no other major one off that we we have in quarter 1. Having said that when we look at the comparison, we've lost number, the EBITDA number was also there's some one offset in 2019, which we have actually mentioned earlier, but having said that, we see that the underlying profitability has actually improved, slightly, year on year. Thank you very much. Your next question comes from prem Jayara Justingham from Macquarie. Please go ahead with your question. Hi. Thank you for the opportunity. A couple of questions for me. Firstly, with Telkom, I appreciate that we had some delays in product launches, but in the country, you said you had I believe you said something about system issues and therefore you couldn't launch products. I thought the system issues were well behind us And just looking at the numbers, the decline in prepaid in terms of revenues, whether it's quarter on quarter or year on year, it is quite scary. And the question really is, have we fixed all our internal issues to be able to come back fighting, or is this really going to be the new story, I. E. Oh, our system still don't work. We still can't launch stuff and therefore, Cellcom is going to continue to bleed kudos to taking the cost out. But this revenue line is quite worrying, must say. Second one is really around the end sale taxes We paid them in, I believe it was April, if not, late March. Could you at least tell us what kind of an impact we should expect in terms of the charge through the P and L, over the course of 2020? Well, you're right. We did the transformation of the IT systems a few years back. But what we're trying to do with the product and the recent product that we launched what's more it's not just a it's not just a small tweak to the product, but also we are doing a structural change to the product giving customers different kind of choices and then, with the base product and also, and also where they can top up or add on to the product. So it's kind of a different, product structure that requires a little bit more work on the system. It's not just about the the system, as I mentioned, but there are other things as well in terms of, like, trying to keep up with with with some of the changes that's happening that that we have to continuously, look at what we work in the market. Do you foresee this being sorted out? Is it sorted out already or is it going to be a long term problem? No. The product that we have launched is already out in the market. So for example, the new postpaid product that we have launched give the option for our customers either to choose whether they want to choose speed or they want to go on and choose for capacity on unlimited unlimited capacity. So to provide this option to our customers, this is the first of its time that we launched in the market, yes? So this is a structurally different in terms of, for that design that gives a lot more options to our and we're seeing traction on this on this product itself. So that structural change takes a little bit more time than usual than just add on additional people with lower price and so on and so forth. So it's beyond just the pricing change, beyond just the capacity change, it's actually the structural product design change. This is something that we have launched. And then moving forward, it's just incremental from that. Yeah. All right. Okay. Thank you. Yes, you are right. We paid the remaining amount of CGT in April, which was around 15,000,000,000 1,000,000,000, probably, with this, we've settled the entire CGT, liability as far as the accounting is concerned, we call, we always believe based on our strength of the VIP. That this amount is recoverable, from our perspective because we have fairly strong position on BIT. However, that said, we have, we have taken a prudent view and accounted for this liability as as, finish barring some amount, which is on account of interest. That we do not think is going to come as a fresh charge for us until the whole VIP case is sorted out. Effectively, we should be seeing, higher claim, than what has been, what is outstanding will be provided for. So that I think amount is something which we will, we will look at it, but we don't see major impact coming this year or subsequent. Vivek, you might want to explain that the IT? Yeah. So I think this is, if you remember, you know, beyond the, bilateral treaty, we have filed that case an arbitration national court. It is the government for the proper treatment of VISTA nepal. So far based on the indication development, it seems a positive position for us, which is what is the legal, people on this. However, that said, Paul Goman has obviously obtained this, but does the international treaty because they're part of that treaty. They are obliged obliged to, to acknowledge, such a case So I think this process will take a while. It won't be 1 year, 2 year, maybe 2, 3, 4 years, but we believe, on the strength of the case, that we have a fairly strong position. So could I summarize that while the cash has gone out, it is unlikely that we will see an 800,000,000 ring get hit to the P and L anytime soon. Is is that a fair assessment of it? Yes, most of it is already taken to learn, but you're right, in your information that we will not see, any impact if any, our claim would higher than orders outstanding goods to be provided for. You want to explain what you mean by that? There's no more provision. So there's no more hit that We're done with the CGT. No. So I think, if you if you recall that, you know, we've been we've been saying all along that, we have in the general provisions on account of tax liabilities and we believe those provisions which we've made, probably for CGT is reasonably, you know, for potential liability, coming in on the And that was done last year. Alright, perfect. Thank you very much. Thank you. Your next question comes from Alex Go from a. Thank you so much for the opportunity. I've got two, three questions. You've indicated you have not seen the full impact of the COVID-nineteen in the first quarter and the second quarter, does that mean your, the bottom line is going to be much more impacted And can you just quantify, potentially, how much would that be? And would that be additional costs that you have incurred during the MCO you give a bit of a guidance on, or color on, what should we be expecting in the second quarter? Obviously, that's my that's my first question. And I've noticed that year on year, your depreciation has jumped up quite a lot, 13% impact. May I know whether there was any accelerated depreciation in there and are they lumpy or and could we expect a bit of normalization to your depreciation charge in the subsequent waters, right? And my third question is Regarding your Hi. Sorry. Regarding your So the our data digital E29 initiate. If you indicated, you know, waterfall that there was something expanded there. Could you just quantify how much was that? So let me, Fentry, if I may take the question. I think, you're right, that, quarter 2 will have, that go to one on account for it. And the reason being most of the market this one for lockdowns, accepting Indonesia and Cambodia around the second half of, March. We have seen some impact because of that largely on account of activities in prepaid market where we ability to, sell recharges or acquire new customers as impacted the prepaid revenue. We are also seeing some impact on postpaid early days, not on account of, revenue, but mostly on account of, is being paid on time and some impact on the enterprise business, which is again, because of the struggle in some of the markets on on account of enterprise, or businesses. So we would see quarter 2, impacted. However, that said, this also has a counter side, which is, we are spending relatively less on sales and marketing on acquisition costs. And then we are also seeing while the revenue coming down, the customer base is fairly, fairly stable in most of the, most of the markets. So there will be impact on revenue. Now our estimate at this point in time would be lower in markets like, Cambodia and However, could be higher in markets which are in South Asia, largely in South Asia, because they are highly dependent on prepaid, prepaid and still on voice revenue. So we will see some impact in quarter 2 because of these lockdowns based 4 out of the six markets. We don't see any major impact on dotcobusiness. I think that continues to do well for us. So if I I can go to the second question, so there's nothing on the accelerated depreciation. I think some of it is coming because of, investments, XL, which is ruling out, extra law. Also, there have been some impact coming in because of the adoption of IFRS. I mean, if you look at last year, while we did start the IFRS adoption from 1st January 2019, a lot of companies did do a full evaluation during the year. For example, we had Excel, while they didn't adopt it, we will bring some estimations based on, based on the, the analysis done by that now in which they've adopted, they've actually gone into tails, around that. So there's been a kind of timing issue, which is resulting in my amount coming on account of the disposition on account of these liabilities. I mean, if you look at the number which I said, year on year, there's an increase of around $160,000,000 on account of, depreciation. Although, it's around close to 45,000,000 just comes on account of the depreciation on, new, the RODO leases system. So I think that's mainly the reason, but there's nothing which is in the form of accelerated depreciation. Now as far as the E tonight initiated is concerned. We would have, basically, spent around the, around 18,000,000 net impact on account of the marketing spends coming, for each and but also has an impact on account of lower revenue because, when we were launching this, getting new customers lower end, we did cut down on some of the charges for the merchant so that we could encourage these customers to actually go and use, their wallet the money, which was around per diating it, per customer given by the government, who'd be able to utilize, across our merchant. So net net would be around, I guess, around 5, around close to around $35,000,000, we get on account of new brands. Okay. Okay. Just putting one last Yes, thank you. But can I put in one last question on Hensel? One of the main reason for the low contribution was because of capacity strengths. I'm just wondering when can that be rectified? Is it over the next 6 months or perhaps next year? Just want to understand when can we expect a turnaround in terms of the revenue trajectory going forward? And also, just to double confirm on what you've from Graham's question earlier regarding the legal case that I just wanted to be doubly sure, there will be no further provisions from the payment of the remaining CGT. Am I right? Okay. Answer first question. So, no, no, I'll get Doctor. Handes to elaborate on the first part. Yeah. Thanks, Dan. Go ahead. Yep. The spectrum constraint has explained by that one, Vivek earlier, comes from the shortage of spectrum and a holdup in terms of the release of, spectrum that ends up secured by our auction, release of the spectrum to end up so that they can really, activate the spectrum and relieve the capacity constraint. We are in the benign stages of, clearing, the negotiations with the regulator on this. So I would expect the spectrum to be on a, yes, within the next 3 to 6 months. So I can take the Follow-up questions on ACGP? I'm sorry, Hans, the turnaround for revenue. Yes, Danshu. So with the with the activation on the spectrum, we we expect to see turnaround in the revenue trajectory within the next 3 to 6 months. I think there was a first question from Alex. There's now about the impact of COVID-nineteen. If I meet on 3? Yeah, please. Yeah. No. And it's, right now, we're seeing is, is that, the first, the MCU or other COVID 19 set in the last weeks of March, really, and At this stage, we, always saying is we know that, whatever assumptions we make today will be different and will be wrong. So we'd rather earn the safe side than not provide any guidance and wait for the same quarter results to get a better understanding of the impact No, we are conscious of the fact that, fair bit of our revenue is prepaid customers voice revenue and so on. If anything during the COVID period, as I said, same reactivation will be affected prepaid new prepaid, sorry, new prepaid SIM cards will be will be will not be easy for people to access to have access. So given the nature of the if you like customer base, assuming that, are the continuing, pandemic or lockdown happens and people don't have jobs and lose their jobs. Sure. That will have an impact. So that's why we'd rather not make any or give any guidance at this stage and wait for the 2nd quarter results to to have a better feel of the numbers. Is it on CGP? Yes. CGP, As I said earlier, we believe based on our assets, first of all, we'll start with think we believe we've got a very strong case, namely, the amount which we have provided on tax liabilities on account of taxes, I think, is enough, sufficient to cover for the, variability. We will also, this is this is a stand. So we should not see any further provisions coming 2020 on account of CGT. However, we will continue to assess every year until the whole VIP AS gets resolved that if there are any, items which we need to do from a recoverability standpoint, question of recoverability comes not based on the position of, the strength of our case. Recoverability comes from the fact that, we would be in a position to recover from the government the amounts which we have paid. So then you'll have to do some recoverability tests apart from that, I don't see any further provisions coming arising on accountancy. So to just expand that slightly on the if I can expand slightly on CGT, well, like, mentioned by Vivek can be 1 or 2 or even 3 years from now. We don't know when we will conclude this. Assuming at the arbitration level, if we were to lose, there's nothing much except for some interest that we have to put in the accounting, quite small, relatively speaking. But if it were to win, then there will be the $200,000,000 or so the U. S. Dollar that will be a windfall for us from both cash and accounting perspective. So it can only be better? Thank you. As we have no further questions at this time, I'd now like to turn the conference back over to you for for the first quarter results. I hope to talk to you again during the second quarter. In the meantime, stay safe and keep healthy. Thank you. Thank you very much. Thank you all. Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect.