Ladies and gentlemen, thank you for standing by, and welcome to the Axiata 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, three housekeeping reminders. Please mute your telephone during the presentation and kindly avoid using wireless headsets. 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, Tan Sri Jamaludin, President and Group CEO. Thank you, sir. Please go ahead.
Thank you very much. This is Jamal, the Group CEO. Today, we are announcing our first quarter 2020 results, as you have seen from the bourse. We're going through the presentation. Before I do that, I will just quickly introduce another speaker, which is Dato' Izzaddin, who is the Deputy Group CEO. This is his inaugural event for our conference. He will be also speaking this time around together with Vivek, who's our Group CFO. Without further ado, let me go to the second slide. These are the key messages from the first quarter results. In general, overall, there is a limited impact on revenue and EBITDA from COVID-19 for the first 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 in XL and Smart, to quite significant, especially South Asian countries, and to some extent, Malaysia towards the last two weeks. The FCF, our free cash flow, grew 25% to MYR 1.2 billion. From that aspect, we have a pretty good cash, as you can see from the results. Together with that also, we made an early drawdown of $300 million to edge up our gross debt EBITDA to 2.6. Without that, our balance sheet is still very strong at 2.51x. On top of that, in early May, we secured MYR 800 million syndicated facility to strengthen our liquidity position for financing and build a war chest, so to speak, for opportunities in the new norm. This is the one that we just announced early this month.
On the performance side, we have a mixed performance across the whole group. On one hand, we have XL, Robi, edotco, and Smart performed very well, extremely well. Dialog performed reasonably well. However, Celcom and Ncell didn't perform as well, and to some extent, disappointing. If you look specifically, Celcom performance affected by delay in product launches. However, EBITDA grew nicely. There's a lot more work to be done in Celcom, which we'll explain later on. As I said earlier, apart from edotco and Smart, XL and Robi did extremely well last year or rather last quarter. Again, we will be explaining exactly in more detail. Ncell is a bit tricky.
For the last three quarters, we have been having 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, in fact, chiefly because of the lack of spectrum, which we're working with the government. We got a spectrum, but it's very onerous in terms of their terms. We're trying to work out the terms. Now, until then, however, and unfortunately, we cannot react the way we should be, given that there's a huge demand for data and mostly at home where our capacity doesn't allow us to compete fully. That's been quite a challenging moment for Celcom.
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 center stage in how we work in first quarter and especially in second quarter. There's a lot of programs that we have announced and plan to announce to take care of our customers and the community at large. That will be presented by Dato' Izzaddin shortly. Last 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, is generally it is a good performance, but it is kind of mixed with some did extremely well and some not as well. With that, I pass to Dato' Izzaddin, the Deputy Group CEO. Dato' Izzaddin?
Yes. Thank you, Tan Sri. Good afternoon, everybody. Insofar as our business is concerned, of course, the lockdown impacted the prepaid reloads and SIM activations. Correspondingly, there was lower direct cost as well as sales and marketing costs. I think as Tan Sri alluded to just now, the first quarter impact would not be representative of the pandemic situation. We are expecting the second quarter results to be much more representative. Insofar as the supply chain is concerned, the good news is we've managed to bring the vendors on our side in terms of making sure that our equipment deliveries are not affected. We are looking also at identifying new [growth] areas insofar as CapEx requirements are concerned. The good news is the vendors are also agreeing to some of the requests that we're making in terms of deferral payments and discounts.
In terms of employee wellness, we like to pride ourselves having make sure that the employees' wellbeing are taken care of. We've provided helplines, counseling services, continuous engagement. Tan Sri and I have done several town halls with the employees at large as well as with the leadership team of all the operating companies. Happy to report that everyone's actually in a very upbeat mood and frame of mind. We even got reports that they think that productivity has gone higher over these last couple of weeks. In terms of CSR, I have another slide after this to elaborate on that. So far as technology and cyber resilience, our networks remain resilient, although despite the traffic surge in peak data traffic of about 2%-12%, network utilization has increased in some areas as a result of redistribution of traffic, as you would appreciate.
We've taken very active steps to make sure that we will detect and accordingly respond promptly to cyberattacks that we have seen activities that's gone up. Insofar as BCM response, all non-essential employees are still working from home. The team at Celcom has come back to the office on 13th of May, earlier this week. Even at that, we've adopted many safety measures to make sure that the staff's safety is ensured. For one, there are two teams that are operating, team A and B. The other operating companies in Malaysia, we have extended the work from home arrangement until 1st of June. It goes without saying that this is something that we pride of and, given the fasting month of Ramadan and Hari Raya around the corner, everyone's trying to make sure that the staff is continuously engaged and remain upbeat. Next slide, please.
In terms of the CSR initiatives that were done, needless to say that we are very supportive of our vendors, of our customers. The SMEs in particular because these are very challenging times. As you all know, in Malaysia, we are part of that government initiative of one gigabit high-speed data daily from 8:00 A.M. to 6:00 P.M. That certainly will have an impact also to our top line, but we feel that this is 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 the weekday. Of course, the other operating companies as well have been doing the same thing. We like to take pride that in Cambodia we sponsored or we contributed MYR 1 million to the government's initiative to counter the COVID-19 pandemic. As well as in Dialog.
Dialog in Sri Lanka has contributed MYR 1 million to upgrade several ICU facilities or to equip two hospitals with ICU facilities. And that has gone down quite well with the president and the government. Celcom as well has provided similar packages, stay home packs, and a bonus for every recharge. In Indonesia, not forgetting Indonesia, they've also done the same thing. They have similar things in terms of providing access to online learning portals, government websites and, similar to Malaysia, access to Microsoft Office 365. In fact, XL has contributed MYR 650,000 to the National Disaster Management Agency as part of the CSR initiative. Next slide. This is just a summary of the EBITDA, PATAMI, free cashflow metrics for the first quarter measured against the first quarter 2019. Double-digit growth and single-digit growth. The shifting gear momentum continues in this first quarter.
As Tan Sri explained just now, the double-digit growth in EBITDA and PATAMI in Nepal, Ncell, is the result of the constraints in the spectrum that has been made available to us. In fact, we are still in discussions with government, with the regulator, to regularize the conditions, to change the conditions that have been imposed on us. In so far as Smart is concerned, you can see double-digit growth in EBITDA, PATAMI, free cashflow, as well as edotco. Edotco is certainly proving to be resilient, and we expect that to be the, if you like, the core profits and PATAMI amongst all the operating companies within this table of Axiata. I think hand over now the slides of the presentation to Vivek to take us through the first quarter results.
Thanks, [Pradatt]. Thank you, Dato'. Very good afternoon to all of you. If I can go to slide number nine, which starts the financial presentation. First slide is on quarter one reported results. We had a fairly good 1.5% growth in revenue, but much better EBITDA growth of 3.4%. PATAMI was impacted largely on account of key factors, which is one was employee restructuring program, which is net MYR 77 million, gross is MYR 101 million. Net amount is post of tax, and some ForEx losses of around MYR 130 million. We also had one time gain, sale of towers around MYR 20 million. If you look at the numbers on revenue, -3.7% on quarter-on-quarter, it's fairly stable if you factor in the impact of a lesser number of days as well as seasonality.
On a year-on-year basis, a 1.5% growth. EBITDA looks low, -8.1% on quarter-on-quarter, partly because of the restructuring program which we did in Celcom. On a year-on-year basis, a 3.5% growth on EBITDA. PAT, fairly stable compared to last quarter. Down on 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. I'll go through more details on PATAMI in my subsequent slides. If I go to the next one, which is really talking about underlying performance, which excludes some of the elements relating to restructuring as well as the M&A, ForEx, et cetera. Underlying performance, excluding devices, 1.5% growth year-on-year, EBITDA up 2.5% year-on-year. Whereas our focus on operational excellence has kept our costs back.
PATAMI is being impacted because of Ncell, which does contribute to our profits, also higher losses in digital business. Digital business is mainly because of some program on targeting the lower-end consumers in quarter 1, which did cost us some on marketing spends and continuing higher D&A expenditure. If you look at the revenue, two opcos did extremely well. 9.5% growth in XL and Robi, 7%. Celcom and Aimsir were down, go through some more details in subsequent slide. However, our program on cost efficiencies does continue to give us benefits in terms of EBITDA development. Year-on-year, 2.5% if it exclude the impact of one-time employee restructuring program in Celcom, the EBITDA growth has been 6.7%. We had four opcos actually giving double-digit, including Robi, which is the 9.1% EBITDA growth, double-digit.
Our costs have remained fairly flat with an EBITDA margin uplift of around 0.8% to 41.5. PATAMI, as I said, did get impacted because of the continuing charges on depreciation. Part of it is also explained through the adoption of IFRS on those, the increase. Lower contribution from Aimsir. The e-Tunai, which is what I was talking about, which was where we partnered with the government, opening accounts for some of the low and the middle income segment consumers. Taxes in Bangladesh. Now, if you tax in end of Q2 coming in Bangladesh. Now, because it started from Q2 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 PATAMI development from last year.
Two hundred and nine million, we got an MYR 187 million uplift coming from EBITDA improvement. Digital businesses, which I explained are higher costs, mainly in digital financial services. MYR 160 million on the depreciation. Part of it, which is around MYR 45 million, is on account of ROU assets, which is the amortization of these liabilities. Finance cost, MYR 30 million, largely on account of, again, relating to the lease interest expenses. Taxes, mostly coming from Robi, which I explained earlier. That's how the MYR 121 comes as the underlying PATAMI for this quarter. If you look at the actual, from MYR 188, which is what we reported as actual, to MYR 121. Most of it is on account of the XL tower gain, which accounts MYR 180 million for the year, and also a negative impact on account of ForEx MYR 123.
Most of it was unrealized loss at the end of quarter, part of it did get realized subsequently. If I go to the next slide, I think from a cash, which I think is critical at this point in time, given where we are. Our key focus remains on preserving cash. I'm happy to say, both from an FCF as well as OCF, we've done well, partly on account of improved EBITDA, partly also on account of attempts to rationalize the CapEx spend. Our FCF yield is around 20.4% for the quarter, and the OCF yield is 10.5%. If I can go to the next one. Operational excellence, I think, has been something which we've been focusing around, specifically on the cost side for the last three years.
If you recall, we had set up a target of MYR 5 billion, 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 MYR 5 billion, and then we have new programs to continue subsequently. That said, we have some increase in network costs compared to last year, mainly in Axiata where we had a new managed services contract starting from April. IT expenses has come down mainly in Axiata again, mainly because of the revised managed services contract, which is benefiting us. Savings on account of sales and marketing expenditure are on 56, and others is largely on account of the restructuring expense which we had in Celcom. Overall, if you exclude the restructuring spend, the costs have remained flat.
What has increased is just on account of new towers investments, sites cost, which has been added mainly in Axiata and Robi. If I go to the next one, which is really around the balance sheet. I think fairly strong in balance sheet. One-time impact coming on account of the borrowing of $300 million, which we did for the repayment in April and subsequent period of time. If I go to the next one. Let me quickly run through some of the performance of Celcom. I think we did have an impact on prepaid. Largely, other lines of revenue, very stable. Prepaid is mainly on account of delayed product launches and also on the acquisitions slow pre to post migration.
That said, I think EBITDA, based on the cost initiatives, which was one of the objectives in Celcom to drive EBITDA margin improvement, I am happy to say that seven-and-a-half, 7.8% improvement on EBITDA, if I exclude the one-time restructuring cost for quarter one. FCF, positive 34.7%. PATAMI, again, if I exclude the restructuring, showing a 31.6% improvement in the profit compared to last year. Celcom, I think some challenges on the revenue side. From a cost profit standpoint, pretty good quarter. If we go to Axiata, I think that's all along a strong story. Axiata, 8.8% growth in revenue, 39.7% in EBITDA, this also partly explained by the IFRS adoption in Indonesia from this year. If I exclude that IFRS impact, still a very strong 17.3% improvement in EBITDA and a strong cash flow improvement of 1.4.
This cash flow excludes the realization of cash received of nearly MYR 3.4 billion from the sale of towers. PATAMI, again, stable PATAMI. If you include the gains coming from the tower sale, looks extremely good there. Strong performance in Axiata. If I go to Robi, again, another quarter of continuous improvement in Bangladesh, with service revenue growing 7% year-on-year. EBITDA growth 10.1%, with EBITDA margin crossing 40% for us. This used to be, if you recall, used to be around 22%-23% just one year after we had merged Airtel and Robi. From that level, the company continues to deliver extremely good on top line, as well as managing their cost, taking EBITDAs to around over 40%.
Free cash flow, I think lower this quarter, mainly because last year we could not import equipment because of the restrictions imposed by BTR, the regulator there in 2019. A strong PATAMI, a quarter of positive PATAMI development, this is after increased taxes in Bangladesh. If I go to Dialog, I think as Tan Sri said, a moderate performance in Dialog, mainly on account of the we paused in middle of the year, middle of the month of March, where there was no movement alone. That had some significant impact in the second half of March 2020. If I go to the next one, which is Ncell, I think as Tan Sri explained, the core revenue at -9.7% and ILD of 16%. ILD was expected in line with the continued lowering of ILD revenue.
Core revenue mainly getting impacted because of the capacity constraints from lack of spectrum, which hopefully we should be able to resolve soon. That leading to the EBITDA drop as well as PATAMI drop. M1 continues its journey towards double-digit development on profits as well as EBITDA and a strong performance in that market. ADS, Boost specifically did this government-led program. We did see Boost Q1 GTV, as well as number of subscriber base improving. Digital advertising business continues to do well with new customers, new clients being taken. The focus now is how to strategize during this period of COVID-19. Aspirasi, which is the micro-financing, micro-insurance business of ours, is doing well. We have around MYR 15 million of loans being dispersed so far. We've also launched a specific program for the COVID-19 assistance for the micro-businesses, micro-insuring.
Apigate, which is the platform for the operator billing and A2P, that again, continues to develop well with increased gross transaction value. Edotco, as Dato' said, continues to have a good performance, specifically on the EBITDA side. Even if you exclude some one-off M&A impacts, 19.1% growth in EBITDA reflective and strong cash flow and profit development business. Considering all the uncertainties around the financial impact of COVID-19, 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. Given that uncertainty surrounding the pandemic, we have decided to withdraw the guidance on 2020 headline KPI.
That said, our focus at this point in time is on cost management, CapEx efficiency, and conservation of cash to be able to build a good, strong balance sheet and capitalize on the opportunities we know, which hopefully should come in some period of time. The last slide, I think, is talking a little bit about opportunities. It's early stage, but we do see opportunity in some markets where fixed wireless access is there. That helps because allows us to do a much faster rollout and give the opportunity for our consumers who want to access work from home. Digitization, specifically on the enterprise side, I think is for small and middle segments. I think it's something where we're looking at as opportunities. Overall digital experience, customer interaction through channels, which has grown quite significantly over the last two months since the lockdown in different markets.
Additional cost, I think we have already a plan of MYR 1.9 billion, MYR 1 billion, nearly MYR 1 billion of costs to be taken out. CapEx, we typically, while we announce CapEx to the markets beginning of the year, we do not release 100% of the CapEx to our operations, and we keep 15% to decide based on opportunities. This is still not being released. We will probably not spend this, maybe if required selectively depending on opportunities in markets. Obviously, focus continues to be on the costs which are directly related to the impact on revenue. Liquidity, I think a lot has been managed through the early drawdown or facilities being put in place at a group level and including in operating companies. XL would have MYR 4 trillion coming from the cash from the sale of towers, as well as in other markets like Bangladesh and Dialog.
We are ensuring that we have a fair good liquidity available to deal with even worst case scenarios caused by the pandemic. That's it from me. I'll hand it over to Tan Sri. Tan Sri, back to you. Thank you. Tan Sri?
Sorry, I was on mute. Thank you, Vivek. Before I proceed with the next topic, which is quite interesting by itself, I just wanted to summarize the key things that from my perspective, we are happy about. Obviously, we're happy with the performances of XL, Robi, edotco, and Smart, not only for the first Q, but we can see a nice trajectory. Of course, in fact, all of them will be affected one way or another by COVID. From a short-term perspective, yes, but as we could see from a medium-term perspective and longer term, we are on the right track. 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. Also, Celcom itself have done quite a lot in reducing its cost.
A lot more to be done, we're quite happy with the progress. Within that also, we are quite happy what they have done on the recent VSS program that to the tune of about 300 people have been reduced, but very nicely and very humanely to the people because it's voluntary. That will give us a tremendous rejuvenation possibility as we bring in new people and as we go into next year, our cost structure will be also improved. We are also happy with the balance sheet. It's a pretty strong balance sheet, and with a strong liquidity and war chest as presented. Not mentioned so far, we also are happy with the synergies that we will be probably talking about it next quarter. We have a lot of new ways of working with the group, and the opcos that have resulted in high potential savings.
We are also happy with the huge interest in the new investors, in edotco and ADS, to be more specific. It has been affected by COVID-19, but hopefully with the next two quarters or so, there could be some movement in the area. Last but not least, we're very happy with the new norms that we are preparing beyond the lockdown, and 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 the performance of Celcom revenue, market share, and sales. Also on the second part, the regulatory, the taxes that we incur at Robi has been quite disappointing because we could have shown a much better result profit-wise, and also the spectrum constraint at Ncell. That's how I would summarize the first quarter.
Coming to the topic on board and management refresh. That's an interesting topic by itself. This is a special topic because we've been asked a few times by our shareholders and analysts and some others about how are we looking into the board refresh and management, especially given our new challenges every time, but also we want to make between continuity and fresh leadership. If you look at the following slide, you can see. Don't worry about the names. Of course, the names are their initials, but focus on the fact that we have a nice program of board members retiring every year. That's one point you should note.
As you can see, over the last three years, 2017-2020, 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. Also take note of how we look at things. It's not by chance, by very specific purpose and by design. We always have a combination of people with general management skills, finance, accounting skills, regulatory, legal skills, strategy, human resource, and more macroeconomy and international relations. You can see how we are replacing one another, someone with a certain skill replaced by someone else with another skill. For example, legal regulatory. We have a very strong someone, Dato' Azzat , very strong legal background, replaced recently, about two years ago, by Dr. Nik. Strategy, back in 2016, Juan Villalonga retired.
He was, as you know, the ex-Telefónica CEO. He retired 2016, and a year or so after that, he's been replaced by Dr. David Dean, who was the BT Group global head of this sector, which is the TMT sector. I can go on the rest, but you can see how we look at things. It's been purposeful. The board takes a serious, measurable focus on all this fresh leadership, like I said, by design, not by chance. If you look at the following slide. Next slide. Next slide. Yeah. Again, to summarize, we retire about at least one board member per year. Over the last three years plus, 2017 to 2020, eight have retired.
At the same time, we injected or we brought in at least one new board member per year to correspond with the skills that I had mentioned earlier. In that respect, about eight have joined or two join us within this year as new board members. If you look at the way we look at board, diversity extremely important for us, not just at management level, which we are very proud of, but also at the board level. We look at skills, gender, nationalities, and of course, very important, the independent. As mentioned earlier, these are the skills, general management, all the way to economy and international relations that we are very purposeful to make sure that we have the diversity in all the skills. As you know, we also take pride that the last few years we have one-third of the board members, female members.
Except 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 one or better, two are non-Malaysians because of the international exposure that we have. Regardless, majority of our board members have significant, not minor, but significant international experience. Last but not least, at least 50% or more board members have always been independent. As you can see the framework below, that's our guiding principle also that we have published. Now, before I pass to Dato' Izzaddin, who will talk to you more about the management refresh, as you know, at the CEO level itself, we are transitioning between myself and Dato' Izzaddin, who will take over from me, January 1st, 2021. I will retire by end of this year.
Just a quick note before I pass to him. We take 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 within one day or one month and all that. Because of the complexity of our business, we 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. There are programs generally and so specific programs that allow us to work on the transition. Net-net, Dato' Izzaddin has mentioned during our presentation, we are trying to balance between continuity and also fresh leadership.
Dato' Izzaddin represent both, being with us as a board member for the last three years plus, and also being new as an executive who can provide us a fresh leadership to, again, if I can stress, not to be beholden to all the things we have done in the past, to question what we are in the past, so that we can do an even better job given the challenges in the future. With that, I'll pass to Dato' Izzaddin, who will take it from here. Dato'.
Thank you, Tan Sri. Yes. Hopefully, so far as the transition is concerned, it has been, what, 118 days today. I have been very happy to get a deep dive, if you like, with the teams. It is certainly a welcoming feeling that I have, and I am getting a lot of support and cooperation from the team. Happy to also inform all of you that the engagements have been very constructive, looking at things differently and hopefully 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? Now, at Celcom, we have announced two recent appointments-
Dato', if you want to
On 1st of May.
You can explain the previous slide.
I see. You want me to go in detail? Okay. Yeah.
Can I have the last page?
Sure. From the left, talent. The incumbent has recently retired, Datin Badrunnisa , after serving Axiata since day one. We are in the market to look for a person who will carry the flag, who will be able to also champion the talent development program that we are proud of. Yeah. That's a work in progress. In the M&A slot, the incumbent will be assuming the position of the CFO of edotco. Anis, you may know him from your previous engagements. The successor will be announced shortly. Insofar as strategy is concerned, Dominic Arena. Now, he had originally decided to relocate to Kuala Lumpur from his wife's home country. As it turns out, in the last Christmas holidays, he decided to relocate back to Sydney.
The reason for that is, he's been away for the last 12 years, and he, on a personal reason, wants to spend a lot more time with his parents. His last day is actually tomorrow, but certainly a friend that we have in years to come. In his replacement, we have appointed Nick [Swersey], who has been with the organization for the last four years in the capacity of, helping out the M&A team, as an advisor to Tan Sri Jamal himself. Yeah. His background is, I don't quite remember his qualification, Tan Sri, but he has served in Ooredoo as well as in Indosat, in Indonesia. We believe that his skillset in terms of relationships with the various stakeholders, the various counterparties we have in the region as well as globally, would certainly help us.
Of course, our risk, security, and compliance, we have appointed Abid Adam, who was previously our CISO, to be the Group Chief Risk and Compliance Officer. Technology, as you know, Thomas Hundt, who is also the CEO for Smart. He is responsible for the IT and network function. On the telco side, there'll be a new CFO, CTO. There's a new Chief Commercial Officer in the form of David Omers, who's been with the organization for some time now. edotCo, of course, we are looking towards appointing a new CEO, given that Suresh has retired to pursue his own personal interests. You can see that Oh, sorry, forgot to add. On enterprise, we've also appointed Dr Gopi Kurup, who was previously from Accenture, to head the group enterprise function. Yeah.
You can see that we are continuously refreshing the organization as well and bringing new perspectives to the organization. Specifically on Celcom. On to the next slide. We've made two announcements or two appointments rather on 1st of May. First one is Imri Mokhtar as the Chief Operations Officer. He is responsible for the technology aspect of the business, covering network, IT, and digital, as well as various other functions, which includes legal, regulatory, enterprise program management, so on. You may be familiar with him. He was previously from Telekom Malaysia. He has over 24 years of experience in the sector. His last position was COO at Telekom Malaysia, overseeing the business operations of unifi TM One, TM Global, and the IT network. He also served as the acting Group CEO of TM between November 18, 2019.
Allan Bonke shouldn't be a new face to all of you, if not some of you, certainly. He was previously with XL. He's been appointed as the Chief Commercial Officer, effective 1st May, and will provide leadership to all revenue-generating units, including customer service and focusing on Celcom's value proposition competitiveness in the market. This is something that we've recognized to be, not necessarily weak, but certainly a gap that needs to be filled in. We believe that Allan, with his vast experience in senior sales and marketing roles in Dialog, in Grameenphone, and so on, will certainly all go well for Celcom. Yeah. These are the two appointments at Celcom. Just a bit more on the Celcom transformation. We've alluded to some of the work that we're doing at Celcom.
Just to put things in perspective, it is not as if something that we have just started, yeah. If you look at this chart from phase 1 in 2017-2018, phase 2 last year, and moving forward between 2020, the next three years, there's various areas that we've already addressed. In terms of headcount, in total for the three VSS, including the one that was just completed, we've reduced the headcount by 1,000 people. Insofar as the recent VSS program is concerned, it was more of making sure we have the right skill set, the classic square pegs, round holes. 303 people have left us. There's a charge of MYR 101 million, you will see in the numbers. What's important is the people that we're bringing in. We've identified something like 76 individuals, 76 positions that needs to be filled in.
Basically regrouping 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 MYR 35 million a year. That number may not seem big, but I think what's important is, as I've said, making sure we have the right skill sets in the various functions. In terms of, in 2019, the operational excellence at the core, EBITDA margin is improved. That shows up in numbers. Staff cost per revenue has also reduced by 0.8 percentage points. Moving forward, 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 commercial and business arrangements that we have with the MVNOs under us.
Of course, with the new norm, we need to re-engineer 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 the way we work. I'm sure you're all familiar. I'm sure you're all going through the same experience in your respective organizations. It's important that we as an organization position ourselves to take advantage of the businesses that will flourish post-COVID-19. Yeah. The work is ongoing. Hopefully, we'll be able to articulate the results come the next quarter and targeted results, targeted cost savings, and so on. Yeah. On that note, I think that's the last slide. Yeah. Vivek? [Sanchay]?
Yep.
That's right.
That's right. Yeah. Thank you.
Can I hand over to the moderator then? Yes.
Thank you. We will now begin the question and answer session. If you wish to ask a question, please press star 1 on your telephone and wait for your name to be announced. If you wish to cancel your request, please press the pound or hash key followed by digit 2. Your first question comes from Arthur Pineda from Citi. Please go ahead.
Hi. Thanks for the opportunity. Several questions, please. Firstly, what was 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 Celcom. You mentioned delayed product launches impacting revenues. What was the cost of that? It seems like 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 we should be aware of? Thank you.
Can you first clarify the first question? What do you mean?
Sorry. The first question was on the digital loss booking for ADA. I'm just wondering what was the booking?
Oh, okay. For ADA
for loss on Axiata Digital. Yes.
For ADS. Okay.
Yeah.
All right. Cool. Vivek, can you answer the question?
So the digital-
Jennifer on second question.
Sanchay, the first, if you were to go back to the waterfall which I had shown, the MYR 34 million impact on increased digital losses, most of it is in digital financial services Boost. The reason for that is essentially the [five program], which was a government-led program where we did invest in customer acquisition because these are lower income customer base, where we did invest in acquiring these customers. During that program, we acquired around 1.9 billion customers, lower end out of which 1.5 million customers remain active. We did have a gross transaction value of around MYR 40 million coming out of that activity. While it was positive from the perspective of new customer acquisition as well as transaction value, it did cost us some money and cash burn.
It's primarily on account of that and also somewhat in our digital advertising business because given the COVID impact, we did see the advertising spends of some of the companies, some of our accounts coming down. However, there are certain fixed costs. These were the two main reasons for higher losses in the Jennifer or Idham, I hand over to you on Celcom.
Hi, good afternoon. This is Idham here from Celcom. Just to comment a bit on the product launch. Yes. Last year, we did a few product launches in June. On prepaid in June, we did a product launch on our Ultra Hour, and it was supposed to be followed by another major product around October or by mid-October. Somehow, the couple of challenges, number one, of course, trying to quickly adapt to what is happening in the market. The main reason is some of the new configuration that we're doing have some challenges on the system. We managed instead of October, that product was actually launched only in January. Similarly on postpaid, we did launch something in December for the lower-end market, but there was another major product supposed to be launched before that around November, which come only around February.
Both of these products are now in the market. Unfortunately, when the thing happen, it happen. When something goes wrong, it doesn't go wrong just once. After February, after we launched in the market, by the time it's about to get some traction that we would get by the COVID-19 and also the MCO, the market did not move as much. Fortunately, in the past, since the MCO has been moved 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. Yeah. It's very early days. Observation, despite the reduction in terms of the revenue, the softness in the revenue, we did manage to grow our profit in terms of profitability through some of the cost structure that we have changed.
We have improvement that we have did in 2019 as we focus more on the operational excellence last year. I'm gonna 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 question from Arthur, you actually asked whether there is any one-off that we have actually put in Q1 this year. Q1 this year, other than the employee restructuring program that we have actually undertook in quarter one that creates the difference in terms of the EBITDA. That means there's no other major one-off that we had in quarter one. Having said that, when we look at the comparison with last year's numbers, there's some one-off that in 2019 which we have actually mentioned earlier. Having said that, we see that the underlying profitability has actually improved slightly year-on-year. I hope that answered the question, Arthur.
Yes. Thank you very much.
Thank you.
Thank you. Your next question comes from Prem Jearajasingam from Macquarie. Please go ahead with your question.
Hi. Thank you for the opportunity. A couple of questions from me. Firstly, with Celcom, I appreciate that we had some delays in product launches. Idham, in your entry, I believe you said something about system issues and therefore you couldn't launch products. I thought the system issues were well behind us. 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. 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 systems still don't work. We still can't launch stuff, and therefore Celcom is going to continue to bleed." Kudos to taking the cost out. This revenue line is quite worrying, I must say.
Second one is really around the Ncell 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&L over the course of 2020?
Yeah. You are right. We did the transformation of the IT systems a few years back. What we're trying to do with the recent product that we launched, 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 where they can top up or add on to the product. It's a different product structure that requires a little bit more work on the system. It's not just about the system, as I mentioned, but there are other things as well in terms of trying to keep up with some of the changes that's happening, that we have to continuously look at what will 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. For example, the new postpaid product that we have launched gives the option for our customers either to choose whether they want to choose a speed or they want to go on and choose for capacity on unlimited capacity. To provide this option to our customers, this is the first of its kind that we launched in the market. Yeah. This is structurally different in terms of product design that gives a lot more options to our customers, and we're seeing tractions on this product itself. That structural change takes a little bit more time than usual than just add on additional capacity for a lower price and so on and so forth. It's beyond just a pricing change, beyond just a 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 there. Yeah?
All right. Okay. Thank you.
Vivek?
I, Prem, on the second question, yes, you are right. We paid the remaining amount of CGT in April, which was around MYR 15 billion. With this, we've settled the entire CGT liability. As far as the accounting is concerned, if you recall, we always believed based on our strength of the BIT, that this amount is recoverable from our perspective because we have fairly strong position on the BIT. That said, we have taken a prudent view and accounted for this liability as finished, 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 BIT case is sorted out. We should be seeing a higher claim than what is outstanding will be provided for.
That, I think amount is something which we will look at it, but we don't see major impact coming this year or subsequent.
Vivek, you might want to explain the BIT.
Yeah. I think this is, if you remember, under the bilateral treaty, we have filed a case, an arbitration, national court against the government for the proper treatment of [VISTA] Nepal. Far, based on the indication development, it seems a positive position for us, which is what is the legal view on this. However, that said, Nepal government has obviously not entertained this. Thus the international treaty, because they're part of that treaty, they are obliged to acknowledge such a claim. I think this process will take a while. It won't be one year, two year, maybe three, four years. We believe on the strength of the case, that we have a fairly strong position.
Could I surmise that while the cash has gone out, it is unlikely that we will see an MYR 800 million hit to the P&L anytime soon. Is that a fair assessment of it?
Most of it has already been delivered. You're right in your information that we will not see any impact. If any, our claim would be higher than what is outstanding as to be provided for.
You want to explain what you mean by that?
There's no more provision, so there's no more sheet there. We're done with the CGT.
I think if you recall that we've been saying all along that we have made the general provisions on account of tax liabilities, and we believe those provisions which we've made, cover for CGT, is reasonably enough for potential liability coming in on this.
That was done last year.
Yes.
Right. Correct. All right, perfect. Thank you very much.
Thank you. Your next question comes from Alex Goh from AmBank. Please go ahead.
Thank you so much for the opportunity. I've got three questions. You've indicated you have not seen the full impact of the COVID-19 in the first quarter. In the second quarter, does that mean your bottom line is going to be much more impacted? Can you just quantify, potentially how much would that be? Would there be additional costs that you have incurred during the MCO? Could you give a bit of a guidance or color on what should we be expecting in the second quarter of this year? That's my first question. I've noticed that year-on-year, your depreciation has jumped up quite a lot, 13% in fact. May I know whether there was any accelerated depreciation in there, and are they lumpy, and could we expect a bit of normalization to your depreciation charge in the subsequent quarters? Right.
Sorry. Regarding the Axiata Digital's e-Tunai Rakyat initiative, you indicated in your waterfall that there was something expanded there. Could you just quantify how much was that?
That means, Tan Sri, if I may take the question.
Please.
I think you are right, that quarter two will have impact than quarter one on account of. The reason being, most of the markets did go in for lockdowns, excepting Indonesia and Cambodia around second half of March. We have seen some impact because of that, largely on account of activities in prepaid market, where the ability to sell recharges or acquire new customers has impacted prepaid revenue. We are also seeing some impact on postpaid early days, not on account of revenue, but mostly on account of bills being paid on time and some impact on the enterprise business, which is again because of the struggle in some of the markets on account of enterprise or businesses. We would see quarter two impacted. However, that said, this also has a counter side, which is we are spending relatively less on sales and marketing on acquisition costs.
We are also seeing while the revenue coming down, the customer base is fairly stable in most of the markets. There will be impact on revenue. Our estimate at this point in time could be low in markets like Cambodia and XL. Could be higher in markets which are in South Asia, largely in South Asia, because they are highly dependent on prepaid and still on voice revenue. We will see some impact in quarter two because of these lockdowns based four out of the six markets. We don't see any major impact on edotco business. I think that continues to do well for us. If I can go to the second question. There's nothing on accelerated depreciation. I think some of it is coming because of investments in XL, which is rolling out Xtra.
There's been some impact coming in because of the adoption of IFRS. If you look at last year, while we did start the IFRS adoption from first January 2019, a lot of companies did do a full evaluation during the year. For example, we had XL, while they didn't adopt it, we were doing some estimations based on the analysis done by that. Which when they've adopted, they've actually gone into details around that. There's been a kind of timing issue, which is resulting in some higher amount coming on account of these depreciation on account of these liabilities. If you look at the number which I said year-on-year, there's an increase of around MYR 160 million on account of depreciation, out of which around close to MYR 45 million just comes on account of the depreciation on the ROU asset.
I think that's mainly the reason, but there's nothing which is in the form of accelerated depreciation. As far as the e-Tunai initiative is concerned, we would have basically spent around RM18 million net impact on account of the marketing spends coming for e-Tunai, but also has an impact on account of lower revenue. When we were launching this, getting new customers, low rent, we did cut down on some of the charges for the merchants so that we could encourage these customers to actually go and use their wallet, the money, which was around RM30 per customer given by the government to be able to utilize across our merchants. Net would be around, I guess, around close to RM25, 26 million on account of e-Tunai.
Okay. Can I just put in one last-
Yeah.
Yeah, thank you. Can I put in one last question on Ncell? The main reason for the low contribution was because of capacity constraints. I am just wondering, when can that be rectified? Is it, over the next six months or perhaps next year? I just want to understand when can we expect a turnaround in terms of their revenue trajectory going forward. Also, just to double confirm on what from Prem's question earlier regarding the legal case, I just wanted to be doubly sure. There will be no further provisions from the payment of the remaining CGT. Am I right?
Okay.
Yeah.
Can I, Doctor, you want to answer on the Ncell first question?
Yeah. Maybe I'll get Dr Hans to elaborate on the first part.
Yeah. Thanks, Tan Sri.
Go ahead.
Yeah. The spectrum constraint, as explained by Dato' and Vivek earlier, comes from the shortage of spectrum and a hold-up in terms of the release of spectrum that Ncell secured via auction. Release of the spectrum to Ncell so that they can really activate the spectrum and relieve the capacity constraint. We are in the penultimate stages of clearing the negotiations with the regulator on this. I would expect the spectrum to be on air, yes, within the next 3-6 months.
Okay. I can take the-
Turnaround.
Follow-up questions on CGT.
No, sorry, Hans. The turnaround for revenue.
Yes, Tan Sri. With the activation of the spectrum, we expect to see a turnaround in the revenue trajectory within the next three to six months.
Oh, okay. Sorry. That's what you meant. Thanks.
Yeah.
If I-
I think, Tan Sri, there was a first question from Alex just now about the impact of COVID-19. If I may, Tan Sri.
Yeah, please.
Yeah. No, Alex.
Sorry.
Right now we're saying is that, the MCO or rather COVID-19 set in the last weeks of March, really. At this stage, all we're saying is we know that whatever assumptions we make today will be different and will be wrong. We'd rather err on the safe side and not provide any guidance, and wait for the second quarter results to get a better understanding of the impact. No, we are conscious of the fact that a fair bit of our revenue is prepaid customers, voice revenue and so on. If anything, during the COVID period, as I've said, SIM reactivation will be affected, and new prepaid SIM cards will not be easy for people to have access.
Given the nature of the, if you like, customer base, assuming that the continuing pandemic or lockdown happens and people don't have jobs and lose their jobs, sure, that will have an impact. That's why we rather not make any or give any guidance at this stage, and wait for the second quarter results to have a better feel of the numbers.
Vivek, on CGT?
Yeah. CGT, as I said earlier, we believe based on our assessment, first of all, start with saying we believe we've got a very strong case. Secondly, the amount which we have provided on tax liabilities on account of taxes, I think is enough, sufficient to cover for the liability. This is the stand. We should not see any further provisions coming 2020 on account of CGT. However, we will continue to assess every year until the whole BIT case 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 would we be in a position to recover from the government the amounts which we have paid. We will have to do some recoverability test.
Apart from that, I don't see any further provisions coming, arising on account of CGT.
To just expand slightly on CGT. Like mentioned by Vivek, can be one or two or even three 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. If we were to win, then there will be the MYR 200 million or so, that will be a windfall for us from both cash and accounting perspective.
Okay, great. Thanks.
Further-
It can only be better.
Yeah. It can only be.
Thank you.
Thank you. As we have no further questions at this time, I'd now like to turn the conference back over to you for any additional or closing remarks.
Thank you very much. Thank you to all for joining us for the first quarter result. 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.