Ladies and gentlemen, thank you for standing by, and welcome to Axiata Group's second quarter 2019 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 phone during the presentation and kindly avoid using wireless headsets. Also note that the call duration will be for a maximum of 90 minutes ending at 4:00 P.M. I would now like to hand the conference over to your speaker today, Tan Sri Jamaludin Ibrahim, President and Group CEO. Thank you, sir. Please go ahead.
Thank you. This is Jamal. Thank you for joining us for the second quarter 2019 results. I'm with my colleague, Vivek, who's the group CFO, and some of the colleagues also from some of the operating companies. Thank you again for joining us. Let's go straight to the point, straight to slide four. There are seven key messages I would like to talk about and then, before I pass to my CFO, Vivek. The first one, you've heard during the last last year where we had the Analyst Day. We talked about shifting gear, where we have been growing significantly from a revenue and even EBITDA perspective, but it's time for us to translate those gains into profitability and cash.
Again, just to put to perspective, the all the OpCo have done extremely well to grow revenue. If you look at for the last 10 years, every single one of them gain market share, some substantially. When we first started, 10 years, 11 years ago, some were number four, number three, number two, number one. Now, all of them number one, number two. We have invested a lot over the last two, three years, arguably slightly more than our competitors. We've decided as of last year to shift gear, so to speak, not necessarily at expense of revenue growth, but rather simply speaking, focusing on profitability and cash to reap the benefits of our investment. That's the strategy. Today, I'm glad to say that it is showing tangible results.
Second point is that with regards to our full year 2019 headline KPI, based on the first half results, we believe that we are likely to perform better than the headline KPI for EBITDA and for ROIC. The third point is that the five out of six OpCos continues to gain revenue market share. Despite the fact that we are focusing on profit, it's good to know that we are still gaining market share. Most important of all, they delivered highest profit growth in their respective markets. The fourth key point, in particular, XL and Robi did a very good job to deliver good profit growth and ROIC improvement. To some extent, it's because of our, in the case of Indonesia, because of our ex-Java investment reaping results and non-NCD for Bangladesh.
XL in particular also has outperformed the market for eight quarters consecutively in almost all measurements. Robi is now profitable for the first, since first quarter this year. Especially, first for first quarter, second quarter and since we acquired a loss-making company, Airtel, in Bangladesh. Fifth point, you will see that, despite the tough telco industry environment in Malaysia, telco delivered very good EBITDA, free cash flow, PATAMI, growth of 4.7%, 5%, and 11.7%, respectively. Second last point, it's good to note that edotco continued to grow double digits in terms of revenue and EBITDA. Last but not least, of course, we announced the board has approved that we will give a dividend of MYR 0.05 per share. Those are the seven key points.
I'll now pass to Vivek to go through the other setups, the rest of the chart.
Very good afternoon, good morning, depending on where you're based. Let me start with slide number six, which talks about reported results. Our year-to-date revenue grew by 4.2%, EBITDA grew by 24.8%. This EBITDA obviously has the impact of the MFRS, which is the lease accounting change effective from 1st January 2019. Profit at MYR 913 million, lifted by one-off gains coming from disposal, which was in M1 in quarter one and divestment of non-core business again in quarter one. We also did sell our rights in Idea, which gave us profit of MYR 96 million and a gain of forex gain of around MYR 83 million. Profit of MYR 913 million for the first half of 2019.
For quarter two, MYR 204 million profit mainly contributed by the operational performance as well as the benefit of the Idea rights sale. Slide number seven. Quarter two underlying performance. This is on constant currency, excluding MFRS impact, so it's all pre-MFRS. I must say we had a strong operational performance year-to-date as well as on a quarter basis with an EBITDA growth of 10.4%, uplifting 2.2 percentage point in EBITDA, largely coming from tangible results of cost initiatives which we've taken, as well as the organic growth in revenue. Our revenue grew by year-to-date 4%. If I look at excluding devices, the growth was 6% year-to-date.
PATAMI, however, was dragged by the fact that we no longer get the profits coming from M1 since we've disposed it off, and higher tax implication in Bangladesh. The tax changes, where Robi is required to now pay tax on revenue increased from 0.75% to 2%, which had an impact not only for 2019, but also that into 2018, which dragged the profits down. The good news is most of the OpCos actually had a strong revenue growth, excepting Celcom and Ncell. Ncell, Celcom, largely because of the industry, but also because of the reduction in the domestic roaming revenue, as well as the hubbing revenue.
Nepal has essentially been on account of reduced IDD revenue, as well as the taxes introduced last year on the telecom services. EBITDA, as I said, strong growth. The good part is, we've seen double-digit growth coming from XL, Robi, Smart, and edotco. Our efforts on cost excellence continues to yield results. Out of the MYR 473 million, around MYR 250 million is on account of OpEx reduction, and our plan of achieving MYR 1 billion stays as is. Our profit, as I said earlier, despite a strong operational performance, profit got impacted because of M1 as well as the taxes in Bangladesh. If I go to the next slide, this provides a bridge, which basically says on a year-to-date basis, MYR 0.5 billion improvement in EBITDA.
A lot of it got diluted because of $83 million, largely on account of interest rates increase in Indonesia. This is not increase in interest rate, this is moving, shifting from dollar loan, which we had around $300 million last year, into the local Sukuk, which is at the local interest rates. That's the impact which is there. Given that we move to local currency, we do not get impacted by the Forex fluctuation. Share of associates is mainly on account of M1, which is around $60 million. Tax implication largely coming from Robi, but also from XL, where we have reversed some of deferred tax asset because for the past 2014, carry forward losses are not expected to be utilized.
That's, I think, the MYR 479 million of underlying PATAMI. If I can go to the next slide. I think as Tan Sri said earlier, our focus has been around cash flow margins, and how our CapEx is being managed. CapEx intensity at 23%. And free cash flow margin, which is EBITDA minus CapEx, has moved up from 10% to 19%. Operating free cash flow margins has moved up from 2% to 9%, with most of the opcos actually showing improvement except Ncell, where we've been impacted because of the lower revenue and increased CapEx in 2019.
If you recall, last year, we were subdued on our CapEx investment in Nepal, essentially because of the ZTE, which is our vendor there, had that freeze at that point in time in 2018. If I go to the next one, this basically is illustrative of what is being done on the cost side by the company. Broad message is the cost has been flat, this in spite of around 4% improvement in revenue growth, as well as, excluding devices, 6% growth in revenue. Most of the cost investments are coming from expansions, largely in the network in XL and also in Malaysia. Savings coming out of the efforts being made in network IT, sales and marketing, and other expenses.
If I go to the next slide, I think strong balance sheet. Gross debt to EBITDA below 2x. This is on the pre-MFRS, it does not take a note on the liabilities on lease payments. We have during the year, repaid around MYR 420 million of debt, which does reduce cash balance to MYR 5.4 billion. Fairly strong balance sheet, I would say. We had taken some decisions last year of moving most of our borrowings into fixed and also into local currencies, given the volatility in both the Forex side as well as the interest rates.
That, I think, is the reflective of the share of borrows between local and foreign, as well as, our strategy of keeping around half of our forex borrowing hedged, it's still holding firm. I go to the next one, our performance of [audio distortion]. I'll just quickly run through each one of them, and I think details can be covered as part of Q&A. Celcom, we've seen challenges in the industry as such. We've seen the industry revenue coming down. Our revenue's been slightly below the growth in industry.
Mainly coming out of the fact that we've got domestic roaming, which is the data for webe, coming down because of the renegotiation we did last year, as well as the overall consumption. Also the fact that there is interconnect revenues being reduced from the beginning of the year, as well as our strategic decision on reducing the hubbing, which is not necessarily a margin accretive business. However, positive is news is 5% growth in free cash flow and 11.7% growth in PATAMI, mainly coming from improvement in EBITDA. Year on year, EBITDA improved by 13%. Quarter on quarter, EBITDA improved by around 28%. If I go to the next one, which is XL.
Again, another strong quarter of excellent performance from XL. The industry growth was around 7.8%. XL delivered 10.9% growth, mainly coming from the growth in data, which has improved by around 29%. And the continuing effort on network on the cost side has been yielding an improvement in EBITDA, which is nearly 20% year-on-year. And also the fact that the business has been able to leverage the network expansion for on cost impact. Free cash flow up 60% with IDR 1.1 trillion. PATAMI for positive profits during the year-to-date 2019. Excellent performance from XL.
For the last eight quarters, the business has been gaining market share, which has been a positive development. If I go to Robi quickly on this one, I think we grew better than the industry at 11.3% and a very strong cash flow improvement. Also from an EBITDA standpoint, which is not here in this slide, we had a 70% improvement in EBITDA on higher operating leverage. Profit, positive, but this is on an underlying constant currency basis. If you look at the actual, you will still see some negative because of the MFRS impact. Most of it is between Robi and edotco. From a group standpoint, it gets eliminated there.
If I go to Dialog, I think, again, continued strong performance. Quarter two was a little bit slow because of the events, the attack Sunday, the attack in Sri Lanka. Their quarter two's been relatively lower. However, overall against the industry, Dialog continues to perform well with a good 10.3% improvement in revenue, a strong free cash flow generation, as well as profit improvement by around 20.5%. Free cash flow, I think, is also partly because of the delayed investment in CapEx in Sri Lanka. The next one on Ncell and Smart Axiata quickly. Ncell down mainly because of ILD, where we've seen around 14% drop, which is in line with our expectations.
However, we do not see core revenue growth coming in that market. One of the reason for that has been the increased impact of the telecom service charge introduced last year, which makes it less affordable for the masses in Nepal. However, the performance of Nepal Ncell continues to be good, mainly because of the ability to retain EBITDA margins above 60%, despite ILD revenue, which is a very high margin business, coming down, and that's what is reflected in their PATAMI improvement. Smart has been continuing to perform well with 12% growth in revenue, 15% growth in EBITDA and a 13% growth in PATAMI and a significantly high cash flow generation.
Overall, from OpCos standpoint, I think all of them have done well. Challenges in few markets, for example, Malaysia and Nepal, mainly because of the data consumption. If I go to the digital business, three verticals which we have. Boost has been doing well from the overall GTV as well as number of customers which they've been adding, and also the merchants which has been growing pretty well. We have around 4.4 million users of Boost. The number of customers who've registered. The advertising business, ADA, I think that is doing well. We expect it to be profitable full year in 2019, and they've been winning a good number of important clients as part of their portfolio.
Apigate, I think we continue to have good traction on connected merchants and growth in GTV. I think we are challenged a little bit on the revenue generation, specifically coming out of the direct connections at southbound, where with the operators, where the company's focused on increasing that going forward. edotco, excellent performance on revenue. 21% growth in revenue and 29% growth in EBITDA, with a strong free cash flow margins. PATAMI, marginally lower, mainly coming because of the part dilution in Bangladesh, also on account of some impairment which has been taken in Pakistan.
Dividend, as Tan Sri said earlier, interim dividend of MYR 0.05, which translates into around 85% of payout ratio, which is in line with what we've declared in earlier years, but reflective of strong performance here. The next slide is on our guidance, the KPIs. Based on the performance of first half as well as the momentum, continuing momentum, we do see revenue to be in line with what has been projected. However, revenue excluding devices, could be higher, because we've slowed down in some of the markets, device revenues. EBITDA, would be ahead, likely to be above. ROIC, given that, first half was 6.6%, we are likely to be above.
CapEx, because of some rationalization which we've been doing, on CapEx spend across market, we expect that to be below MYR 6.8 billion which we had given guidance at the beginning of the year. The next slide on risks. I think they're pretty normal risks. We do see unfavorable regulatory environment in some of the markets, specifically in the areas of taxation. We also have the macro challenges in Sri Lanka, post the event in April. Celcom, I think, while it's been tracking well, but challenges on the industry as such.
Capital gains tax in Nepal, I think we have an order yesterday which is still in a very short form and I think we can't really interpret and we are trying to understand until the long order comes on what next steps can be taken. Opportunities I think Indonesia Bangladesh continues to be doing well. Boost I think GTV is good. We are looking at how to drive revenue and infrastructure edotco momentum which continues and our ability to take out costs which at this point in time is pretty much in line with the targets which we had set for 2019. That's it from me. Thank you very much. We can now open up for Q&A.
Thank you. We will now begin the question-and-answer session. If you wish to ask a question, please press star one 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 the digit two. Your first question comes from Prem Jearajasingam from Macquarie. Please go ahead.
Hi. Thank you for the opportunity. Two questions from me, please. First of all, on Celcom. On paper, this looks like a pretty decent uptick in the EBITDA margins. Could I be rather facetious and ask what's driven down those direct expenses so much on a quarterly basis? With regards to staff costs, that seems to be creeping up or staying pretty lofty despite the VSS charges that we took last year. Is there anything more that's happening in Celcom that's causing this number to remain elevated? Finally, you know, again, with the bad debts at Celcom, is there anything here that's keeping it stubbornly high, or should we expect in the not too distant future for these numbers to improve? The second one was essentially a small one around Boost.
I understand that Boost together with Dash in Singapore are part of this VIA initiative. How important is this to Boost to really scale up, and how soon should one be expecting more news on this one?
Maybe Jennifer can answer the first two questions.
Okay. Prem, I'm Jennifer here.
Right.
Answer the first couple of questions. The first one is in terms of the direct cost, Qo Q, yes, we do have a one-off cost benefit, which we have actually made the reversal. The amount is close to about maybe slightly north of MYR 15 million. Having said that, even if we were to normalize that amount, operationally the number two, you know, the profit still looks higher compared to Q1. Staff cost, the amount that we're actually seeing now, because as we have explained in Q1, there were certain reversals that we have done in Q1. The number that's in Q2 is what the run rate for the staff cost going forward.
Whilst we actually did take off some cost in terms of the VSS, the cost savings that's arising from the VSS, we are seeing those results. Having said that, there were some replacement that we have to put in, and hence that's why the cost, you know, We won't be seeing the entire cost savings from the VSS as we have said earlier. The third question is in terms of bad debt. Yes, we're starting to see some small decline in terms of the bad debt, which was arising from some of the drives that we have actually done last year.
We are hoping to see that the number continuously, I wouldn't say that there's gonna be a sharp decline, but we are hoping to see some smaller numbers in terms of bad debts as we come in the shorter timeframe. I hope that answered the question.
Yes, thank you.
There will be.
You said MYR 15 million, right?
MYR 50.
Sorry, you mentioned 15 15.
50.
50. Oh.
50.
For the first half is MYR 28 million, right?
Yes.
Yes. Yeah.
Prem, to your question, Boost. I think at this point in time, it's a good initiative, but we do not see benefit until we really aggressively start moving into the remittance, which is not something immediately in the horizon.
The company business has been working on that. At the moment, its focus is more on the domestic side.
The biggest question is Boost.
Other Much bigger, broader question is the, how we look at Boost. Your scaling up is very important to get the economies of scale and to get the, shall I say, the network effect of Boost. Because Boost by itself is not the end game. The services that Boost will be offering beyond payment are actually the end game. We are working on that. So these are the other micros, micro-lending, micro-savings, micro-insurance, and micro-remittance. Those are the important. Last but not least, I think there were, we have been saying that at the end of the day, we need consolidation even in this Asian market with regards to digital payment or you call it meta digital financial services.
Thank you. Sorry, could I just add one more question? I suppose I'm not sure that you addressed it right at the beginning of the call, but would you be able to tell us where we are with regards to this merger and what you think the chance of completion is, and when we can expect next steps on this one, please?
Okay. Shall I wait till the end? I do anticipate a lot of question on this. You know.
Yeah, sure.
Wanna focus on the.
Yeah. Yeah.
Q2.
Okay, sure.
We come back, for sure I'll be answering this question. Thanks.
All right. Thank you.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star one on your telephone keypad. We will take our next question today from Piyush Choudhary from HSBC. Please go ahead.
Yeah. Hi, good afternoon, and congrats for a good set of results. Two questions from me. Can you share how the macro conditions panning out in Sri Lanka in third quarter, and are you seeing, you know, improvements now? Secondly, in Ncell, could you share again the outlook over there, after a tough second quarter? Lastly, you know, as Prem Jearajasingam also asked if you can, you know, share the update on the merger and the timelines to watch. Thank you.
Okay. Thank you, Piyush. I ask Hans Wijayasuriya to rush back to Sri Lanka to answer your question about Sri Lanka. He'll be answering the first two questions. Hans?
Yes, live from the ground. Yes. The second quarter was somewhat subdued as Vivek explained. This was in the aftermath of the Easter Bombings. What we saw was that the hospitality sector in particular, but also the retail sector and the transportation sectors were impacted with the downstream compression of consumption. This was on top of the lagging effects of the removal of floor rate, which we discussed at the last call. What we are seeing in Q3 is a recovery on the tourism side. We are seeing many of the fundamentals coming back in place. We should see a recovery in the third quarter by and large.
The removal of the prorates much less. The Dialog has in fact, I think weathered it very well and impact due to the price for conditions have been much less than expected previously, mainly due to Dialog's very strong data offering and able to keep the per customer revenues at or above the levels previously recorded. Ncell ILD performance has been better than the run rate we expected this year, which has moderated the reduction in revenue. On the domestic revenue side, the lagging impact of the TSC, the telecom service charge, and reduced the reduction in accrued revenue to Ncell due to part a larger part of it going to the tax authorities is still in play.
That's where we see the net revenue reduction year-on-year. Again, on a quarter-on-quarter basis, we see improvement in this area as well.
Hans, do you want to elaborate on the TSC?
Yes.
Do you want to elaborate on TSC, Hans?
The TSC was introduced. Yep. The TSC was introduced latter part of Q2 last year. On for data services, it represented a 13% tax on customer spending. On voice services, it was an increase from 11% to 13%. The real impact has been on data growth, where a consumer needs to pay approximately 13% more than previously for the same amount of consumption. This has, in a flat ARPU pool environment, it means that the accrued or net revenue to Ncell is under pressure. Having said that, Ncell's packaging innovation during the last quarter has helped to stem this tide, and we should see a reversal going forward.
Okay. On a major, I said, I'll wait till the end, unless this is the end.
Okay. Okay. Sure.
Okay.
Thank you.
Okay. One more question.
Thank you.
One more question.
We'll take our next question.
Go ahead.
Alex Goh from AmBank.
Yeah. Thank you for the opportunity. I have two questions, and it's regarding Celcom. I'd just like to know what are your plans and objectives for the fiber plans that you have for Peninsular Malaysia, especially, and the ones that you're planning to roll out? How does that move in tandem with the newly released NFCP agenda that the government has? Yeah, that's my first question. The second one is regarding your decline in your prepaid customers. Could you give us a bit of visibility on when do you think this trajectory is going to change, perhaps in one years or two years' time, based upon your own internal targets?
Yeah. Okay. Jennifer?
Okay. For the NFCP agenda, I think it's still early days for us to actually make good significant comments on that because the amount and the plan has only been released lately. Having said that, we have got some input in terms of the NFCP from our perspective, how we want to actually contribute in terms of fiberization to digitize Malaysia. That would be what we're actually doing is actually in line to what the CapEx investment that we already had in place in our business plan.
Your answer? yeah. Your answer.
Prepaid. Prepaid.
Yeah.
Second one.
The second. Sorry. My name is Danny. Hi, Alex. On the decline in prepaid customers, I think it's fair to say that anybody's guess how far this is going to go. We've seen in Q2 as well, lots of adjustment is made at the price point below MYR 50, where competitors, unlike ourselves, we're not playing in the below MYR 50 price plan. We see on postpaid lots of adjustments to the existing commitment levels. Lots of more gigs for the same commitment levels. The low-end prepaid, the low-end postpaid is becoming the new prepaid, if you like. Lots of customers are flocking to these price points.
As far as we are concerned, we've seen slowly the number of churn declining across the, the three months in quarter two. We see some kind of stabilization in as far as the customer drop is concerned. I think going forward, we will still continue to see the decline. To what extent this decline continues and to what extent it will continue remains to be seen because it depends on the intensity that happens, the fight that happens at the low-end postpaid.
Okay. I just follow up on the fiber plans for Celcom. How much CapEx are you planning to set aside next year to move into this space? Which I would expect that you're aiming more towards the urban areas like Klang Valley or perhaps even the Penang and Johor areas. I'm just wondering, you know, how widespread do you plan to move into this? Given the fact that, you know, there are other players like Digi is, you know, exploring this. Are you also looking to rent space with TNB, you know, who is just doing a trial runs now?
I think how much CapEx are we gonna set aside, in terms of, for fiberization is still. It's still early days for me to actually make the comments. We have got some in play, I mean, some number in mind, but I think we will share at a later stage when we have got that more concrete idea. The other thing is on the, whether we are going to trial with Tenaga again.
This one. With this, yeah.
We had some discussion with TNB earlier, you know, I think, you need to watch the space to see, what happens thereafter.
Yeah. Maybe I can answer from a broader perspective, Alex. From a strategic perspective, we are going to participate and align with the aspirations of the government in regards to NFCP agenda. That's the first point. Within that, of course, we have to be quite selective on where we roll out knowing that TM and TIME and some Maxis are also rolling out to some of the homes. Actually, it might be the other way around. We might not go so aggressively in some of the areas where they are already there. Turn out to be mostly urban areas. We are rolling out our own in Sabah where we have strong fiber presence even before this, we're going to take advantage of that.
In some areas we will work with the TM actually, using taking advantage of MSAP rather than rolling our own. Last but not least, from a consumer perspective, it's not fiber nor they probably don't care whether fiber or wireless. If we can achieve a good, consistent quality and speed, in certain areas, we'd rather roll out fixed wireless access. More details will be given out as we digest further the NFCP agenda.
Okay. Thank you. Also, on your edotco side, could you give us a bit more on your timeline on your edotco listing, given the fact that you now have a merger plans currently going on?
Yeah. I guess, you know, in the first place, well, of course, we were thinking, not really necessarily planning to do it before, but with the merger we probably have to put it in a back burner for a time being.
Okay. Thank you.
Thank you.
Thank you. Your next question comes from Foong Choong Chen from CIMB. Please ask your question.
Hi. Thanks for the call. Three questions from me. Firstly, for Celcom, in terms of the wholesale, domestic roaming, revenue coming from webe, has it improved on a quarter-on-quarter basis into the second quarter? I recall from the first quarter conference call that it was mentioned that 4G traffic will only pick up from the end of June. Do we also see that from end of June till quarter to date? My second question, regarding the comments on CapEx possibly coming in below the guidance of MYR 6.8 billion, could you provide a bit more color as to where or which markets we will possibly see this CapEx coming in below guidance?
Third question, a bit more of a bookkeeping question. On the normalized PATAMI number for year to date, as per the waterfall chart, under normalized PATAMI there's a figure of MYR -455 million under others, and that's quite a fair bit of an increase versus the first quarter of 2019. I just wanted to know what is driving that negative number upwards. On the Axiata Telenor merger, I'd also appreciate if you could provide us some additional color on the discussion with regulators around the region because there was some news in Indonesia pertaining to the minister saying that he may have to consider the merger a bit more closely given that it's pertaining to EU and Norway.
Thank you.
Okay. Thank you.
Foong Choong Chen, Jennifer here. I'll attend the first question in terms of the wholesale revenue for Celcom. The revenue from webe has not improved as much as we would like it to be. It has started to climb up, but it's still early days for us to actually see real take up in terms of the 4G traffic because it's in honestly, because there are some teething problem for us to actually attract as well. Hopefully, in the next quarter we should be able to see a bit more better traffic in terms of the 4G.
Okay. Vivek?
On CapEx, I think, in general across, but specifically, Malaysia, Celcom would be lower than what we had estimated earlier. We also expect some lower CapEx coming from Sri Lanka. These are the two markets. In general, across markets, we are looking at a much lower number than what we had estimated.
Some of them are very specific decisions of going slow on CapEx investments.
Sorry. Any color on the amount of CapEx, total CapEx that we could be looking at for the full year?
I mean, I can't give you the exact number, but it would be anywhere between MYR 300 million to MYR 600 million, MYR 700 million, lower.
Okay.
On the normalized PATAMI, I think the number, which you said was others of MYR 47 million, right? Is that what you asked for?
Yeah, there's a MYR -465 million.
Just MYR -465 million.
Yeah, that's.
Which chart are you looking at?
Yeah, this is under slide 26. In the waterfall chart on normalized PATAMI, there's a others figure of MYR -465 million for the first half of 2019 and that seems to be a fair bit more than the first quarter 2019 number of, I think, MYR 179 million. And that sort of dragged the PATAMI from growing more than what it should have.
Compared to last year, right? Compared to last year. I think the large one is on. We obviously have some part of it is coming from the taxes, which pertains to the both, I think, reversals last year compared to what is happening this year pertaining to the prior period. That's the big one which is there. Of course, last year we had. That's one which is there. M1 is the other one which is there for us in the waterfall. There is the ADA, which is the digital. Because we've the others we've, they're reported as part of the specific OpEx.
This is relating to the ADS, losses on ADS, which is there. There is an others of around MYR 148 million, which is on account of different taxes, which is there. We can provide you the details later on, okay? It's mainly ADS.
Okay. All right.
Yeah, M1.
M1.
Yeah.
Okay. Shall I, shall I just talk about the merger now? Question. Sorry. Please go ahead.
No, that is all the questions from me. Thank you.
Thank you.
Thank you. We'll go to our next question today from Catherine Chu from Wells Fargo Securities. Please go ahead with your question.
Hi. Nice meeting you. I basically have two questions. One is that, since you are progressing well with the Telenor merger, I would like to know how about how you're gonna deal with your U.S. dollar bonds. Second question is that following previous question, would you like to tender your current U.S. Dollar bonds outstanding for doing what things or push it down to your new merged company? That's all. Thanks a lot.
Thanks. Well, at this point in time, we are still in discussions on what should be the corporate structure, how, the bonds would be dealt with going forward. In general, the intention was to have our debt moved to the merged group. How we're going to structure that and what kind of requirements would be to make that happen is we are still under discussions.
Thanks a lot.
Okay. Shall I proceed with the question on the merger since I was told there's no other question? Moderator, shall I proceed?
Thank you. As a reminder, ladies and gentlemen.
Okay.
If you wish to ask a question, please press star one. There are no further questions at this time.
Okay.
We'll now pass the call back to Tan Sri. Please continue, sir.
Yeah. Thank you. We've got the merger straight to the point. It's still ongoing. The chance of completion, I would say, is good. There are a lot of things, of course, need to be done.
Let me elaborate a bit. When we announced sometime in early May, we talked about this process of negotiation leading to the definitive agreement would take three to six months' time. Understandably, now it's the fourth one, a lot of people must be a bit concerned whether this process will go on. The answer is yes. To put to perspective, many of you of course are more than familiar, unlike all the deals that we have been through, or like practically most of the deals, it's a one country, one big entity. We have 14 large entities and nine countries to go on, there's a lot of work to be done. Let me explain the two parts of it. One are the working out all the terms. There are three category of terms.
One is the commercial term. The other one is the terms relating to protecting national interests. The third one are protecting staff interests. The second category of the process, they are due diligence. They are quite interrelated, but separate. Now let me start with the easy one. The due diligence is mostly mechanical. There's a lot of work to be done. There are more than 100 people involved, consultants, bankers, lawyers, and people from the operating companies on both sides have been involved to go through due diligence. If you ask me right now, to give you just a feel, we're probably about 70% of the way on the due diligence. Right.
A few more stuff to be done in terms of agreements, in terms of contracts, in terms of all the other terms so that we can factor them in the reps and warranties. We are 70% there. On the terms, we are very much, I would say we are, probably, you know, overall 80% done on working all the terms. Again, unlike a typical deal, which is primarily it's not wholly commercial, there are other terms that are particularly in this case with regards to national and staff interest, given that we are a GLC. A lot of things we have to do to meet the requirements of the national and staff interests. In that respect, I say 80%.
Mostly on the commercial we are very close, but there are other terms that we have to discuss. Therefore, the answer why it's taking longer than normal, but like I say, it's still within the expectation, expected completion date that we just talked about, that we announced early during when we signed the MOU. The next step will be to complete all the discussions on the terms. The one that will also take a bit more time is the actual legal documentation. Again, that's less about agreeing on the terms per se, but more agreeing on a word by word on the documentation. That's extremely tedious. Net-net, we think we can complete within the six months period as we speak right now.
Again, as we uncover more and more terms to be discussed and legal documentation to be done, that might change. So far, I think we are within that six months. We should be within that six months. Are there questions relating to the merger? Have I answered all the questions?
No, no, first. We do have a question from Alex Goh from AmBank. Please go ahead.
Yeah. Just to follow up on the merger, are there any issues that you think it's going to be a potential hindrance to, for this deal to go through? I mean, anything that really sticks out, you know, whether it's from a national interest side or, you know, perhaps even on the entity, the two separate entities as it is?
Okay. I am not sure the word hindrance is a good word. Of course, to agree on some of the terms and the exact legal words to use, has been in discussion for some time, mostly related to the national interest. You know, I can't tell you exactly why, but those are some of the discussions we are having right now.
Okay. Thank you so much.
Thank you.
Thank you. Once again, if you'd like to ask a question, press star one.
Oh, yeah, there was a question that which I forgot to answer with regards to the regulator from the region by Foong of CIMB. Generally, we are only doing that post-signing as part of the CP of agreement, and we'll do that post-signing. Obviously, some countries we have had some early discussion. Obviously, I can't talk about on their behalf. All I can say we are progressing rather nicely in the countries that we are talking to already. In regards to Indonesia on EU, I remember there was sort of a on the palm oil issue. I do not think they are connected. As far as I know, they are not.
We have no.
So, uh, with.
Caller questions at this time.
If there are no questions that I want to ask, I just want to wish thank you to all of you. Thank you for joining us for the second quarter results and formulation. [Non-English content] . Thank you.
Thank you.
Thank you. This concludes today's call. Thank you for your participation. You may now disconnect.