Earnings Call: Q1 2019

May 28, 2019

Ladies and gentlemen, thank you for standing by, and welcome to the Axetta Group's first 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, 3 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 5:30 PM. I would now like to hand the conference over to your speaker for today, Tan Sreejaman Udin, President and Group CEO. Thank you, sir. Please go ahead. Thank you. Thank you. My name is Jamal. I'm I'm the group CEO for Aljeta. I'll be presenting to you on the third quarter 2019 results. And before I start again, thank you very much for joining us for this conference call. Let me move joining me shortly will be, Viveng Sood will be, as group CFO, will be presenting the details on the results. Let me go straight to slide 4 in the chart, and you can see it from here. I presented to you, I think last early this year, the in focus areas for 2019, I will go through that again, but key point to note is the focus on profitability and cash, just to be sure also it is more in relatively speaking compared to revenue. So we are still very focused on revenue gain, our market share gain, revenue growth and so on, but, that's a major shift to us. What does it take to improve our profitability and cash for 2019, early 2020? So that's the main message here. Going to slide 5, on the foot area, we believe we've delivered at least for the first quarter 2019 what we started off to do for this year. EBITDA grew 7.7% whereas our revenue grew 4.3%. This is our constant currency. Our ROIC also improved 1.8 percentage point to 6.2% year on year. And as you can see from first quarter, we plan to announce that accelerating Rovi return to profit with the highest market share since the, respective budgets. So that's for number 1. On point number 2, the spotlight on OpEx and CapEx efficiency, we in 2nd in 1st quarter, we delivered 262,000,000 savings or inters of cost optimization, both Quebec and OPEC and OPEC. And we believe we are on track to achieve 1,200,000,000 for this year. As you can see from the first quarter results, our year on year cost is flat despite the fact that the growth in revenue the absolute cost was flat. Moving to item, 4 We said that we will, fund new investment, new growth, fund investment in new growth areas to a strategy partnership. You heard, early this month where we went capital deduction from Midstream, into ADH. And free money into product validation of USD 500,000,000. Then we'll have to fund our our investment in ADS. On point number 5, we talk about monetizing our investment. Of course, you've heard about M1 monetization, with $1,650,000,000 profit and a gain from that disposal of $113,000,000. You've also heard that early this year, we have transferred 5 assets. The the effect, what we call non 0.6 and 140,000,000 to peg assist. Yeah. With a gain on disposal of about 300,000,000 consistent with our view about India, we have, we decided to not subscribe to the provincial rights in India, So we are now diluted to 2.5%. 0 impact to P and L. Last but not least, we've attracted our balance sheet from $5,100,000,000 last quarter to $6,800,000,000 this quarter. Our gross debt EBITDA also improved slightly from 3.2 2.3x to 2.2x. And our OSCF also improved $234,000,000. We on point number 6, this is the biggest story of the mall. We said for 1 2 years, we need to consolidate it, we need to consolidate it, we need to consolidate it. And, unfortunately, it did not happen. Is that whatever was bigger than what we had originally had in mind to create a global champion by the budget of selling in Asia and Argentina. So we'll talk about it in more in more detail. Point of the way, we have increased awaiting our EBITDA at F FDF deal for our KPIs consistent with, our intention to go for profit rather than purely revenue. My number 7 is an overview of our performance. So I'm pleased to note that in terms of profitability for digital spectrum. Let me make the track There are 3 triple constraints. There are 3 pillars, right? 1 is digital, operator. 2nd is digital business. The 13th infrastructure. This is just to give a quick snapshot on our performance for all. Digital operator most processing is profitability. As you can see from EBITDA growth for year on year, practically all our companies perform number 1 or at worst number 2. In a respective market. In terms of, digital business, we, most importantly, is to focus on valuation as we can see effectively with the 2 major initiatives, it's now 2.6x, the valuation compared to our initial investment of $92,400,000. Last but not least, our total growth performed very well against revenue grew 25 percent, EBITDA, 45 percent, and P and C almost doubled. With that, I pass to Verex, my CFO, to go through the details of the results. Thank you, Audrey. Very good afternoon to all of you. Let me start with slide number 9, which is actual reported results for first quarter 2019. This include the effects of MFRS 16, which we have adopted from 1st January 2019. So you would see EBITDA numbers financial reported including the impact of MFRS, 'nineteen. Let me start with revenue. Revenue quarter on quarter was down 5.1% on actual currency, largely because of the devices in Cellcom, the device sale was significantly high in quarter 4. And it's not been that much in quarter 1. If I exclude the device, the revenue decline would be around 2.3% whereas on a year on year basis, we've seen a revenue growth of 3.5 percent. EBITDA at 16.2% growth included in the quarter 1 number of EBITDA is around $252,000,000 impact on account of MFRS. And 18.9% growth year on year. Partami has been significantly high in quarter 1 because of a few items of gains from disposal. 1 is our investment in Hemat where we gained $130,000,000. And our investment, the divestment of the North And Digital businesses, which, gave a profit of CHF 302 1,000,000 in quarter 1. So we reported one of the high on reported numbers, one of the highest orders of profit of at $7,000,000 $9,000,000. On normalized basis, excluding these one off items, we've seen a profit decline from 3 one 0 last year to $209,000,000. And largely on account of 2 factors, one is M1 is no longer an associate of ours. So we used to get around close to $30,000,000 gain on from MR, which has been a negative impact. And also the fact that we have in Indonesia moved from U. S. Dollar loans to domestic loans with interest rates in the domestic loans is much higher than the U. S. Dollar, but this allows us to prevent fluctuation to meet ForEx as impacting our profit line. Let me go to the underlying performance. I think that's more important because we reported as an impact of some of the one off items. So underlining revenue, 4th round quarter drops by 5% again, largely on account of devices, which has been down. If I exclude devices, the impact would be around 2% lower which is just the number of days. So if you expect us for the number of days, the quarter on quarter revenue has been flat. However, year on year basis, we've seen a 4.3% growth in revenue. And if I get just for devices, service revenues grown by around 5.8%. Year on year. EBITDA has seen a strong growth in the quarter with value of our business is actually showing a double digit growth in EBITDA on a year on year basis. Excel showed 30% growth will be 38 percent, Dialog 15 percent E.co26 percent and Smart 16 sales. So that's been a extremely good EBITDA development from these businesses. Cellcom has been lower and the impact has been largely on 2 factors. One is on account of the wholesale or domestic roaming revenue, which we used to get from, the BB that's come down substantially for 2 reasons. 1 is the renegotiated contract, which is half of what it was earlier. And secondly, the overall traffic also see coming down. And second factor, which is impacted is on account of some one off network costs relating to the LTE expansion. But I mean, the year on, the quarter on quarter up 39,000 year on year down by around 24% mainly on Conoco 2 factors, which I explained earlier. 1 is the M1 profit And second is a conversion of U. S. Dollar loan to local loan in Indonesia. If I can go to the next slide This basically gives the protocol, on, the underlying anatomy and the reported pedami. So I think, briefly touched upon, the factors which explains why, quarter year on year, Patami has been down, while we've seen an improvement on EBITDA, it has, still an impact coming off the factor, which I said earlier, and also the increased D and A on account of, prior investment which we've made, in the last year. On reported, I think it's been impacted by 2 main factors One is the, the one off gains from M And A activities and the audit gain of, 79,000,000 If I go to the next slide, having strong cash flow, projections, capital expenditure pretty much in line with the standard, if you expect, specifically, early spends in, in Cellcom. Which should give us some benefits, during the rest of the year, and our strong cash flow, both free cash flow which is EBITDA minus CapEx and operating free cash flow, which takes in account the tax and the interest. Next slide, Hanae, balance sheet remains strong, marginal reduction in the debt for us. And also on the gross debt and net debt levels. The numbers were little inflated including the MFRS adjustment because, under MFRS 16, we have to classify the leases, finance lease as a debt item, which does take the gross debt to EBITDA look particularly much higher. So if you adjust for that, We've seen that coming down. So a fairly good balance sheet from a risk perspective, a lot more local currency borrowing. Than the foreign currency, which does avoid fluctuation, which was, lastly, it will hit significantly on account of the ForEx box volatility. And also we moved to, very, significant, a good balance between the hedge unhedged U. S. Dollar loan. And, of course, a good cash position mainly coming from the improvement in free cash flows as well as the receipt of around CHF 1,700,000,000 coming from the sale of M1. I have slides on, not for the only offers, but I'll touch upon just 2 or 3 of them. First, let me touch upon Cellcom. And I think we can get into more details in the Q And A section. I think we've generally seen industry being muted in the first quarter. And that's very clearly visible from a decline of around 3.6% and also the impact a lot of wholesale, revenue, which has seen the industry being, on a year on year basis, on a quarter on quarter basis, we seen a 4.7% reduction in the service revenue. Let me clarify. This is based on what is the available information So there may be some operators which we are not publicly available information. However, if I go to the right hand side, I think we've seen, a higher decline for us, mainly on account of wholesale, which is the domestic grooming to Vibe. Which has contributed about $60,000,000 drop in the quarter from the last year same quarter. We've also seen an impact of in payment because of the NTR rates coming down effective from 1st January this year. But I'm happy to say that, the core revenue, which is both prepaid and postpaid, has seen a positive development year on year. Which is, which is much better than the other operators in the same space. We've also seen OpEx coming down for Cellcom from last year. So this year, which is clearly visible and the actions, which are being planned, taken, to reduce OpEx, largely on account of direct expenses, which is the international interconnect costs, have come down. And we've seen at the 140,000,000. Despite OpEx coming down, you've not seen that impact on positive impact on Fazami. The reason is the wholesale revenue used to stay slow down as profit, for us, which has now come down. So that's That's one negative. In fact, second is the impact of the investments which we've made in network, resulting into a higher D and than what we used to have earlier. So I think overall, from an operations core revenue perspective, done very well, but it's been impacted by either noncore revenue or by one off elements in quarter 1. Excel, I won't spend much time because I'm sure you're all very familiar with the Excel results. I think a strong performance on revenue and EBITDA compared to the market, but I would go to slide number 16, which is Roby Performance. I think, this has been one opco, which is really turned around in terms of both revenue growth as well as the EBITDA margin revenue development. I mean, we've seen year on year revenue growth in Groovy ahead of the market growth, which is nearly 11% growth in service revenue. And EBITDA growth of 81%. But 81% actually, I mean, I would say it should be there at 37%, because we've made some accounting changes on IFRS 60, IFRS 15 in quarter 2, which if you go back to quarter 1, would have been a 38% EBITDA growth on from a year on year basis. And after a very long time, since we acquired APL, first time in the quarter is actually being, profitable. So we are now running a profitable business in Bangladesh, which had gone down from a good profit before the acquisition because as you know, we did require a business, which was a loss making business. I won't spend time on dialogue. I think again, a very strong quarter for dialogue. Let me touch upon NCELL. NCELL, revenue declined by around mainly coming out of the ILD decline, which is expected, and it was part of the plan But what we've also seen is low growth in the core revenue, specifically on the data. And that's largely because of no, not much growth on the revenue generating base in NCELL, but one of the reasons for that was delayed investment consequent to the ZTE issue, which we had last year. So now I think we started rolling out aggressively 4G in Nippa and we should see positive traction on the Court Avenue going forward. But I think good to say and then, sir, despite IIT revenue coming down, they've been managing to keep their EBITDA margin above 60%, and that's basically developing a strong, development 32%, but I think the quarter 1 number has been slightly higher with because of some assets write off, which we reversed in quarter 1. But excluding that, also, there's been around the teen percent growth impact in Nepal. Smart continues to do extremely well on revenue, EBITDA and profit. So largely, and if I look at the mobile operations, all operations done extremely well cellcom has been muted because of the industry as well as some of the one off items, which we had to deal with in quarter 1. Let me just go to the next one. I think I don't have to spend much time on that, but, just on the digital businesses, I think the fundamentals, are looking quite strong, with growth in the GTV across businesses as well as, the invoice specifically expansion in terms of number of customers registered as well as number of merchants active, in that place. Next slide, I'll just quickly on infrastructure. I think we've never been very bored on giving all the numbers on E.co. This is the first time We've been in the chart explaining it, but good to say that revenue growth of 25% year on year across markets And we've seen EBITDA growth of 32% year on year and improvement in EBITDA margin. Adjusted EBITDA is basically to adjust for certain M and A, business development activities and on account of, employee shares, which is one off items. So I think the underlying improvement and strong. We did see that impact as much on the top line, mainly because of some of the legulatory costs in a couple of markets, which we've considered in this quarter. Going to the next slide, just a quick reflection on where we are versus our guidance. Overall, pretty much in line with the guidance for the year. And this is all on CMFR as constant currency basis. The last name for me is what are the risks? I think we have seen some on your unfavorable regulatory, issues in the markets, specifically in Nepal and Sri Lanka. So, spits on Sri Lanka has been largely on account of the floor rate removal as well as a loading of the pay as you go tariffs on data. So that has some impact as well as the overall macro environment in Sri Lanka, particularly to even in the month of April. Cambodia, it's been some electricity crisis, I think the management has done well, to contain impact on revenue. However, this has had some a negative impact on the cost line, from diesel spends and the generators, which they have to put in place. Cell home turnaround, I think while the management has been making all efforts, the industry remains and of course, our still hanging, issue on the capital gains back. Opportunity in Indonesia, Bangladesh continues to do well. We should see positive year for both these markets under something exceptional negative happens. Digital business continues to have a strong momentum, not only from a validation of values for Standard Time, but also in terms of the core, economic unit economics in that business. And the possibility of higher densities in, in GDOTCO and structural cost day growth. So we've been focusing on a few of these areas quite actively and we should see some benefits coming out of, those actions being taken. Okay. Thank you very much. I don't know. Thank you, Vivek. I think, pass back to the X0. Sorry. Moderator. Would you like to open We will now begin the question and answer session. Your first question comes from Wei Chi Wu from BNP. Please go ahead. Hello? Can you hear me? Yes, quite Yeah. Okay. What are you going with? Yeah. Okay. Great. Thanks for the opportunity. My first question is related to the infrastructure business. Can I just check what happened to managed sites in Sri Lanka in the first quarter? It was blank. And related to this, related to the business, I noticed that the revenue on a per tenant basis increased quite nicely in the first quarter. I wanted to check the driver for this and also the driver for the EBITDA margin increase for the infrastructure business a pre MFRS basis? 2nd question is related to the proposed merger. Just wanted to check whether you have had any engagements with the regulator in Malaysia regarding the merger And based on your recent interactions with them, what do you think, Exyatta could potentially meet to give up in Malaysia for the merger to be approved? Thank you. Okay. When I pass to the CEO of you don't go. You just can't wait to answer your question. I think on the first question, it was just a definitional thing. We were running some managed services with dialogue on towers as we change the arrangement. The dialogue is running that directly with us providing sort of staff to them now in a slightly different arrangement. So I think that's more just a definitional question. Impact on revenue is almost negligible, I think. On the per tenant revenues. I think you're are you talking about, course, the last quarter to this quarter? In which case that's largely driven by a growth in, Bangladesh and, probably in Malaysia and Pakistan. It would see quarter it was the last Q1 to Q1 year on year, then much of that is driven by Malaysia, both in terms of tenants, but also because we've taken on the new business with Cellcom, which is the, field services team. And so while that's a managed services, that may inflate the for the tenant, well, right? So I think that's the high level drivers. Okay. On the third question, in regards to that direction, yes, we we did. In fact, we had a full presentation, by, both teams, myself, personally, and the, good CEO of, Telenor, together with our respective CEOs, CEO, South Thomas, CEO of Digi. I don't want to be presumptions about what will be what was the direction and what they are thinking. All I can say is that, we had a good presentation. They understood the case reasonably well, I hope by then, we talk about the impact to consumer impact to a tough impact to the industry, and what are your thoughts and the benefits to the country and the nation. So that's all I can say for now. As you know, they came up with the, merger guidelines almost coincidentally, but it was a bit prepared. It went away before us, but it kind of accelerated knowing that you see what happened. Based on that, we've, of course, from all point of view, we believe, is a good case. But I cannot, I said, I don't want to be so presumptions to say what they take, what I'll do, what do they take? Thank you for your comments. Can I just follow-up on the question on e.co? So from your comments, it seems like the increase in margin was also driven by this new business with Cellcom. Is that accurate? And would it be accurate to assume that that's going to be largely eliminated, at the group level, because of the intercompany transaction. Sorry. I'm just trying to make sure I heard your question correctly. Was the margin improvement linked to the managed service contract with Cellcom. If that's your first question, the answer is no. That's a relatively low margin business that we do with them. So the margin improvements that you see are linked purely to increase in towers and tenants. And that's typically the case across all countries And I think, of course, yes, this intercompany revenue gets eliminated at group level. Sorry to, go on this, but, if the if margin would improve, from increased tenancy, but I, note that your tenancy ratio, across the e.co was relatively stable at that one point 6 times in first quarter. Okay, so not there. So one that depends a bit on mix So, so I think you're going to find that the mix of Malaysia and Bangladesh has increased Therefore, giving it slightly higher weightage that tends to be relatively higher margin. Businesses with the margin in Malaysia also picking up over the year. But there's also something which we call loading revenues. And that goes up. So that doesn't show up in the towers and tendencies data. It's additional equipment that is put on as power. So that has really grown year on year, that has significantly. Thanks for the comments. Thank you. Your next question comes from Chung Chan Phong from CIMB. Please go ahead. Hi, thanks for the opportunity. A couple of questions for Cellcom and then a question for Dialog. For Cellcom, the wholesale revenue from from GM, given the drop in the first quarter, what are our expectations on how this revenue will trend in the coming quarters on a sequential basis. And also I know in the slide, that was a 94,000,000 ringgit drop in the service revenue for Telkom. You mentioned 60,000,000 related to the wholesale revenue from TM. How about the other 34,000,000? What is driving that decline? 2nd question, can you elaborate a little bit more on the one off L network expansion cost, what's that related to? And is the 35,000,000 ringgit a pretax or a post tax impact. And, thirdly, on the Cellcom staff cost, a fairly big drop into 1Q, would that be the run rate going forward? Those are the questions on Cellcom. And then on Dialog, you mentioned about, writing price competition. Can you provide some additional color as magnitude that we're seeing in the market. And has it gotten worse or better after the first quarter results? Those are my questions. Thank you. Okay. Let me pass to Alex Fields to answer your question and, together with the CFO. Yeah. Hi, good afternoon. This is Ida. I'll pass the other question to Jen, our CFO, but a bit on the Centimeters, the drop in revenue was because one is, on BB is because of the rig, but we do expect that this is going to recover because of the traffic, the 4 g traffic that is supposed to be coming in. We expect for it to be coming in by the end of the second quarter. With the new traffic coming in, we expect the revenue will be increased from what it is today. It may not reach the level that it was in the in the previous year, but it is something that we see a positive traffic come up, from this. Yeah. I'm going to pass to Jen to talk about the rest of the costs that appear in the 94% drop. So the 6 I'll answer the first part, which is in terms of the service revenue drop of 94,000,000. There are 2 parts to it. The first part as we have explained earlier is regarding the domestic roaming, which is the, the charges that we actually charged to, TM for BP portion of the traffic. The second part of it is actually mainly derived from the regulated termination rate, which has actually dropped from 2.92to1.96, effectively, it's close to about maybe 30%. So the drop of 94 million, the first part of 60,000,000 is coming from wholesale. The remaining will be coming from the, mobile termination rate. The second question that we you have is, I mean, the third question that you have in terms of the 1 off LTE expansion cost you know, when as you see, the top coverage, the key top coverage that we have, we actually increased quite a bit in the last couple of quarters. So there are certain one off expenses that we need to incur, to actually do the expansion. So this quarter, in quarter 1, we have actually got to maybe 35,000,000 worth of 1 off expense, and we think that it will be a bit more that it will come in in quarter 2, then thereafter it should stabilize. In terms of the stock cost, the bottom one number is actually, you know, will reflect more or less the run rate that we going to have going forward. But it will be more or less there, but I wouldn't say that is the runway, but I think that's going to be a bit hard a bit we we have got a one time reversal in quarter 1, but that will offset with some of the headcount is going to be going away because some of them are still in the company until the first half of the year. So more it will be more than that, but, you know, longer run, we should see that the, run rate should see maybe even be a bit lower compared to what you're actually seeing in Q1. Yes. Again, maybe I just a follow-up question, regarding the LTE network expansion, just to clarify, yeah, meaning to say that the, some of these costs were incurred in a couple of quarters ago, but that is all being recognized in bulk in 1Q, is it? Is that what you're saying? A little bit of that will be a portion of that will be in relation to the previous quarters to be fair, but that's also quite a chunky part, which is actually relating to the current process. Okay. So the 35,000,000, you you said that, you you might do see some, one off, network cost in the second quarter. But after that, we should see a reduction in the network cost, sir. Because the one off should actually go in turn after. Okay. On a first question, Doctor. Hans would be answering the question. Thanks for the question. As you know, just We've already moved in the 4th quarter. And since then on the voice side, we've seen 2 rounds of price reduction. Communicating in the market, tariff structures, changing moving the direction of near unlimited voice this data portal. If you look at this package construct, we will see that voice tells take an update of close to the antibodies. I think on a revenue per unit basis, thanks to Paul. I would say that change took place in 2 rounds Q4 and Q1, but it appears that, in Q2 and going forward, that could become steadily difficult. We have, hit the bottom so to speak. On the data side, that's significant, 44% on a packaged basis and around 70% due to the regulator bringing down the payout ratio rate, mandatory bringing down the payout ratio rate to 30, 10 something designs. So the overall impacts here in the contract, are full paid, all customers who have an article of 300 rupees or less. We would see revenue stability, but, the portion is for the higher segments who would downgrade, to the fact of around 350 per month. So overall, the pressure on revenue, I would say, the elasticity impacts are coming in as well as we see in the 45% range relative to what it would have been otherwise. Thank you. Your next question comes from Srini Rao from Deutsche Bank. Please go ahead. I have a couple of questions. First, I just want to, you know, understand the MFRS 16 impact, because there's a bit of a change in how you have reported. It seems to me, and correct me if I'm wrong, but the maximum impact seems to be for cellcom and Ruby, that's that's number 1. Is that, is that a fair understanding of that? And secondly, if the MFRS impact is such that now the depreciation number from a cash flow perspective has a Actually, it's not a non cash item completely anymore. So is that again a fair understanding of of the IFRS 16 impact? That's my first question. The second question is, I know you have indicated the MTR impact is it is it fair to say that that it was net negative at the EBITDA level based on the based on the, you know, disclosures which you have given for Cellcom? Those are my questions. I'll come back from here. One, and I can also answer the second one. First one, the MSRS impact is increased EBITDA by around $250,000,000 and reduction in, depreciation or sorry, your increase in deposition by around $235,000,000 kind of, at EBIT level, not that kind of impact of MFRS. But there is no new finance cost comes in because this is classified as finance lease, which is around $50,000,000. So net net, we have a negative impact on the profit by around 3,000,000 dollars, $17,000,000 and post tax, $17,000,000 negative impact. So At the Pottami level, it's not that big, but it does impact the profit line as well as the EBITDA line and the disposition this does not have any impact on the cash as such, but, yes, one can argue when one look at the OCF number, you typically do the EBITDA minus CapEx minus interest and Now you eliminate the depreciation item, which is which could effectively show the cash flow numbers higher So I think one has to be adjusting for that because this is really just an accounting EBITDA increase. It's not a cash related EBITDA improvement. On the NTR, Jennifer? Okay. The MTR, well, if you look at the impact in terms of revenue, yes, there's impact in terms of revenue, but at the same time, That's also impact in terms of the call. So net net for EBITDA is almost neutral. Understood. K. Thank you. If I can if I can Okay. Your next question comes from from Macquarie. Please go ahead. Hi. Thank you for the opportunity. A few questions from me please. Firstly, on Salcom. You know, if we could could I just get an appreciation of, do you think that the issue with Cellcom is one of revenues or costs because in the absence of market growth, which I suppose we'll have to take as a given, then, you know, obviously, that cost line is where we seem to be having issues relative your peers, which explains the big EBITDA margin gap to your peers. What needs to be done and how long do you think this process is going to take, you know, and do you think that the ongoing, you know, the the potential merger with Digi essentially means that everything gets put on a back burner until the merger actually takes place before we actually go and clean things up. That's one. And the second one is a bit more macro, you know, with all these restrictions on Huawei, how has that impacted your network planning, etcetera, across the group? And what do you think it means for your CapEx trajectory going forward? Thank you. That information on 1, the artist costs, costs, costs. I think revenue wise, we know what we're doing. I think minus the monthly or weekly hiccup, you know, Lloyd, I think we are on the right track. But I think costs are MSSE it's something that we have to work very hard. And, with regards to the merger, I think we, but inside merger, I think what we said quarter or so next year. It's too late. We have to do a lot now rather than that. So, Jennifer, you want to elaborate? Yeah. I think in terms of revenue, we know that this first quarter that that, you know, we we see a major shift mainly because of the, termination rate. So that will actually affect the whole core industry. And on the same note, because once we actually reduced the revenue, we also reduced the cost of net net EBITDA, but it should be more or less neutral. Yeah. We understand that there is another portion between which, you know, the wholesale revenue, it will go all the way down in terms of profit. We have actually made certain, you know, we have actually we are still in negotiations with, Tian at the same, currently before we actually closed the deal. The thing is that, well, until we have actually completed the deal, we should be able to see some increase in terms of traffic that, even explained this out to actually notify some of the impact in terms of the change in rates from, PM. So in terms of, the other question, which is not not like, you know, the core revenue, that that is the that is the portion that has got a lot of impact to the revenue. Having said that, but for the core revenue in terms of postpaid and prepaid, we see there's pretty good traction in terms of postpaid. Postpaid, we have been continuously growing and if you look at this quarter, that's that's pretty, you know, is quite a good growth in terms of postpaid. Having said that, the revenue in terms of prepaid because this is a shorter quarter in quarter 1. We see a slight decline at the same time. We also see some migration in terms of prepaid to put it in that effect. Yes, we we do agree with you. Revenue is one side of the thing. Cost is something that we need to address. We know we know that there's a couple of areas that we're actually focusing on to actually reduce the cost. The main one, I think if you look at the last 2 quarters, what we have actually done is that we have done some how how should I think, you know, for more than 3 separation schemes, with the employees. And we start to see if that the staff cost is starting to decline in that effect. That is one of the major difference between us as compared to the competition. The second piece that we are also working on is that, you know, this topic is actually quite a difficult process for us to actually show the results of the some of the work that we are actually doing because of the one off network costs that's coming, we knew that our network costs are compared to the competition. We are still a lot higher And hence, we are actually putting a lot of focus in terms of better this quarter, what we have done quite a tad bit in terms of reducing the cost, the one off cost one off charge for the LTE expansion is kind of like, nullifies the impact of the cost savings that we have actually done over the last couple of quarters. We are actually very conscious of that in terms of cost and that there's a lot more that we actually have, initiatives that we actually have in, in, on our list for the special execute this year. Thanks, Jennifer. Sorry. Yeah. So just just to, you know sorry. I'm gonna put you on the spot here, but, let's assume the fact that because E.co takes away a fair amount of, or adds a fair amount of cost to Cellcom, which the other operators don't have. And, you know, I'm sure that various other costs that are lumped on at the Cellcom level in these numbers But if let's say, our baseline should be an EBITDA margin of 35% versus on a pre MFR 16 basis, you know, we're quite a distance from that. How long do you think it will take for us to narrow that gap? I think in the last couple of briefing that we had, we had a program, a previous program for us to actually close the gap. I wouldn't say that we were mentioned highly, but that's a program that we have in place, of close to about maybe 900,000,000 OpEx plus CapEx to actually look at the network. I think that's a previous program to actually close the gap, in the effect of I can't remember what the the the the amount is about 9, 900,000,000. All right. Okay. Thank you. And on Yeah. 3 mile answer on your the third question, which was on the Huawei. I think, first of all, I mean, we believe in after talking to the other operators, many of them, it's more a geopolitical issue, related to the trade war. We also, I mean, there's no clear indication that there's a real security issue, but there's obviously vulnerability, which we all understand, and consequent to the the issues which has been currently discussed in various spaces, I think 5G security is still being questioned. So I mean, we are not We are not there on 5G at this point in time. From our perspective, at this point in time, there's no real change in CapEx plan. We also understand that the new, new legislation from in U. S. Puts them into the entity list and the difference between the entity list and what was expected earlier. Is that entity list is more on purchase, which means they cannot purchase from any U. S. Companies unless they have a license obtained, but our understanding on talking to Huawei at various levels that they have sufficient stocks of spares and equipments to supply to us. We've also been closely working with Huawei as well as internally on doing a business continuity, planning, which is basically looking at each and every component of our network and identifying which of those components have U. S. Confidence in it. And we do not see, much of it on the on the core network side where we do see potential issues are on the, on the BSS or OSS. And that's where we are working on different options, going forward We are also actively now pursuing which may have been done on a slower pace is looking at, moving to a virtual, core network, which does allow us much more greater flexibility than depending on Huawei on the, core network, so I think this is clear plan being done, Deborah, But at this point in time, there is no real impact on our CapEx prediction. Yes. Thank you, country. Thanks. Oh, yes. My that that that's fine. Thank you. So your voice is breaking. Great. Oh, really? My best friend is finished answering the question. Yes. Thank you. We will now take our next question from Alex Goe from AM Bank. Please go ahead. Thank you for the opportunity. I have one question on Salkom. It's regarding your postpaid So, Alex, can you hold on again? I think the problem will be on our side now. We can't hear you. Of Prem. Sorry? Hello. Can you hear that sign up? Yeah, the line is quite sad. We can't hear a friend just now towards the end. Now we can't hear you. In the moderator, can you speak so that we know where the problem is? Yeah. Can everybody just speak and say something? Yes. Bear with me for just one moment as we try to reestablish a better connection. One moment, please. It's a delay on, we can't hear you. Hello? Can you hear me? Please bear with me for just one moment as we try to fix the issue. Yes. Hang on. Yeah. Ladies and gentlemen, please standby as we reestablish the connection with the main speaker, Mr. Go, you may proceed with the question once they're connected again. Thank you. Okay. Please go ahead. The lines are open. We were in the process of taking a question from Mr. Alex Go from AM Bank. Okay. Thank you so much. Yeah, I have two questions. One is on Cellcom. I've noticed your postpaid subscribers, if I were to compare from the fourth quarter of last year to this quarter, 1st quarter, it has actually declined by 10,000. I just wanted to and that has come after the previous 4th quarters of increase. I'm just wondering, has the trajectory for the postpaid segment, has it turned around? I mean, in a sense that, that has a competition reached such a point where your traction of gaining new subscribers have, is tapering off? That's my first question. The other question is regarding the merger with Telenor, Asia, I I appreciate the fact that that it's difficult for you to give gravity at this point in time, but is there a possibility that, you may need to go on a dual brand strategy like Excel situation. And you may could you also need to give up some of the spectrum? Okay. So it's fine. I'll take that out of this one. I did. I'm here. Yeah, we see a slight dip on the first quarter, but I wouldn't call it as a as a trend because what we did was we in the first quarter of this year, we slowed down a little bit in terms of, selling the devices for the postpaid. So we also saw a for a shorter quarter, yeah, shorter number of days. We were very aggressive also in the 4th quarter last year. So it is not a trend and we we foresee like in the 2nd quarter, this is coming back in terms of postpaid. Even though the subscriber has gone down, but our postpaid revenue has actually increased. By about 7%, yes. Okay. On the second question, well, yeah, it's very premature to mention anything about door panel whatsoever. We have not even had discussion or detailed discussion with the dollar sign, but, we will be looking at that as a possible scenario. And also one brand of scenarios. So what will be in contention from an execution perspective In terms of spectrum, yes, I think too early to say too. We believe we have a case to say that in terms of per bank accounts, further But, for such a driver, we are still low. In fact, but then again, we are too committed to command beyond that. Sorry about that. Just come, yeah. Just go back on the postpaid segment for Salcom. I understand that your revenue has got it, but does that mean the the reduction in some of your postpaid numbers in this first quarter? Was it due to some legacy numbers that are that are not performing. That's why your revenue was able to grow. I think Okay. Yeah. Well, we have some legacy plans. Also, we were also seeing the churn has gone out also more from the low ARPU customers. What I didn't mention earlier is also include some of those really low ARPU in terms of the M2M postpaid devices that was in our services. So that's why you see a decline in terms of number of subscriber number of users, but that's why you see also the increase in overall revenue. I see. Okay, great. Thank you so much. Your next question comes from Ranjan Sharma from JPMorgan. Please go ahead. Hi, good evening and thank you for the presentation. Just one question from my side. Coming back to the Huawei question and the impact on network rollout and architecture, because of US putting Huawei on an entity list, Does that have any implication, whatsoever on your merger plans with Telenor? Because of the way the networks might have been formed or the partnerships with Huawei. Thank you. No, no bearing whatsoever in our merger. We'll tell you now, actually. It's not even in the consideration. Thank We will now take our next question from Serena Raul from Deutsche Bank. Please go ahead. I just wanted to ask, on on specific markets, actually. First, you know, if I can start with Robi, you know, where you mentioned that in this quarter's potential tipping point, could you, could you actually suggest what? I mean, is it are you seeing revenue share gains? And from what I can see, it probably has come from the number 3 player. So correct me if that's if that's wrong. And and again, some commentary on the competitive landscape in Bangladesh would be helpful. Secondly, on Excel, I mean, at least seems that Excel has kind of reached some level of an EBITDA, which is, you know, higher than what it has shown, the trend rate over the last, kind of, almost 3, 4 years. So any kind of feedback on on on the Indonesian competitive environment also will be useful. Thanks. Okay. The competitive landscape in the first quarter came in characteristic in difference from previous quarters was Hobe's, very efficient customer acquisition strategy, which resulted in a reduction in customer acquisition costs and elevation of EBITDA. In terms of revenue market share gains equals measured for both GP and And you're correct that, on a year on year basis, it was at the cost of, the 3rd year. But we've seen that they are being quite aggressive towards the end of the last call. Okay. Are they on a second question? Yes, I think, XL, Trinity performance has been the goal that you're right. I mean, we are going on the, much, much higher EBITDA level. And I think this loan is so, consequent to some of the cost initiatives, which they run. But to say that, there will be some impact coming on the new managed service, which will kick in and in our quarter 2, with Huawei, which will have some negative impact. However, I think we also now seeing some uptake on revenues ex Java actually translating into the improvement in EBITDA. So large contribution actually is coming from the fact that we are seeing a top line growth in Indonesia. Congitative landscape I think it remains still difficult. We've not seen the kind of investments, which the other operators have said they would do actually on the ground yet, but there had been far more aggression on customer acquisition by some of the operators. So I think competitive landscape still remains tough and a little bit unpredictable in Indonesia. Thanks. This is Eric. Thank you so much. As there are no further questions, at this time, we will now pass the call back to company. Please continue, sir. Thank you very much. Thanks, all of you for joining us in the first quarter results announcement. Please, as usual, if there are other further questions, we'll be so happy and so glad to respond to you through our IR organization. Thanks again, and have a good evening. This concludes today's call. Thank you for your participation. You may now disconnect.