Very good morning to all of you. Welcome to the Quarter Three results of Axiata. I think welcome not only to those who are present here and also to those who are joining us in this call through online access, which we've provided. Usual disclaimer, I don't go through the details on the disclaimer. Let me straight away jump onto the results of Quarter Three. I think these are basically the reported numbers. These have had a significant impact coming on account of elements like the MFRS, Forex, and Idea impact which we saw in Quarter Two, when we actually deconsolidated the Idea results from Axiata. I think the good news is on a sequential basis, we've done better. We've seen a growth in revenue as well as in EBITDA. EBITDA growth has been faster than growth in revenue.
However, we continue to be impacted on the profit line because of higher depreciation and interest costs. Some of our markets have been impacted because of the increased interest rates on borrowings during this year compared to the last year. I think this is important, which is the underlying performance of Axiata. If you look at the underlying performance, I think 2.5% growth in revenue, 1.9% growth in revenue during the quarter. This is after adjustments of MFRS, adjustment on account of the Idea impact. Adjustments on account of Forex implication. We've had a 9% impact on Forex during the year, which is basically on translation from the operating currencies we have versus MYR. Good news is that we've seen a positive development on the EBITDA numbers on a sequential basis, +4.3% growth in EBITDA.
When it comes to revenue, most of the markets actually outperformed their industry. We've seen a 4.2% growth in revenue during the year. We've also seen on a year-to-date basis, growth in EBITDA. If I adjust for the elements like the ELP. ELP has been the voluntary separation scheme which we carried out during the Quarter Three in Celcom. If I adjust to that, we've seen a positive EBITDA growth compared to the revenue growth. Cost initiatives, if you recall last year we did say that we would take out MYR 5 billion over the five-year period. I think we've been tracking pretty much in line with what we had said, and we'll go through some details later on. PATAMI for us has been impacted largely on account of increased depreciation. The effect of some of the investments on networks which we've made over the last couple of years.
While we are seeing positive effect of those investments in the top line, we do see an impact on our profits coming out of higher depreciation and also on the interest rates. Three of our markets did see interest rates going up during the year so far. We've seen the increase in interest rates in Bangladesh moving up from 6% to nearly 11%. We've seen interest rates increase in Indonesia, which moved up from 8% to 10%. We saw interest rates moving up in Sri Lanka. That's been the impact on account of interest rates and also the increased investments, which we did say earlier in the year that we would invest in three of our core digital businesses which has been increased investments compared to the last year.
However, as I say, balance sheet, given the turmoil in the market and on account of Forex, on account of interest rates, we still maintain our balance sheet fairly strong at gross debt to EBITDA of 2.34. We have around half of that in US dollar and half being hedged. We've been moving slowly and steadily into fixed interest rates. 67% of our debt is now on fixed interest rates. This does have a short-term impact on our borrowing cost, but long term, we believe given the uncertainty around the interest rates environment, this is the right strategy. Let me explain the movement in profits from last year to this year as is quarter-on-quarter. As I said, while there's been an improvement on EBITDA, most of it has been actually taken away by increased depreciation, increased investments on new businesses, and finance cost.
If you look at quarter-on-quarter, the one on the right-hand side, you would see that the margin improvement around 1.6% during the quarter has been consequent to increased EBITDA margins coming across most of the OpCos for us. Let me go through each of the OpCos and how they have performed. I think Celcom has done well when it comes to the top-line growth. We've seen 2.1% growth in revenue coming from both prepaid as well as postpaid. In fact, last quarter was much better for postpaid than we've seen in the earlier periods. We've also seen our strategy of high-value customer focus bringing from increased network positioning, showing improvement in ARPU both on postpaid as well as prepaid customers. Year-to-date revenue, we've seen a 3% growth.
EBITDA, however, has been lower, mainly coming because of the one-time impact on the VSS, which we carried out, and also on account of some of the propositions in the earlier part of the year, which we gave to drive a much higher IDD and migrant population on our network. Last year, we had this one-off gain, which was the sale of 11street, but that was more internal because that was sold from Celcom into the Axiata portfolio, and also on account of higher D&A charges. I think cost has been an issue for us in Celcom, and EBITDA margin has been impacted because of some of the one-off costs, which I explained earlier. The management in Celcom continues to focus on cost optimization. In fact, that's one of the main areas of focus for us going forward in Celcom.
We've seen some improvements happening on the subscriber acquisition cost and sales and marketing cost, but there's a long way to go. As far as the coverage is concerned, we have reached 90% LTE coverage as at the end of quarter three 2018. XL, I think this year everyone knows has been a year of a lot of ups and down in Indonesian market. This year happens to be after a significantly good year for us in 2017. The impact of SIM registration has been across the industry. I must say, XL relatively did much better than any of the other operators in this space when it came to the process of SIM registration. The strategy of transformation which we had put in place around 2016 has been working well for XL. We've been focusing on three specific areas in XL.
One is being the data leader, second is building on two brands which we have, third is expanding our footprint outside Java into the non-Java area. All this has yielded in terms of improved performance relative to the market. We still need to see the post-impact of SIM registration really falling in place. As far as the footprint is concerned, I think we've been expanding ourselves with 4G. We've got 116,000 BTS, most of it going into the 4G space. As far as the revenue is concerned, I think we've had a slight growth. I think the only company amongst the large operators showing a year-on-year growth, marginally lower on EBITDA on a year-to-date basis. The impact of interest rates and the depreciation coming out of the higher investments we've made on network expansion, resulting in profits being lower.
Dialog, by far the best performing asset of ours at this point in time, has seen a solid performance on a year-to-date basis on all parameters, all lines of businesses. Revenue has grown 15.6%, EBITDA 18.9%. Profits have been marginally lower, mainly coming out of the Forex impact. You would have seen how the Sri Lankan rupee has been depreciating, also the interest cost, which I talked about earlier. If I adjust for these Forex, we've seen a PAT improvement of 21% in Sri Lanka. As I said, I think we've been firing in all lines of businesses in Dialog, with mobile growing 13.7%, fixed business growing 33.5%, pay TV business growing at 8.4%. While the mobile revenue growth has been solid, we've been recently impacted because of the decline in the removal of the floor rates on voice.
That, I think, is something which we have to watch out going forward. Fixed revenue has been growing well and has been compensating very well to the loss which we've seen on the mobile side consequent to the removal of the floor rates. In terms of population coverage, 54% on 4G and 59% on fixed. There's still a lot of scope in terms of footprint expansion and taking a data leadership in that market. Robi, I think, starting with the merger which we have had with Airtel in 2016, Robi's been expanding very well and has been doing exceptionally well in the market space with a service revenue growth of 9.1% and EBITDA growth of 31%. Yes, EBITDA comes from a much lower base, but we've seen a significant improvement on the EBITDA margins.
Airtel, which we acquired, is now turned positive in terms of the EBITDA margins for us. PAT has been impacted, mainly coming out of the Forex as well as the interest cost increase. Yes, last quarter, we did see one-off gain from the transfer of 20% stake from Robi for the tower business to edotco. The EBITDA margins continue to be strong because of lower devices as well as reduction in interconnect charges. We've seen some positive effect of removal of the introduction of the unified floor rates in Bangladesh. Over time, that effect has been narrowed down because of the impact of elasticity of voice usage in the market space. Overall, Robi's performance has been in line with our expectation, in fact, better there.
Ncell, we were aware of the ILD revenue, which will come down, but I think good to say that Ncell continues to hold their EBITDA margins despite a reduction of around 15.5% on ILD revenue, which does contribute on nearly 96% of margins. 96% EBITDA margins. Despite that, they have been holding their EBITDA margin at 63%. Year to date, revenue's been at 2.2%, mainly impacted by the loss of 15.5% drop in ILD revenue, but compensated well with core revenue growth. EBITDA, marginally lower. Again, as I said, on account of ILD, which does contribute a significant EBITDA margin, and that flows down to the profit line for the year to date. Last year, we had one-off prior period impact of MYR 1.3 billion, which has been, when you compare on a year-to-date basis, impacted.
As far as the market is concerned, we've seen some impact which is coming out of the new charges which have been introduced in Nepal, which is telecom service charges. You may know that the telecom service charge has been introduced on data at 13% and on voice has been increased from 11% to 13%. That's had some impact on the quarter, with revenue declining at 5.6% and EBITDA declining at 3.7%. Data revenue accounts for 23% of total revenue. We see a big opportunity in Nepal as we continue rolling out our 4G across the country. Sorry. Smart. We've seen some easing out of the pricing pressure, or price war, as we call in Cambodia. That has an impact on a positive development on revenue at 3.4%, and the data growing at 22%, and 60% of our revenue now comes from data.
There's been a fair amount of data consumption improvement in Cambodia. We do see stabilization of prices in that market. EBITDA grew at 0.7%. Part of impact has been increase on regulatory charges on account of the revenue share, which has increased from 2% to 4% to 4% to 7%. Quarter-on-quarter, revenue grew 2.6%, EBITDA 8%, and PAT 8.6%, so fairly strong quarter performance coming out of Smart. edotco. It contributes nearly 8% of our revenue and EBITDA. Has had a solid performance on revenue development at 13.5%. EBITDA has been impacted on account of some of the adjustments made on the service agreements as well as on account of some of the spends which we had incurred on the M&A activities. However, PAT continues to do very well at 18.3%.
edotco has 17,800 towers, which is a 8.5% year-on-year growth and tenancy continues to be strong, increased from 1.5x-1.62x in quarter three to 2018. Digital businesses. We've seen some investments going into digital businesses. I think all of them have been doing well. Specifically, Boost in Malaysia has been doing extremely well with 3.28 million users registered and more than 50,000 merchants using Boost app. In terms of core business, the three verticals, we've invested MYR 207 million, pretty much in line with what we said at the beginning of the year. We've also been looking at rationalizing our non-core assets. The focus has been on these three verticals, which is the mobile financial service, the platform business, and the digital marketing business.
M1, I think despite whatever is happening in that market space, M1 continues to do well when it comes to the top line growth, as well as managing to hold well on the margins and EBITDA. We do get significant contribution coming from M1 on our results. Last but not the least, I think Idea. We all know what's happening in that market space, but I think the good news is quarter three was the last quarter for us with any P&L impact because as you know, on 16th of August, we did deconsolidate the Idea investments and whatever was the impact on account of one-off write-off or impairment was taken in the books in quarter two. Going forward, the only impact which will come is on the fair value adjustment, which will go through the balance sheet and not through the P&L account.
Coming to capital expenditure, I think in line with what we stated earlier, intensity of 24%. Good investments going into Celcom, improving the network position in this market space. Also going into the other opcos, as well as edotco, which is actually others here. edotco investment is largely linked to the new towers build, which would have a significant flow of revenues and profits, going forward. As far as cash flow is concerned, one of the key focus areas for us, we continue to have a positive operating free cash flow, ensuring that our balance sheet remains solid. As far as the financial position is concerned, as I said, gross debt to EBITDA at 2.34x, largely impacted because of the translation of EBITDA from the operating currencies into MYR.
If I adjust for that, the gross debt to EBITDA is 2.11, which is pretty much what we would like to have below 2.5x. As I said earlier, I think we continue to be focused on ensuring a good balance between hedged and unhedged portfolio, as well as focused around moving from to fixed interest. As far as the balance sheet is concerned, I think fairly strong and fairly stable balance sheet for us, and I think that's extremely important given the current environment and macro environment which we are working with. We last quarter adjusted our KPIs by taking out the ODAR, which we know we did not go ahead with. If I take those adjusted KPIs, I think we are pretty much in line with the KPIs in terms of our guidance for this year. Revenue is pretty much in line.
EBITDA is marginally below, but that's mainly coming out of on account of the ELP or the voluntary separation scheme, which we've carried out in Celcom. Also the ROIC, pretty much in line if I had to adjust for the losses from Idea, which we took into account. Overall, the guidance against the KPIs, we're still holding what we said at the beginning of the year. That's it from me. Clare?
Thank you, Vivek. That concludes the presentation, and I think this will be followed by a Q&A session. There will be mobile mics on the left and right side of the floor, feel free to raise your hand. State your name and organization before you ask the questions, please. Can we also please invite the rest of the Axiata Group team to join Vivek on stage now for Q&A? Axiata CEO Tan Sri Jamaludin Ibrahim. We also would like to invite Celcom CEO Idham Nawawi, Celcom CFO Jennifer Wong, XL CFO Mohamed Adlan and XL CMO Allan Bonke to join Vivek on stage. I'm sending apologies on behalf of Dr. Hans Wijayasuriya, as I understand that his flight from Colombo is delayed coming into KL this morning. We do have about 10 participants on Skype.
We will take questions from the floor first, and if there's any questions coming through Skype, we will proceed for the Skype questions later. We will open the floor for Q&A. Please put up your hands and the mics will come.
Hi. Morning. My name is Prem from Macquarie. Two questions from me. Firstly, with regards to the Malaysian mobile market and Celcom's performance, do we think that the price situation has stabilized in the market, and that we at least can look forward to some form of growth in the marketplace for mobiles over the next couple of years? Or is that situation still very fragile, and should we be expecting further price declines and profit declines here? Secondly, also along the same track for XL Axiata, it appears that you seem to be doing well outside of Java, and I suppose the market was very disappointed with the lack of stronger growth at XL given that market pricing was seen to be in repair. If you could talk about what the opportunities are, and what do you think will placate the market with regards to those growth expectations?
Thank you.
Thank you, Prem. First, good morning to all of you. Thank you for coming over to our investors analyst day.
As you can see, we have the whole lineup here to answer the questions. I'm going to pass to Idham to answer your first question and Adlan or Allan to answer the second question. Let me proceed still with Idham. Idham, could you answer the first question? Don't take away my mic.
Good morning, everyone. It's my first question for the first appearance for the analyst briefing. Thank you for the question. Number one, yes, in terms of do we see a price stabilization? I'm going to get some support from Jennifer as well. In the past 18 months or 24 months, yes, you're right. We have seen the price erosion, right, in terms of Especially on the data yield. We also have seen at the same time that the volume or utilization has increased significantly. That kind of compensate for the loss in terms of due to the rate decline. What we're doing in terms of strategy internally for us, what we've been focusing on the high-value customers, where you see that the high-value customers that we're targeting has gone up by about MYR 5, right? That is something that our strategy is working.
Whether the market will see a further erosion, that is something that we honestly can't really predict at this point in time. You see there's some changes in terms of the regulatory regime, regulatory environment. So far, it's been very much on the fixed broadband side. We do hope that with the things that's been happening in the market on the mobile space, where we're talking about the competition itself, has taken care of the price competitiveness in the market. We hope we don't see similar intervention. Yeah. Jennifer?
Just to reiterate what Idham has actually said. We have seen that the mobile market, essentially, the price package, at least for the market, has not moved that much, as compared to the fixed lines. In that sense, I think the market is actually more rationalized and more sensible in the sense that we do not just price down for the sake of pricing down. Everyone held on to the price point that we have. There's one competitor who has actually launched something more competitive, but I think in essence, the rest of the market has not changed. In that sense, I think the Malaysian market has been quite sensible in that sense, at least for the post-paid market.
Thank you and good morning, and thank you for the question. Regarding XL and the growth both in Java and ex-Java. 2018 was a very special year. You all know that the introduction of SIM registration process, there was a lot of uncertainties about what's going to actually happen in Indonesia. I think your wording with the question was actually lack of growth in XL. We are actually very happy with the growth. It seems like that we're going to be the only telecom company in Indonesia who will actually have positive growth in 2018, as our competitor look in a negative way. Ex-Java, we still see that this is a single-player market almost. We see that the incumbents getting 70%-80% of the revenue outside Java.
We also see that there is a higher ARPU outside Java than Java. With the rollout that we have been doing in 2018 and with the double-digit growth, which we'll come back later on our presentation, we still see potential growth outside Java. Our main strategy is still to roll out network outside Java to compete, but at the same time also be very aggressive to be able to attract customer outside Java. Thank you.
I see Dr. Hans walking into the ballroom. Could you please join us on stage for the Q&A session on the third quarter results? Thanks, Dr. Hans.
Has that answered your question, Frank? There's another question here.
Good morning. Foong from CIMB. Thank you so much for the presentation. On the third quarter results, I have two questions, mainly for Celcom. Continues to be pretty solid. Looking at ARPU trending upwards. What I want to understand here is how much do you think, in terms of room for that to continue to grow going forward, given that it's already quite close to where the market leader is? Are we doing a fair bit on shared lines as well? Because we don't see any sort of dilution on ARPU there. On the prepaid side, could you help us understand why the prepaid subscriber numbers were rather weak in the quarter? Was that due to competition, or was that due to any sort of cleanup exercise? Second question regarding the ELP program. What was the one-off charge in the third quarter?
How many employees actually participated in the program? Otherwise, if you could tell us the number of staff you have after that program, that would be helpful. Going forward, where do you see your staff numbers or where do you think an efficient staff number would be in the next few years? Those are my two questions. Thank you.
In terms of the postpaid numbers, whether they are true, we think that is going to trend up or not. I think there's still a little bit more to actually push because at the end of the day, if we say MYR 1 or MYR 2, especially in terms of subscription of value-added services, is actually not impossible. We feel that there's still room. If we were to compare with the competition, yes, we are actually inching up, but I think there's still some gap or some room for us to actually improve in terms of the postpaid numbers. Having said that, I think the main push for us going forward is not just in terms of pushing the ARPU. That's why when you actually see the way we have actually pushed our ARPU, we don't push for one time up, but it's actually inching MYR 1, MYR 2, every quarter.
That's our game plan. We are not actually going out to increase like MYR 5, MYR 6 in one go, but the way we have actually moved is actually inching up. In terms of prepaid numbers. The number of subs has actually come down in Q3, mainly because in Q2, we have quite a good take-up. We have a push in terms of numbers because of the election. During the election, we had quite a number of subscribers who actually subscribed for a short time, and those numbers have actually churned out in Q3. Having said that, I think the numbers going forward should have more or less rationalized in that sense. The ELP amount that we have actually charged out in Q3 is slightly north of MYR 50 million for now. The number that we have actually put in is the number that has been offered and accepted.
The exercise is still ongoing until the end of the year. The efficient number that we are actually looking at is quite close to what the competition is at the moment. We think that we're going to shed maybe about 20% of the resources that we actually have at the moment.
If I may before we go to the next question, I wanted to answer from a broader perspective on both the Celcom postpaid and prepaid and then the ELP. On the Celcom postpaid and prepaid, I think that's the biggest strategy that we have been saying for the last two years, that we did not execute as well, but the last two years we have executed reasonably well, is the ability to go for the higher-end subscriber base. Higher end, more value, higher value customers. We have improved our network distribution, customer experience, and many aspects of our businesses. That has resulted in our ability to gain the share of the higher value customers. If you look at the ARPU for postpaid and prepaid in 2017 and year to date 2018, it has increased consistently for both cases.
Maybe you have less customers, but certainly from an ARPU perspective and revenue perspective, it has improved. That's the broader strategy. On ELP, there's also a broader strategy, which I'm going to talk about later on from a broader perspective across the group. That's something to do with us getting more efficient as a company across the group and especially at Celcom. Just to qualify the two programs, one has been announced and completed, right? The second program, which was announced on Friday, should be completed by end of the year. This is a massive program to improve significantly the efficiency of Celcom from a staff population, but also from sheer productivity. It's a big program, and I think I'll talk about it later on from a bigger perspective.
Suffice it to say at this point that the financial gain, the cost will be more than MYR 50 million this year. The first phase, MYR 50 million, and the second phase will be perhaps a portion of that. The benefit will be to the tune of MYR 50 million-MYR 100 million from 2019 onwards.
Hi, this is Wei Shu from BNP. Two questions. As we have seen, there are many factors impacting the net profit for Axiata, and in fact, there are also many ways you can define what is normalized PATAMI. What should we be looking at when we are thinking about the dividend payout for the company? Which normalized PATAMI should we be looking at? Is the intention still to increase the payout back to 2015 levels in 2018? Related to that, what other financial matrices does the company look at internally to determine the dividend payout? Secondly, FX and interest rates have been impacting the company, and I think given current circumstances, will continue to be an issue in the years ahead. Vivek has shared very briefly some of the initiatives that you are taking.
Can you provide a little bit more detail as to what the initiatives are to manage FX and interest rates going forward? Thank you.
Let me start with the first one on dividend, question on dividend. I think the intention is to go back to the levels of 2015, which is what we did say when we moved into 2017, that the plan is to have, in a way, a moratorium because we were investing heavily on the CapEx in some of the markets for two years, and then we will go back to 2015 levels of dividend. I think that still holds as a plan. In fact, if you look at the
Payout which we did in the interim dividend was pretty much in line with what used to be in 2015 levels. That intention still stays, so there's no change in that particular plan. As far as the consideration which we have is, of course, what is the normalized profit. When we looked at normalized profit is the number which I displayed on the screen. If you look at what that normalized is, because there are some items which are standard items which we normalize. For example, Forex or could be PPA impact or some of those elements, or one-off write-offs on account of digital divestments of investments, et cetera. Those are the numbers which I presented are the normalized numbers, which we will look at when we actually decide on the dividend payout ratio.
I think the other elements we do look at is overall the shareholder return. If dividend is an element of the shareholder return, we would look at that as well as we will also look at if there are opportunities of growth, which require investments coming in. How do we balance between the two at every point in time. As I speak, I think the intention is still to go back to the levels of 2015, for 2018 dividend, and we would like to keep that level at least, going forward. Your last question on the Forex, I think couple of things we've been doing. One is, we have more or less, in our operating countries, moved out of Forex loans. It's mostly borrowings is in local. If you look at other than the group, we have Forex borrowings in Indonesia.
We have some small borrowings in Bangladesh and in Sri Lanka. Indonesia, we would be out of the Forex borrowing by the end of this year. Which means the entire borrowing in Indonesia would be local borrowing. As far as the Bangladesh is concerned, it is small amount. Plan is to be, as much as possible, look at local borrowing. Fair to say liquidity in some of these markets are not so strong that it's not always easy to get good long-term local borrowing. Similar situation is in Sri Lanka. We would like to go more to local. Given liquidity situation, we do balance between local and foreign borrowing. I think in Sri Lanka, we do have some inflows coming in USD revenue through the termination rate termination, so that does give some kind of a cushion for us on the USD borrowing.
The second thing which we've been doing is moving as much as possible on fixed interest. For example, the group loans are on fixed interest and more or less to fixed till the maturity. In some of the other markets, we have still a fair amount of fixed, but it may not be till maturity, but we do look at, as much as possible, given the current volatility, to move to the fixed interest. Third element where we remain little bit exposed is on the CapEx side because nearly around half of our CapEx for the entire country is on Forex, on USD CapEx. That I think is something which we are exposed to. We are in discussions with our vendors on moving that Forex CapEx either to local currency or to currencies which are less volatile given the current environment which is there.
I think these are the basic methodologies we are following to ensure we are able to manage our Forex. I am not that much worried on the translation impact, which is on account of ringgit versus the operating currency, because that does not have any cash impact. It is just translating the operating currencies into reporting currencies. I am not really worried about it. It could move in either direction at any point in time. You have seen how suddenly the Indonesian currency, which was at 15,200 to a $, has actually gone back to something like 14,500, which nobody had anticipated. In fact, when I look at our forecast or even the bankers' forecast in May versus what it is now is changing.
I am not that much worried about translation impact as such because that is non-cash, that is why our focus is lot more around underlying performance on real constant currency basis and not on the foreign. Just to summarize, I break Forex into three heads. One is translation, which is really not a concern for us. It is mainly because of the translation into local currency that it impacts. Second one is the transaction related, which is realized and unrealized. Unrealized on loans, again, I am not that much worried because we have, as I said, even if we are exposed in some of the markets, we are either covered through on the interest side, or we are covered on the hedging of the Forex side. I am not worried.
It is really about the realized Forex impact, which we are worried about, which has not been very significant for us in 2018 so far.
Thanks, Vivek. Just to clarify, when we look at the 2018 dividend payout, we should be looking at 84% of the normalized PATAMI you showed on page three of your presentation.
That's right.
Thank you.
Hello. Hi, I'm Alex from AmBank. I have two questions. My first is regarding your cost initiatives that you mentioned in your slide. You've mentioned MYR 1.3 billion savings for the first nine months versus your MYR 1.4 billion target. I'm wondering, does that mean your fourth quarter, you're only looking about MYR 100 million, and where is that coming from? Is this coming from your Celcom ELP? Incidental to that, the MYR 1.3 billion savings you've had so far, how much of that actually translated into profit reduction for that period? I'm just trying to work out the actual impact to your margins in that area. Going into next year, how would that cost initiatives continue to turn out? That's the first one. The second one is regarding your fixed broadband in Sabah.
I'm just wondering, how does your program over there jive with what the government is doing now and now with TM's effort? Also incidental to that, because of what's happening in TM and also with the management changes, is there any attempts to revisit reconsolidation?
Let me take the first question, and then I'll ask Idham or Jennifer to take the second one. MYR 1.4 billion, out of which MYR 1.3 billion we've achieved, is half-half split between CapEx saving and OpEx savings. You can say around MYR 600 million, MYR 700 million is on account of CapEx and around, say, MYR 500 million, MYR 600 million is on account of OpEx, out of which 80% would have gone into the P&L. I would not look at VSS or ELP as a saving at this point in time because that impact will flow subsequently into the next year. That's not something which is a saving at the moment for us. As far as the impact of the next quarter, you're looking at MYR 100 million. I think we look at saving, not on the basis of when is the activity being triggered. We look at savings, when does that impact flow into the P&L?
When I look at next quarter, when I say MYR 100 million, we could probably be slightly higher than what the target for MYR 1.4 billion is. It's based on not the new initiatives which have been triggered, it's based on the initiatives which have already been done, the impact of that flowing into the P&L. We don't look at saving the moment an initiative is triggered. The saving is only when it starts flowing into the P&L. If you're going to stay back for the subsequent sessions we have, I have a section on cost initiatives. I will go through more details around what we are doing during that timeframe.
On the city Sabah.
Yeah.
First is, yes, we are in compliance with what the government call for in terms of pricing. I think we have announced it earlier that we have reduced our pricing. Though it's early days, we are seeing growth coming up still in Sabah. One thing for sure, there's a lot more opportunities for us to go do better in Sabah in terms of fiberization, especially when we have, at this point in time, the most fiber in the state of Sabah compared to other players as well. This is an area that we will be looking at quite, I will use the word keenly in the next few quarters on how we grow better for the broadband in Sabah. Yeah, Asri just reminded me.
In terms of the broader picture, yes, of course, home broadband or fiber is ultimately one of, probably, the best infrastructure to provide the fixed broadband. We are also exploring other technologies as well, because other technologies has developed, not just the fiber. We're looking into in terms of fixed wireless access to the homes, now with the LTE and later with the 5G as well. We have alternative technology to get to the home. We're looking at this, not only in Sabah or Sabah and Sarawak, but we're also looking at this even in Semenanjung area. We have these services ongoing today. Today is we're riding on top of our current LTE network, LTE and LTE Advanced network, which is today already 90% and 78% in terms of population.
If the situation change, especially in terms of what the government going to do with the spectrums as well in the future, this is an opportunity where we can even be more aggressive in this area.
Thank you. On the question on consolidation, I'm afraid to say there's no change in our position. If I can just reiterate, there are many logical financial reasons why we should consider that, there are many qualitative reasons why it's going to be very hard to do that. Net-net, I do not see a change in position at this point in time.
Yes, please. Yeah.
Hi, it's Ranjan Sharma from JP Morgan. Thank you for having us. I have two broad questions. Firstly, on regulation in Malaysia, what are you hearing from MCMC in terms of pricing on the wireless side in Malaysia? If there is a focus for the regulator to actually decrease prices further, is there any scope for consolidation in the wireless space? Second question is on Indonesia. You are, of course, emphasizing your growth strategy outside of Java. How does Axiata Group think about increasing CapEx allocation for XL as a whole? Thank you.
Thank you for the question. Straight on, so far, we have not heard specifically that the regulators are asking for the price reduction in terms of wireless. We have been in discussion with the regulators, and I think we have also put out across the period over the past 24 months, if you look at the price in the wireless market, has actually been taken care of by the competition in the market, right? We've seen that. We've also been talking to regulators about it's not just about the price, but it's what can we do in order to reduce the cost to serve the customers? That we can actually help reduce the price and give a better quality to the customers, this is in terms of the policies around spectrum, the policies in terms of access to towers, the SPCs, et cetera.
It's not just about price that we've been talking about with the regulators, but it's also how do we help reduce the cost to deploy in Malaysia.
On the consolidation, I must admit that there were lots of movements, quote, unquote, in 2016. Kind of disappeared a bit in 2017 and totally disappeared in 2018. While there are, in this case, there are good valid reasons why, but from what I hoped for two years ago, it is not happening at this point in time.
As concerned, I think we've taken a call as far as the XL strategy is concerned, we are pretty supportive of that strategy of expanding outside Java. So far, we're seeing the effect of that on overall top line and also the fact that we see positive returns from some of those places coming in. We will continue to be looking at significant investments going forward on expanding network outside Java. However, fair to say that we will closely watch the return on investments coming from those markets. Also the fact that this would not be at compromise on investments elsewhere. We will continuously watch the returns from these investments, but we will support XL's investments outside Java.
Over this side. Oh, sorry. Which one first? Okay, do you mind? Yeah, please.
Hi. Srini here, Deutsche. Three questions. Specifically on the third quarter. Celcom numbers were slightly soft, if I may see on a quarter-over-quarter basis. If you can throw some light on that'll be helpful. Similarly, XL, we are seeing at least for the quarter, Telkomsel has been pretty aggressive, and they continue to have a fairly aggressive stance. In that light, you mentioned about outside Java investments. Does the balance sheet have flexibility to maintain aggression which Telkomsel seems to be showing in expanding their 4G network? Finally, on Robi, there has been a fairly significant quarter-on-quarter increase in absolute EBITDA. Any, what has happened there would be helpful. And of the MYR 700 million OpEx savings, which Vivek talked about, broadly which OpEx have we seen that happen? Those are my four questions. Thanks.
Idham, question number one?
Question one.
Jen?
The number for Q3 as compared to Q2. The numbers for Q3 as compared to Q2 in terms of revenue, our focus, as we have said earlier, in a few last couple of quarters and even in last year's same event, we said that we have always been focusing in terms of the core brand itself. If you look at the core brand, which is the postpaid and prepaid, our revenue has actually increased. If, let's say, just to answer the question why it has actually softened a little bit is because in Q2, during the election, the number was actually a bit higher, especially in terms of prepaid. After the election, we start to see the number actually come back a bit more softer in terms of prepaid. In terms of postpaid numbers, we have actually grown quite healthily in that sense.
In terms of revenue for the core brand, we think that we have actually stabilized, and in fact, we have actually improved. On the same tone, if we look at in terms of profit, if we were to normalize the number from the ELP, the answer the question?
Yeah. On the second question, if you look at Q3 numbers, yes, I think you probably have seen that Telkomsel have been pretty aggressive, especially in pushing prices up, especially for their existing customers. I think from our perspective, I think we need to see whether what they are probably doing at this point in time is probably sustainable or not. The way we look at things is, I think we look at more, that's probably more sustainable in the longer term. From a year-to-date perspective, I think we are still outperforming the industry. I think we are the only one that's probably going to achieve a flat revenue growth in the full year 2018. On expanding outside Java, I think we will continue to expand outside Java. By end of this year, I think our 4G population coverage will probably hit around 80%.
I think we'll continue that investment to probably closer the gap with the market leader to expand outside Java even to next year. I think we'll probably try to achieve closer to 90% population coverage next year. Whether we have the flexibility, the internal cash to do it, I think if you look at our debt to EBITDA today, we are probably at around 1.5 times. Definitely, there is ample room for us to scale up if need be to support this investment outside Java.
Yeah, I'll take the third question on Robi. The third quarter encompassed the Hajj festival, which is one of the largest festival in Bangladesh with the operators take the opportunity to push significant growth in RGB or revenue generating base. This actually did work very successfully for Robi, and there's a 5% RGB push, and therefore a revenue flow down of 6% QoQ. That largely gives the EBITDA bump in the third quarter.
Let me take the last one, which is the saving coming from the different markets. I think we've seen savings coming across all opcos. XL has been doing very well when it comes to renegotiating on the tower rentals, which has been giving us significant benefits coming out. We've also seen Dialog being very focused on simplification and digitization as an activity which is giving substantial saving to flow in. Large part of our savings are coming out of network elements, which we've been running as a horizontal activity across all opcos which has been helping us bring down costs. I would say that the one which has been little bit behind on what would have been the target has been Celcom. I think there's been some one-off costs which have come in, which has impacted margins.
Celcom has been a little bit behind, but now we've seen the last couple of months an improvement on delivering savings in that opco.
Hi, this is Hussein Safi from Citi. Just two questions from me. First is, I see that edotco is rolling out small cell in Malaysia, which I understand comes from the fiber network. I want to understand is edotco rolling out fiber as well? The related question is that fiber and small cell or towers are quite complementary business. Is edotco looking into rolling out fiber in the market as well? Related to that question, EBITDA down and earnings are up quite a bit as well. What drove that, if you help us to understand it? Just last one there, Ncell, CapEx was quite low year to date 2018. Just want to understand what drove that. Thank you.
Before I pass to Suresh to answer the question on edotco, I just answered the strategic question on what is edotco's role in fiber. From our perspective, that's not what edotco wants to do as a fiber company because we have other priorities at this point in time. There's no plan for fiber per se. However, there are many situations where it makes a lot of sense to where it comes to fiberizing the towers and the small cells. Not because of fiber business itself, but to supplement the wiring up of the towers and the small cell. Suresh, you want to be more specific on question one and two?
Sure. I think first thing on small cells, we are rolling out some trials on small cells. It depends what you want to call a small cell. For example, in Malaysia today, nearly 50% rolled out in the last four years of new towers is entirely lamp posts, right? I would argue many people call those lamp posts small cells. I call them small macros, but they're getting smaller and smaller
True shareable are what we're trialing right now. That, we've just installed in KL Sentral, I think we'll have a live launch end of this week. With all four operators on it, the part of your business, fiber is part of your solution. I think the focus with partners as much as for solution means fiber to the tower or fiber to the macro installation equipment room. I think that's how we'll look at it. I hope that gives you some clarity. You also asked a question, I think, about revenue.
Shall we take one question? We have one question from the side, Darlene. Basically, it's for Celcom. Any opportunities to cut costs apart from staff costs, and when do you expect EBITDA margin to stabilize from here? This is from Gopa from Nomura.
Okay. I think the further details we actually will present later during our session. Just to give a quick preview, there's three areas that we will be focusing on. One is in terms of network cost for sure because that's the biggest line item in our P&L. The second one is, of course, the staff cost as was mentioned. When we actually rationalize the headcount, and also the resources, then we should be able to see the number being rationalized as well. The third one is in terms of sales and marketing. That cost pillar will be mainly driven by the digitization of distribution and also logistic for Celcom. That's the three main pillar that we will be looking at in total for the next couple of quarters. In the next three years, we're actually hoping to see the amount.
If I may add, in terms of to improve the EBITDA performance, we're looking at two prongs. Number one is, of course, on the cost side. When we say we look at the cost, it's not just a pure cost cutting, but more really looking at the cost structure, so it's more sustainable in terms of cost performance after that. We're also looking at very specific about how do we monetize the network better. Yeah. This is another area that we will look at. We'll present a little bit later to give you an idea how we plan to do so that in each of the investment that we made, how do we monetize it better.
Do we have any more questions from the floor? We can take one last one agenda item.
Hi, good morning. Piyush from HSBC. Just two questions specifically on the results. Are we seeing any signs of improvement post uniform floor pricing was implemented in terms of customer behavior shifting from grabbing phone? On net pricing would be now similar across networks. Secondly, if you can tell, in Nepal, what has led to a sharp deceleration in the revenue? If there is explanation on what's the exact impact of this telecom service charges in Nepal.
Okay. The lowering of the unified, not only lowering but also unification of the floor led to some adjustment in tariffs where overall the difference between on-net and off-net tariffs had to be eliminated. The level of tariffs since then have begun to come down overall in the market incrementally. Early stage of the introduction, Robi gain was the highest gainer. At the same time, we had MNP coming in. Again, the published data shows that, and it was reported in the press as well, that Robi has been the highest gainer in the MNP regime as well. There were two dynamics. One, off-net, on-net pricing unifying, and second, MNP coming in soon after. In both situations, Robi has been the highest gainer.
Even from where it is now, because market competition is driving that price level back to where it was on an average basis. On Nepal, the taxation, not much change. For data from 0 to 13%. The impact this had was these emerging markets. Customers are budget limited, meaning that they have a specific budget that they would top up. When a larger proportion of that top-up goes out as government taxes, the revenues or ARPU accruing to the operator as net revenues reduces. Having said that, although potentially the effect could have been as much as around 8%-9% weighted average basis, the impact was significantly less. There has been a gross ARPU increase, but not enough to compensate for the increased flow out to the tax authorities. Does that answer your question?
Thank you. Just to clarify, the taxes were only on mobile, these increment taxes in Nepal?
Yeah, there has been deferring treatment of these taxes between mobile and ILD?
Yes, ILD.
Yes. Only on mobile.
Okay, that concludes the third quarter results presentation. Thank you, everybody.