Acquisitions Working For Axiata

Malaysia's Axiata Group , which has telecoms operations across Asia Pacific, has reported a strong performance in 2012 with revenue and net profit increasing 7.3% and 6.2% respectively. Organic growth, particularly through data services , continue s to play an important role, although the group has demonstrated its willingness to expand through mergers and acquisitions. Axiata is reportedly eyeing increasing its presence in Sri Lanka, and BMI believes that the conditions are favourable.

Growing Through Organic And Inorganic Means
Axiata Group Revenue And Mobile Subscriber Base

Axiata reported its 2012 revenue grew to MYR17.7bn while net profit (before minority interest) reached MYR2.9bn. The group saw double-digit revenue growth in Indonesia ( XL Axiata ), Sri Lanka ( Dialog Axiata ) and Bangladesh ( Robi Axiata ) while its domestic business ( Celcom Axiata ) showed solid performance. In Cambodia , where most operators are struggling amid a harsh business environment, Axiata has acquired Latelz's Smart Mobile and the integration with hello is to be net profit accretive in 2013.

According to Cambodia's Ministry of Posts and Telecommunications, Viettel -owned Metfone was the clear mobile market leader with 47% market share in September 2011 with seven rivals sharing the remainder . However, the acquisition of Smart Mobile has thrust hello into second position in June 2012, up from third in September 2011. The gap with Metfone has significantly narrowed as Axiata believes that its combined entity had 34% market share (Smart Mobile and hello had 21% and 13% respectively) , compared with Metfone's 35% . Meanwhile, CamGSM (market ed as Cellcard) was third with 19%.

Smart Mobile has been an outperformer since its merger with TeliaSonera -owned Star-Cell in late 2010 . The addition of Smart Mobile is beneficial to Axiata as the former has a favourable licence fee structure (25-year concession versus hello's build-transfer-operate status) and licences for GSM (900MHz and 1800MHz), 3G and WiMAX.

Axiata's appetite for acquisitions continues as India's Business Standard reported in early March 2013 that the group has approached Bharti Airtel to purchase the latter's operation in Sri Lanka. Dialog Axiata is the mobile market leader with 7. 8mn subscribers at the end of 2012 while Airtel Sri Lanka had 1.7mn subscribers. Axiata was reportedly interested in purchasing Tigo Sri Lanka in 2009 , but Millicom International Cellular eventually sold its operation to Etisalat . Business Standard has also reported that Axiata had approached Hutchison Telecommunication s Lanka , but the two companies were unable to agree on a valuation.

Axiata could have a greater success with Bharti Airtel given that the Indian operator has significantly larger operations in India and Africa, which warrant greater attention. Bharti Airtel has not seen its Sri Lankan operation record stellar growth - Airtel Sri Lanka had 1.5mn subscribers at end-December 2011 and 1.8mn in March 2011 - and a divestment would allow the operator to focus on its core market. Airtel Sri Lanka has a presence in all 25 administrative districts and has launched 3.5G services in major towns. The addition of Airtel Sri Lanka would bolster Axiata's mobile data operation, which is experiencing strong demand - Dialog Axiata reported data revenue (excluding SMS and value-added services) grew by 53% in 2012.

This article is tagged to:
Sector: Telecommunications
Geography: Bangladesh, Asia, Bangladesh, Indonesia, India, Cambodia, Sri Lanka, Malaysia, Asia, Asia

Access all of our latest analysis, data and forecasts - request a trial