Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by and welcome to the Axiata Group First Quarter 2020 Results Briefing. [Operator Instructions] Firstly, 3 housekeeping reminders. Please mute your telephone during the presentation, and kindly avoid using wireless headsets. Also note that the call duration will be for a maximum of 90 minutes. I would now like to hand the conference over to your speaker today, Tan Sri Jamaludin, President and Group CEO. Thank you, sir. Please go ahead.

Thank you very much. This is Jamal, the group CEO. Today will be our -- we are announcing our second -- first quarter 2020 results as you have seen from the Bursa, so we're going through the presentation. But before I do that, I'll just quickly introduce another speaker, which is Dato' Izzaddin, who is the group -- Deputy Group CEO. This is his inaugural event for the IR conference. So he will be also speaking this time around together with Vivek, who's our group CFO. So without further ado, let me go to slide -- the second slide. These are the key messages from the first quarter results. So in general, overall, there's a limited impact on revenue and EBITDA from COVID-19 for the first Q. Of course, you will see later on that the impact will be more second half of March 2020. Having said that, the impact varies from country to country, from marginal in the case of Indonesia in XL and Smart to quite significant, especially South Asian countries, and to some extent, Malaysia towards the last 2 weeks. The FCW (sic) [ FCF ], our free cash flow, grew 25% to MYR 1.2 billion. From that aspect, we have a pretty good cash as you can see from the results. But together with that also, we made an early drawdown of USD 300 million to edge up our gross debt/EBITDA to 2.6x but without that, our balance sheet is still very strong at 2.51x. Now on top of that, in early May, we secured USD 800 million syndicated facility to strengthen our liquidity position for financing and build a war chest, so to speak, for opportunities in the new norm. This is the one that we just announced early last month -- early this month. Now on the performance side, we have a mixed performance across the whole group. On one hand, we have XL, Robi, edotco and Smart, perform very well, extremely well. They have now performed reasonably well. However, Celcom and Ncell didn't perform as well and, to some extent, disappointing. If you look specifically, Celcom performance impacted by delay in product launches. However, EBITDA grew nicely. Now there's a lot more work to be done in Celcom, which we'll explain later on. And as I've said earlier, apart from edotco and Smart, XL and Robi did extremely well last year -- or rather last quarter. And again, we will be explaining exactly in more detail. Ncell is a bit tricky. The -- for the last 3 quarters, we have been having a huge competition not just as a mobile operator but also with the ISP players, to the extent that we could not really react, mainly because, in fact, chiefly because of the lack of spectrum, which we're working with the government. We got the spectrum but it's very onerous in terms of their terms. We're trying to work out the terms. Now until then, however, and unfortunately, we cannot react the way we should be, given that there's a huge demand for data and mostly at home where we cannot really -- our capacity doesn't allow us to compete fully. So that's been quite a challenging moment for Ncell. On the CSR, we have done quite a lot. And I think when compared to many others, we thought ourselves that our focus on our customers, our dealers and our partners have been -- taken a center stage in how we work in first quarter and especially in second quarter. So there's a lot of programs that we have announced and plan to announce to take care of, like I said, our customers and the communities at large, that will be presented by Dato' Izzaddin shortly. Last but not least, given the huge uncertainty, like many other companies, we are withdrawing our 2020 headline KPIs. Again, you can discuss it -- we will discuss that shortly during this presentation by Vivek, our group CFO. That's basically the key messages. As you can see, if I can, in a nutshell, is generally, it's a good performance, but it's kind of mixed. Some doing extremely well and some not as well. With that, I pass to Dato' Izzaddin, the Deputy Group CEO. Dato' Izzaddin?

Thank you, Tan Sri. Good afternoon, everybody. Insofar as our business is concerned, of course, the lockdown impacted prepaid reloads and SIM activations. But -- and correspondingly, there was lower direct cost as well as sales and marketing cost. I think as Tan Sri visited just now, the first quarter impact is not as -- would not be representative of the pandemic situation. We are thinking that -- we are expecting the second quarter results to be much more representative. Now insofar as the supply chain is concerned, the good news is we've managed to bring the vendors on our side in terms of making sure that we are -- our equipment deliveries are not affected. We are looking also at identifying new growth areas insofar as CapEx requirements are concerned. So the good news is the vendors are also agreeing to some of the requests that we're making in terms of deferral payments and discounts. In terms of employee wellness, we like to pride ourselves having -- make sure that the employees' wellbeing are taken care of. We've provided helplines, our accounts' main services, continuous engagement. Tan Sri and I have done several town halls with the employees at large as well as the leadership team of all the operating companies. Happy to report that everyone's actually in a very upbeat mood and frame of mind. We even got reports that they think that productivity has gone higher over this last couple of weeks. In terms of CSR, I have another slide after this to elaborate on that. Insofar as technology and cyber resilience, our networks remain resilient, although despite the traffic surge in peak data traffic of about 2% to 12%, network utilization has increased in some areas as a result of redistribution of traffic, as you would appreciate. And we've taken very active steps to make sure that we will detect and accordingly respond promptly to cyber attacks that we have seen activity that's gone up. Insofar as BCM response, all non-essential employees are still working from home. In fact, Celcom has only started, on 13th of May, to come back -- the team at Celcom's come back to office on 13th of May, earlier this week, even that we've adopted many safety measures to make sure that the staff's safety is ensured. For one, there's 2 teams that are operating Team A, Team B. Whereas the other operating companies in Malaysia, we have extended the work-from-home arrangement until 1st of June. Of course, it goes without saying that this is something that we fight off. And given the fasting month Ramadan and Hari Raya around the corner, everyone's trying to make sure that every -- the staff is continuously engaged and remain upbeat. Next slide, please. Now in terms of the CSR initiatives that were done, let's just say that we are very supportive of our vendors, of our customers, the SMEs, in particular, because these are very, very challenging times. As you all know, in Malaysia, we are part of that government initiative for 1-gigabit high-speed data daily from 8 a.m. to 6 p.m. Now that certainly will have an impact also to our top line, but we feel that there's something that we should avail to the customers. In addition, we're providing unlimited WhatsApp services as well as free unlimited access to Microsoft Office 365 on a weekday. Of course, the other operating companies as well have been doing the same thing. We like to take pride that in Cambodia, we sponsored -- or we've contributed USD 1 million to the government's initiative to cater -- to counter the COVID-19 pandemic. As well as in Dialog, Dialog in Sri Lanka has contributed USD 1 million to upgrade several ICU facilities -- or to equip 2 hospitals with ICU facilities and that has gone down quite well with the President and the government. Ncell as well has provided similar packages, the Home Packs and bonus for every recharge. In Indonesia, not forgetting Indonesia, they've also done the same thing. Yes to the things in terms of providing online learning portals, access to online learning portals, government website and, similar to Malaysia, access to Microsoft Office 365. In fact, XL has contributed USD 650,000 to the National Disaster Management Agency as part of the CSR initiative. Next slide. Now this is just a summary of the EBITDA, PATAMI, free cash flow metrics for the first quarter measured against the first quarter 2019. Double-digit growth and single-digit growth. The shifting gear momentum continues in this first quarter. As Tan Sri explained just now, the double-digit growth in EBITDA and PATAMI in Nepal Ncell is the result of the constraints in the spectrum that has been made available to us. And in fact, we are still in discussions with the government, with our regulator to regularize the conditions, to change the conditions that have been imposed on us. Insofar as Smart is concerned, you can see double-digit growth in EBITDA, PATAMI and free cash flow, as well as edotco. edotco is certainly proving to be resilient and we expect that to be the, if you like, the core profits and PATAMI amongst all the operating companies within this table of Axiata. I think -- hand over now the slides of the presentation to Vivek to take us through the first quarter 2020 results. Vivek?

Thanks, Dato'. Thank you, Dato', and very good afternoon to all of you. If I can go to Slide #9, which is starts the financial presentation. First slide is on quarter 1 reported results. So we had a fairly good 1.5% growth in revenue, but much better EBITDA growth of 3.4%. PATAMI was impacted largely on a couple of [ determining ] factors, which is one was employee restructuring program, which is net MYR 77 million, gross is MYR 101 million so the net amount is post of tax and some ForEx losses of around MYR 130 million. And then we also have onetime gain on the sale of towers, around [ MYR 280 million ]. But if you look at the numbers on revenue, negative 3.7% on quarter-on-quarter. It's fairly stable if you factor in the impact of lesser number of days as well as seasonality. But on a year-on-year basis of 1.5% growth. EBITDA looks slow, minus 8.1% on quarter-on-quarter, partly because of the restructuring program which we did in Celcom. But on a year-on-year basis, the 3.5% growth on EBITDA. PAT fairly stable compared to last quarter, down because on year-on-year, mainly because of the onetime gains we got in 2019 when we actually sold M1 stake as well as divested some of our digital ventures. PATAMI is down on quarter-on-quarter and also on year-on-year, so I'll go through more details on PATAMI in my subsequent slides. If I go to the next one, which is really talking about underlying performance, which excludes some of the elements leading to restructuring as well as the M&A, ForEx, et cetera. Underlying performance, excluding devices, 1.5% growth year-on-year, EBITDA of 2.5% year-on-year. Whereas our focus on operational excellence has kept our costs flat. PATAMI has been impacted because of [ EBITDA ] which does contribute to our profits and also higher losses in Digital business. And Digital businesses mainly because of some program on targeting the -- targeting the lower-end consumers in quarter 1, which did cost us some on marketing spend and continuing higher D&A expenditure. But if you look at the revenue, 2 OpCos did extremely well, 9.5% growth in XL and Robi, 7%. Celcom and Ncell were down and I'll go through some more details in subsequent slide. But however, our program on cost efficiencies does continue to give us benefits on in terms of EBITDA development. Year-on-year, 2.5%, exclude the impact of onetime restructuring -- employee restructuring program in Celcom. The EBITDA growth has been 6.7%. And we have 4 OpCos actually giving double digit, including Robi, which has been 9.1% EBITDA growth double digit. And our costs have remained fairly flat with an EBITDA margin uplift of around 0.8% to 41.5%. PATAMI, as I said, did get impacted because of the charges on -- continuing charges on depreciation. Part of it, I've also explained through the adoption of IFRS on those increase. Lower contribution from Ncell, the [indiscernible] which is what I was talking about, which was where we partnered with the government, opening accounts for some of the low- and the middle-income segment consumers and taxes in Bangladesh. Now if you recall tax in quarter 2 coming in, end of quarter 2 coming in Bangladesh, now this, because it started from quarter 2, 2019, the like-for-like, this impact would not have been there in the previous year. So if I can go to the next slide, basically giving a waterfall on how the PATAMI development from last year the MYR 209 million, we got MYR 187 million uplift coming from EBITDA improvement. Digital businesses, which I explained, the higher costs mainly in digital financial services. MYR 160 million on the depreciation. Part of it, which is around MYR 45 million is on account of ROU assets, which is the lab authorization of lease liabilities. And finance cost, MYR 30 million, largely on account of a gain relating to the lease interest expenses. Taxes, mostly coming from Robi, which I explained earlier, and that's how the MYR 121 million comes as the underlying PATAMI for the quarter. But if you look at the actual from MYR 188 million, which is what we reported as actual to MYR 121 million, most of it is on account of the XL double gain, which is about [indiscernible] for the year and also a negative impact on account of ForEx, MYR 123 million. Most of it was unrealized loss at the end of the quarter, but part of it did get realized subsequent [ half of it ]. Moving to the next slide. I think from a cash, which I think is critical at this point in time, given where we are. So our key focus remains on preserving cash. And I'm happy to say both from an FCF as well as OFCF, we've done well, partly on account of improved EBITDA, partly also on account of attempts to rationalize the CapEx spend. So our FCF yield is around 20.4% for the quarter and the OFCF yield is 10.5%. Right on through the next one. Operational excellence, I think, has been something which we've been focusing around, specifically on the cost side for the last 3 years. And if you recall, we had set up a target of MYR 5 billion gross costs to be taken on, both on CapEx and OpEx. I'm happy to say we are still on that target. Hopefully, by the end of this year, we would have achieved that MYR 5 billion, and then we have new programs to continue subsequently. But that said, we have some increase in network cost compared to last year, mainly in XL, where we had new managed services contracts starting from April. IT expenses has come down mainly in April. Again, mainly because of the revised managed service contract and -- which is benefiting us. Savings on account of sales and marketing expenditure around MYR 56 million, and others is largely on account of the restructuring expense, which we had in Celcom. So overall, if you exclude the restructuring spend, the costs have remained flat. What has increased is just on account of new towers investments sites cost, which has been added mainly in XL and Robi. So if I go to the next one, which is really around the balance sheet, I think fairly strong balance sheet, onetime impact coming on account of the borrowing of $300 million, which we did for the repayment in April subsequent period of time. If I go to the next one, let me quickly run through some of the performance cost. Celcom, I think we did have an impact on prepaid, largely other lines of revenue fairly stable. And prepaid is mainly on account of delayed product launches and also on the acquisitions flow and slow pre to post migration. However, that said, I think EBITDA, based on the cost initiative, which was one of the objectives in Celcom to drive EBITDA margin improvement, I'm happy to say that 7.5%, 7.8% improvement on EBITDA, if I exclude the onetime restructuring costs set in quarter 1. FCF positive 34.7%. PATAMI, again, I mean, if I exclude the restructuring of 31.6% improvement in the profit from -- compared to last year. So Celcom, I think, some challenges on the revenue side. However, from a cost profit standpoint, a good quarter. However, as I said, I think that all along, a strong story, XL. 8.8% growth in revenue, 39.7% in EBITDA, but this is also partly explained by the IFRS adoption in Indonesia from this year. But if I exclude that IFRS impact, still a very strong 17.3% improvement in EBITDA and a strong cash flow improvement of 1.4%. This cash flow excludes the realization of cash received of nearly $3.4 billion from the sale of towers. And PATAMI, again, table PATAMI, but if you include the gains coming from the tower sale, looks extremely good. So strong performance in XL. If I go to Robi, again, another quarter of continuous improvement in Bangladesh, with service revenue growing 7% year-on-year, EBITDA growth 10.1% with EBITDA margin crossing 40% for us. This used to be, if you recall, used to be around 22%, 23% just 1 year after we had merged Airtel and Robi. And from that level, the company continues to deliver extremely good on top line as well as managing their cost, taking EBITDA to around over 40%. Free cash flow, I think, lower this quarter, mainly because last year, we could not import equipment because of the restrictions imposed by BT as the regulator there in 2019. A strong PATAMI, a quarter of positive PATAMI development, and this is after increased taxes -- increased taxes and monetization. If I got to Dialog, I think as Tan Sri said, a moderate performance in Dialog, mainly on account of the curfew imposed in middle of the year, where there was -- middle of the month of March, where there was no movement alone. So that had some significant impact in the second half of March 2020. If I go to the next one, which is Ncell, I think Tan Sri explained on the core revenue at minus 9.7% and ILD of 16%. ILD was expected in line with the continued lowering of ILD revenue. Our core revenue mainly getting impacted because of the capacity constraints from lack of spectrum, which hopefully we should be able to resolve soon and that leading to the EBITDA drop as well as PATAMI drop. Smart continues its journey towards double-digit development on profits as well as EBITDA and in the strong performance in that market. ADS, I think we've been doing well on Boost, specifically with this government-led program, we did see a Boost quarter 1 GTV as well as number of subscriber base improving. Digital advertising business continues to do well with new customers, new clients being taken. And the focus now is how to strategize during this period of COVID. Aspirasi, which is the microfinancing, micro-insurance business of ours is doing well. We have around [indiscernible] of loan being disbursed so far. We've also launched a specific program for the COVID-19 assistance for the micro businesses, micro-SME. And Apigate, which is the platform for the direct operator billing and A2P, that again continues to develop well with improved -- increased gross transaction value. edotco, as Dato' said, continues to have a good performance, specifically on the EBITDA side. Even if you exclude some one-off M&A impacts, 19.1% growth in EBITDA, reflective and strong cash flow and profit development business. Considering all the uncertainties around the financial impact of COVID-19, it's difficult, I mean, someone really has to have a very good crystal ball to be able to predict, which I am not sure anyone can do it at this point in time. So given that uncertainty around -- surrounding the pandemic, we have decided to withdraw guidance on 2020 headline KPI. That said, our focus at this point in time is on cost management, CapEx efficiency and conservation of cash to be able to build a good strong balance sheet and capitalize on the opportunities, new normal, which hopefully should come in some period of time. The last slide, I think, is talking about -- a little bit about opportunities. I mean, it's early stage, but we do see opportunities in some markets where fixed wireless access is there. And that helps because it allows us to do a much faster rollout and give the opportunity for our consumers prone to access work from home. Digitization, specifically on the enterprise side, I think this of our small and middle segments, I think is something where we're looking at as opportunities and overall digital experience, customer interaction including channel, which has grown quite significantly over the last 2 months since the lockdown in different markets. Additional costs, I think we have already a plan of MYR 0.9 billion, MYR 1 billion -- nearly MYR 1 billion of cost to be taken out. CapEx, we typically -- while we announce CapEx to the markets beginning of the year, we do not release 100% of the CapEx to our operations, and we keep 15% to decide based on opportunities. This is still not being released. We will probably not spend this, mainly if required, selectively, depending on opportunities in the market. And obviously, focus continues to be on the costs, which are directly related to the impact on revenue. Liquidity, having lots is being managed through the early drawdown or facilities being put in place at the group level. And excluding in operating companies, XL would have IDR 4 trillion coming from the cash from the sale of towers as well as in other markets like Bangladesh. And Dialog, we are ensuring that we have a fair good liquidity available to deal with the even worst-case scenarios caused by the pandemic. So that's it from me. I'll hand it over to Tan Sri. Tan Sri, back to you. Thank you. Tan Sri?

Sorry, I was on mute. So thank you, Vivek. So before I proceed with the next topic, which is quite interesting by itself, I just wanted to summarize the key things that, from my perspective, we are happy about. Obviously, the performance of -- we're happy with the performances of XL, Robi, edotco and Smart, not only for the first Q, but we can see a nice trajectory. Of course, in fact, all of them will be affected one way or another by COVID. But we -- from a short-term perspective, yes, but we could see from a long, medium-term perspective and longer term, we are on the right track, so we're happy with that. We're also happy with the operational excellence and within that, the cost management that we have done across the whole group. And also Celcom itself have done quite a lot in reducing its cost. A lot more to be done, but we're quite happy with the progress. And within that also, we are quite happy what we have done on the recent VSS program that the -- to the tune of about 300 people have been reduced, but very nicely and very humanely to the 200 people on -- because it's voluntary. And that will give us the tremendous rich innovation possibility as we bring in new people. And as we go into next year, our cost structure will be also improved. We're also happy with the balance sheet. It's a pretty strong balance sheet and with a strong liquidity and [ war chest ] as presented. Not mentioned so far, we're also happy with the synergies that we will be probably talking about it next quarter. We have a lot of new ways of working with the group and the OpCos that have resulted in high potential savings. We're also happy with the huge interest and new investors in edotco and ABS to be more specific. Again, it had been affected by COVID, but hopefully with the next 2 quarters or so, there could be some movement in that area. And last but not least, we're very happy with the new norms that we are preparing beyond the lockdown and to get -- to support and to help us in the medium term in the future. Obviously, on the flip side of it, we are quite disappointed with the performance of Celcom revenue, market share and Ncell. And also on the second part, the regulatory, the taxes that we incur at Robi has been quite disappointing because we could have shown a much better result on it profit-wise and also the spectrum constraint at Ncell. So that's how I would summarize the first quarter. Now coming to the topic on Board and management refresh, that's an interesting topic by itself. This is a -- we have a special topic because we've been asked a few times by our shareholders and analysts and some others about how are we looking into the more refreshed management, especially given our new challenges every time. But also we want to make between continuity and a fresh leadership. So if you look at the following slide, you can see, don't worry about the names, of course, the names they are initials. But worry about the fact -- well, focus on the fact that the -- we have a nice program of Board members retiring every year. That's one point you should know. And as you can see, over the next -- over the last 3 years, '17 to 2020, we have been quite -- we are accelerating new fresh Board members to come in to the Board. So that we are doing a lot of refresh, given I said, new challenges facing the company. But also take note of how we look at things. It's not by chance, by very specific purpose and by design. We always have a combination of people with general management skills, finance accounting skills, regulatory legal skills, strategy, human resource and more macro economy and international relationships. So you can see how we are replacing one another -- someone with a certain skill, replaced by someone else with another skill. So for example, legal regulatory, we have a very strong someone that has that very strong legal background replaced recently about 2 years ago by Dr. Nik, and strategy back in 2016, Juan Villalonga retired. He was, as you know, the ex Telefónica CEO. He retired 2016. And a year or so after that, he is being replaced by David Dean who was the BTG Global Head of this sector, which is the TMT sector. So -- and I can go on the rest, but you can see how we look at that. And it's been purposeful. The Board takes serious measurable focus on all this fresh leadership, like I said, by design, not by chance. So if you look at this following -- well, not this following slide, just the pictures in case you're interested to know how we look like. If you look at the following slide, next slide. Next slide. Yes. So again, to summarize, we retire about at least one Board member per year over the last 3 years-plus, 2017 to 2020, 8 have retired. At the same time, we injected or we brought in one -- at least one Board member -- a new board member per year to correspond with the skills that we had mentioned -- I had mentioned earlier. So in that respect, about 8 have joined -- or 2 joined us within this year as new Board members. So if you look at our -- the way we look at the Board, we do -- diversity is extremely important for us not just at management level, which we are very proud of. But also at the Board level, we look at skills, gender, nationalities and, of course, very important, the independence. So as mentioned earlier, these are the skills, general management, all the way to economy and international relations that we are very, very purposeful to make sure that we have the diversity and all the skills. As you know, we also have take pride that the last few years, we have 1/3 of the Board members, female members, except recently when one of them retired early this year. We intend to replace that very soon with another female Board member. We also make sure that at least one or -- that 2 are non-Malaysians because of the international exposure that we have. And regardless, majority of our Board members have significant, not minor, but significant international experience. And last but not least, at least 50% or more Board members have always been independents. As you can see the framework below, that's our guiding principle also that we have published. Now before I pass to Dato' Izzaddin, who will talk to you more about the management refresh. We -- as you know, at the CEO level itself, we are transiting between myself and Dato' Izzaddin who will take over for me January 1, 2021, so I will retire by end of this year. But just a quick note before I pass to him. We are confident that compared to so many companies that we know of, we have a very structured and systematic program of transition. It's not done like within 1 day or 1 month and all that. Because of the complexity of our business, we do it over a period of time in terms of processes and time itself. And even process is very structured. We look at the business transition. We look at external relationship transition, people transition and personal transition. And there are programs generally and some specific programs that allow us to work on the transition. And net-net, Dato' Izzaddin, as mentioned during the last -- our presentation, we are trying to balance between continuity and also fresh leadership. So that is why I didn't represent both. Being with us as a Board member for the last 3 years-plus and also being new as an executive who can provide us a fresh leadership to, not again, if I can say not to be beholden to all the things we have done in the past, to question why we are in the past, so that we can do even better job, given the challenges in the future. So with that, I'll pass to Dato' Izzaddin, who will take it from here. Dato'?

Yes. Thank you, Tan Sri. Yes. Hopefully, the -- so far as the transition is concerned, it's been, what, 118 days today. I've been very happy to get a deep dive, if you like, with the teams and the -- it's a certainly welcoming feeling that I have and getting a lot of support and cooperation from the team. Happy to also inform all of you that the engagements have been very constructive, looking at things differently. And hopefully -- and the new norm, as it were, will certainly provide us a bigger challenge in terms of tweaking our business model moving forward. Can I the next slide. At Celcom, we've announced 2 recent appointments.

Dato', you want to explain the previous slide?

Oh, I see. You want me to go in detail? Okay. Yes. Sure. I mean, from the left, talent, the incumbent has recently retired [ Dato' Baru Nisa ] after serving Axiata since Day 1. We are in the market to look for a person who will carry the flag, who will be able to also champion the talent development program that we are proud of. Yes. So that's work in progress. In the M&A slot, the incumbent will be assuming the position of the CFO of edotco, Annis. You may know him from your previous engagements And the successor will be announced shortly. Insofar as strategy is concerned, Dominic Arena, now he had originally decided to relocate to from his wife's home country, but as it turns out, in the last Christmas holidays, he decided to relocate back to Sydney. And the reason for that is he's been the way for the last 12 years, and he, on a personal reason, wants to spend a lot more time with his parents. So as his last day is actually tomorrow, but we -- certainly, a friend that we have in years to come. In his replacement, we have appointed Nick Swierzy who has been with the organization for the last 4 years in the capacity of helping out the M&A team as an adviser to Tan Sri Jamal himself, yes. So his background is -- I don't remember his qualification, Tan Sri, but he has served in Ooredoo as well as in Indosat in Indonesia. And we believe that his skill set in terms of relationships with the various stakeholders, the various counterparties we have in the region as well as globally would certainly help us. Of course our risk, security and compliance, we have appointed Abid Adam, who was previously our CISO, to be the group Chief Risk and Compliance Officer. Technology, as you know, Thomas Hundt, who is also the CEO for Smart. He is responsible for the IT and network function. And of course, on the telco side, there'll be a new CFO, CTO. XL, there's a new Chief Commercial Officer in the form of [ David Omes ] who has been with the organization for some time now. And edotco, of course, we are looking to as appointing a new CEO, given that Suresh has retired to pursue his own personal interests. So you can see that -- sorry, I forgot to add, enterprise, we've also appointed [ Dr. Gupi Kurup ] who was previously from [indiscernible] to head the group enterprise function, yes. So you can see that we are continuously refreshing the organization as well and bringing new perspectives to the organization. Specifically on Celcom. On to the next slide, yes. We've made 2 announcements or [indiscernible] on 1st of May. First one is Imri Mokhtar as the Chief Operations Officer, and he is responsible for the technology aspect of the business, covering network, IT and digital as well as various functions -- various other functions, which includes legal, regulatory, enterprise program management and so on. You may be familiar with him. He was previously from Telekom Malaysia. He has over 24 years of experience in the sector. His last position was COO at Telekom Malaysia, overseeing the business operations of unifi, TM ONE, TM Global clusters and the IT network. And he also served as the acting Group CEO of TM between November '18 to 2019. Now Allan Bonke shouldn't be a new face to all of you, if not some of you certainly. He was previously with XL. He has been appointed as the Chief Commercial Officer, effective May 1, and will provide leadership to all revenue-generating units, including customer service and focusing on Celcom's varied proposition and competitiveness in the market. This is something that we've recognized to be a -- well, not necessarily weak, but certainly a gap that needs to be filled in, and we believe that Allan, with his vast experience in senior sales and marketing rules in DTAC, in Grameenphone and so on, will certainly all go well for Celcom. Yes. So these are the 2 appointments. So come now, just a bit more on the Celcom transmission. We've alluded to some of the work that we're doing at Celcom. Now just to put things in perspective, it is not really something that we have just started. If you look at this chart here from Phase 1 in 2017, 2018; Phase 2 last year and moving forward between 2020 and the next 3 years; there's various areas that we've already addressed. In terms of headcount, in total for the 3 VSS, including the one that was just completed, we've reduced the headcount by 1,000 people. Now insofar as the recent VSS program is concerned, it was more of making sure we have the right skill set, the classic square pegs, round holes. So 303 people have left us. There's a charge of MYR 101 million, you will see in the numbers. But what's important is the people that we're bringing in, we've identified something like 76 individual, 76 positions that needs to be filled in. So basically regrouping some of the functions so that we become a bit more efficient in the processes. They are hopefully the targeted savings or the estimated savings per year is about MYR 35 million a year. Now that number may not seem big, but I think what's important is, as I said, making sure we have the right skill sets in the various functions. So in terms of -- in 2019, the operational excellence at the core, yes, EBITDA margin has improved. That shows up in numbers. Staff cost per revenue has also reduced by 0.8 percentage points. So moving forward, yes, the areas that we're looking at are those business areas of enterprise, home device. We're even looking at our MVNO strategy to relook at that commercial and business arrangements that we have with the MVNOs under us. And of course, with the new norm, we need to reengineer our network operations, our business processes to make sure that we are ready to take advantage of when the pandemic subsides and we go back to the new way. Now this means reconfiguring the way we work. I'm sure you're all familiar. I'm sure you're all going through the same experience in your respective organizations. But it's important that we, as an organization, position ourselves to take advantage of the businesses that will flourish post COVID-19, yes. So the work is ongoing. And hopefully, the results, we'll be able to articulate the results come the next quarter, and positive results, positive cost savings and so on, yes. So on that note, I think that's the last part, yes? Vivek? Tan Sri?

Yes, yes. That's right. Yes. Thank you.

So can I hand over to the moderator, then?

[Operator Instructions] Your first question comes from Arthur Pineda from Citi.

Several questions, please. Firstly, what was the digital loss booking for this quarter versus the prior period? Just wanted to clarify that. Second question I had is with regard to the comments on Celcom. You mentioned delayed product launches impacting revenues. What was the cost of that? And it seems like the revenue -- even though revenues were much softer, you've actually seen a big jump in the normalized profit. Is there any items on the cost side which we should be aware of?

Can you first clarify the first question, what you mean?

Sorry. The first question, just on the digital loss booking for EDA. I'm just wondering what was the booking for cost on the [indiscernible] digital, yes?

For ADS? Okay. Yes. All right. So Vivek, can you answer the question? And then -- [indiscernible] on second question.

Yes, Tan Sri. The first, make sure you go back to the waterfall, which I had shown, we had MYR 34 million impact on digital infused, which is losses. Most of it is in digital financial services, Boost. And the reason for that is essentially the [indiscernible] program, which is [indiscernible] program, where we did invest in customer acquisition because these were [indiscernible] income customer base, where we did invest in these -- acquiring these customers. So during that program, we acquired around 1.9 million customers, [indiscernible], out of which 1.5 million customers remain active. And we did have a gross transaction value of around MYR 40 million coming out of that activity. So it's -- while it was positive from the perspective of new customer acquisition as well as transaction value, it did not -- it did cost us some money and cash burn. So it's primarily on account of that, and also somewhat in our digital advertising business, because given the COVID impact, we did see the advertising spend of some of the countries of accounts are coming down. However, there are certain fixed costs to be [indiscernible]. These were the 2 main reasons for higher losses in the [indiscernible]. Director Idham, I hand over to you on Celcom.

Hi, good afternoon. This is Idham here from Celcom. Just to comment a little bit on the product launch, yes. Last year, we did a few product launches in June on prepaid. In June, we did a product launch on our [indiscernible] and was supposed to be followed by another major product around October or by mid-October. Somehow, the challenges -- we've had a couple of challenges. Number one, of course, trying to quickly adapt to what is happening in the market, but the main reason is the -- some of the new configuration that we're doing had some challenges on the system. So we managed this in October, that product was actually launched only in January. So similarly on postpaid, we did launch something in December for the lower-end market, but there was another major product supposed to be launched before that around November, which come only around February. Both of these products are now in the market, where unfortunately, when the thing happened -- when something goes wrong, it doesn't go wrong just one. So after February, after we launched in the market, by the time it's about to get some traction, then we were hit by the COVID-19 and also the MCO, so the market did not move as much. But fortunately, in the past, since the MCO has been moved to become CMCO and the trades starting to open again, we are seeing some positive early indication on these 2 products that we have launched in the past 10 to 14 days, yes. It's very early days. On the -- yes, so observation, despite the reduction in terms of the revenue, the softer [indiscernible] revenue, we did manage to grow our cost in terms of profitability through the -- some of the cost structure that we have changed. We have improvement that we had did in 2019 as we focus more on the operational excellence last year. I'm going to ask -- pass on to our CFO, Jen, to just explain which areas that we have managed to take out some of these costs.

Yes. I think the question from Arthur [indiscernible] that was there any one-offs that you actually pursued in Q1 this year. Q1, we feel the -- other than the employee restructuring program that we have actually undertook in quarter 1 that creates the systems in terms of the EBITDA in PATAMI, there's no other major one-off that we have in quarter 1. Having said that, when you look at the comparison with last year's number, the EBITDA number was also -- there's some one-offs that in 2019, which we have actually mentioned earlier. But having said that, we see that the underlying profitability has actually improved slightly year-on-year. I hope that answers the question, Arthur?

Yes.

Your next question comes from Prem Jearajasingam from Macquarie.

A couple of questions for me. Firstly, with Celcom, I appreciate that we had some delays in product launches. But Idham, in the [indiscernible], you said you had -- I believe you said something about system issues, and therefore, you put in launch products. I thought the system issues were well behind us. And just looking at the numbers, the decline in prepaid, in terms of revenues, whether it's quarter-on-quarter or year-on-year, it is quite scary. And the question really is, have we fixed all our internal issues to be able to come back fighting? Or is this really going to be the new story, i.e., our systems still don't work, we still can't launch stuff, and therefore, Celcom is going to continue to bleed. Kudos to taking the cost out, but this revenue line is quite worrying, I must say. Second one is really around the Ncell taxes. We paid them in -- I believe it was April, if not late March. Could you at least tell us what kind of an impact we should expect in terms of the charge through the P&L over the course of 2020?

Yes, you are right. We did the transformation of the IT systems a few years back. But what we're trying to do with the product, the recent product that we launched, was more -- it's not just a small tweak to the product but also we are doing a structural change to the product, giving customers different kind of choices and then with the base product and also where they can top-up or add on to the product. So it's kind of a different product structure that requires a little bit more work on the system, right. So it's just about the system, as I mentioned, but there are other things as well in terms of like trying to keep up with some of the changes that's happening, that we have to continuously look at what will work in the market.

Do you foresee this being sorted out? Is it sorted out already? Or is it going to be a long-term problem?

No. Yes, the products that we have launched is already out in the market. So for example, the new postpaid product that we have launched gives the options for our customers to either to choose whether they want to choose speed or they want to go on and choose for capacity, on unlimited capacity. So to provide this option to our customers, this is the first of its kind that we launched in the market, yes. So this is structurally different in terms of product design that gives a lot more options to our customers, and we're seeing traction on this product itself. So that structural change takes a little bit more time than usual than just add-on additional capacity for a lower price and so on and so forth. So it's beyond just a pricing change, beyond just a capacity change. It's actually the structural product design change. This is something that we have launched and then moving forward, it's just incremental from that, yes.

All right. Okay.

Vivek?

Frame on the second question. Yes, you're right. We paid the [indiscernible] amount of CGP in April, which was around MYR 15 billion. With this, we have settled the past CGP liability. As far as the accounting, as [indiscernible] to recall, we always believe, based on our strength of the VIP, that this amount is recoverable from our perspective because we have fairly strong position on VIP. However, that said, we have taken a prudent view and accounted for this liability has changed, barring some amount, which is on account of interest that we do not think is going to come as a fresh charge for us until the whole VIP case is sorted out. Effectively, we should be seeing a higher claim than what has been -- what is outstanding, will be provided for. So that, I think, amount is something which we will look at it, but we don't see major impact coming this year or subsequently.

Vivek, you might want to explain the VIP?

Yes. So I think this is -- if you remember, under the bilateral treaty, we have filed a case an arbitration, national court. It is the government for the proper treatment of [indiscernible], Nepal. So far, based on the indication development, it seems a positive position for us, which is what is the leading view on this. However, that said, Nepal government is obviously not entertained this, but does the international treaty because they're part of that treaty. They are obliged to acknowledge such a claim. So I think this process will take a while. It won't be 1 year, 2 year, maybe 3, 4 years, but we believe on the strength of the case, that we have a fairly strong position.