Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Good afternoon, everyone. Welcome to Axiata's final year results for 2020. My name is Clare Chin, Head of Investor Relations at Axiata Group Berhad. Thank you for standing by. Today, we have with us Dato Izzaddin Idris, Axiata Group's CEO; and Vivek Sood, Axiata's Group CFO; as well as representatives from our operating company. There will be a short presentation followed by a Q&A. Lastly, 2 housekeeping reminders: you will be on mute throughout our presentation. Also note that the call duration will be for a maximum of 90 minutes. Without further ado, I would like to hand the conference over to Dato Izzaddin.

Thank you, Clare, and very good afternoon to all of you. Thank you for spending the time with us this afternoon to share -- for us to share with you the results for the full year ended December 2020. As you all know, 2020 was a life-changing year for all of us from a business point of view. If you remember, after the first quarter and second quarter results, we were very nervous of the performance for the full year. But despite the challenging pandemic year, we like to think that we managed to record quiet a good performance for 2020. So just some key messages on these first 2 pages, after which, Vivek will take us through the details. As you can see, and I'm sure you would have picked up the press release as well as the Bursa announcement. Revenue, excluding device, just a slight dip of negative 1%. EBITDA went up by about 1.1%, with a -- with EBITDA margin at 44%. Now that's a result of -- on the back of OpEx savings of MYR 745 million. Now underlying PATAMI compared to 2019, it's down by 9.4%. But this, as you know, as a result of higher D&A and lower contribution from 2 markets -- 2 businesses, namely Ncell and edotco. So compare the underlying PATAMI of MYR 865 million with a reported PATAMI of MYR 365, as we've explained, this is impacted substantially by the accelerated shutdown of 3G in most markets to refarm 4G services. In total, the impact is about MYR 604 million for the accelerated shutdown of 3G across all the markets. Now adjusted operating free cash flow is up to MYR 1.7 billion, whereas free cash flow itself -- sorry, for free -- for operating free cash flow, the number is MYR 3.3 billion for the full year 2020, difference between MYR 3.3 billion and MYR 1.7 billion is the right-of-use assets. So that has led to a strong cash balance of MYR 7.2 billion across the group. And gross debt-to-EBITDA is at a manageable level of 2.7 -- 2.57x compared to 2.86x in the third quarter. That's the result of paying down some debt in the fourth quarter. Now, of course, I just need to just be mindful that the cash balance of MYR 7.2 billion is a group balance. And as you appreciate in these markets, it's a bit of -- we're trying to work on the financial guardrails for and of course to dividend up more dividends to corporate center to Axiata Group Berhad. But across the group XL pretty healthy balance for the OpCos tied to the challenging period. Now going on to especially OpCos, you can see that for Celcom, the results of PATAMI was lifted by better cost and credit management as well as financial prudence. You can see that although revenue excluding device is down by negative 8.8%, if we exclude the employee restructuring program, the BSS, that was implemented last year, revenue was -- the EBITDA and PATAMI went up by 2.4% and 11.5%. Now of course, from a credit and management point of view, I'm happy to report that the bad debt level has been better managed this time around for the full year 2020, it's about MYR 105 million compared to MYR 165 million the year before. And an interesting development as well, the Celcom Life app has managed to attract now 2.6 million monthly average users as of end of 2020. Moving on to XL. They recorded a very strong performance, very encouraging despite the price war, largely led by Telkomsel as well as, of course, the pandemic. The weakened economic environment doesn't help. But again, the team there has done pretty well with revenues excluding device at a positive 3.8%. And of course, effective OpEx management and better management of CapEx. Now Ncell continues to be a challenging year. It has been affected by the prolonged COVID-19 lockdown, also challenges arising from spectrum constraints. As you know, we're still working on to get the L900 spectrum. At the same time, the lower active subscriber base, foreign workers, foreign remittance and so on. But at the end of the day, for the fourth quarter, we are seeing some greenshoots that hopefully will translate to a better 2021. And so far as Robi is concerned, as you know, Robi was listed on 24th of December last year. This morning, the share price is at BDT 43 compared to the BDT 10 IPO price that has lifted the profile and will be now into being one of the top 5, top 10 listed companies on the Bangladeshi Stock Exchange. Operationally, they continue an aggressive 4G network expansion in the non-CCD area, and was able to sustain the profitability throughout the 4 quarters in 2020. And of course, that came on the back of strong subscriber data growth as well as cost optimization. Next slide. Now Dialog continues to be stop start performer so far as our portfolio is concerned. Challenging first half, didn't deter management from ramping up their marketing efforts so that they were able to recover in the second half, and at the same time, the diligent cost management has improved the EBITDA margin overall to 42.3%. And as a result, PATAMI grew up to 11.7%. Likewise, Smart, another star performer, this is notwithstanding the challenges, whilst revenue ex-device grew by about 3.8%, bottom line impacted by 3G asset write-off. So that's the challenge, if you like, for this market. ADS continued to gain momentum as a result of tailwinds from the accelerated digital adoption in the new environment. Happy to report that boost -- number of boost reserves is up to 8.8 million. Number of merchants that signed up with us is at 224,000. And gross transaction value up 2x, of course, this is driven by the jump in online transactions. ADA continues its trajectory, remained PAT positive. Although ADS' bottom line is a loss, but that loss was dragged down further by the higher marketing spend at Boost to encourage government-led e-wallet adoption. To be specific, the higher marketing spend is about MYR 40 million negative that dragged down the results of ADS. Now edotco, whilst we all acknowledge the relevant nature of the business of towers, because of the pandemic, also physical challenges for rollout, many of the customers had scaled down on their rollout last year. Hopefully, that will spill over into 2021, as well as some proactive measures on receivables that edotco has largely stemming from the second-tier customers in Pakistan and Cambodia that has resulted in revenue growth of about 4% EBITDA, just marginally below down by negative 0.8%, whilst PATAMI came down by about 21%. Now cost per GB, and as you recall in our December briefing, the Analyst Investors Day, we talked about a few targets that we've outlined for ourselves for the next 4 years, 2 of which are presented here, cost per GB. And so far as 2020 is concerned, cost per GB fell by 35%, and that's on track to -- on track to reach our target of less than $0.10 per GB by 2024. The Board approved a second interim dividend of MYR 0.05 yesterday, and that brings a total dividend for 2020 to MYR 0.07. And this certainly will be a transitioning period for us towards a high dividend company, and the focus now is on the DPS rather than DPR. In the past, we've always articulated a DPR strategy, but I think for all concerned, it's much easier to focus on the dividend fund term or dividend per share as a target. And again, the target is at least MYR 0.20 by 2024. In so far as Headline KPIs are concerned, we continue to maintain that we will not prescribe specific targets for 2021. We wish, however, to give guidance for revenue, excluding device, and EBITDA growth for 2021 to be a low single-digit percentage, CapEx guidance of about MYR 6.5 billion, and of course, we expect the accelerated depreciation to weigh on Celcom and Robi in the near term. However, this puts the 2 companies in a better position in the longer term. Now I'll hand over to Vivek now to take us through the detailed results, covering the group as well as specific telcos and edotco as well as ADS. Vivek?

Thank you, Dato'. Very good afternoon to all of you, and good morning to those who are on the western side. Let me start with the first slide. This is the only slide which I'll talk about on reported numbers; and after that, it's going to be underlying performance of each of the operating company. In terms of reported, we declined at 1.5% for full year. But if you look at quarter-on-quarter, we gained 2.5% revenue. EBITDA remained flat at 0.4%, slightly on the reported basis, but we saw a quarter-over-quarter dip in EBITDA mainly coming out of the XL and also from edotco impact of the credit losses, which have been booked at the end of 2020. Profit wise, it is around 65% lower than the last year and PATAMI 75%. But this, I'll just take a little bit of a while to explain. Last year, if you recall, we did gain onetime benefits of sale of M1, a gain from divestiture of our ADS businesses and the noncore ADS businesses and the disposal of rights of IDR shares, which did give us overall gain of around MYR 628 million. This year, we have basically accelerated the 3G shutdown in most of our markets, which has resulted in around negative MYR 604 million impact booked in December 2020. Apart from that, we had a tower gain in XL back in quarter 1, which gave us a benefit of MYR 285 million. So net-net between last year and this year, on a reported basis, there is a negative impact of around MYR 965 million, and that is what broadly explains why the profit number for 2020 looks much below the reported profit numbers of 2020 -- or 2019. If I go to the next slide, underlying performance, we -- it's much better than what we had anticipated at the middle of the year, with revenue dropping by minus 1%, EBITDA showing a 1.1% growth. And if I adjust for the employee restructuring program in Celcom, the EBITDA growth is of around plus 2.1%. And this impact is mainly -- profit is lower by around close to 9.4%, mainly coming out of the higher D&A. Lower contribution from Ncell and edotco. edotco, as I said, mostly on account of credit losses booked in December. That said, revenue did show a positive growth in quarter, quarter-on-quarter plus 3%, whereas EBITDA did have a marginal drop, as I said earlier, because of mainly XL and edotco. And in terms of the businesses, I think the struggle last year has been mostly in Ncell, where we -- revenues have actually dropped by 22.5%, coming from both all factors, which is data, voice and ILD. But the positive news is last quarter, we did see a comeback or a recovery in Nepal. As far as profit is concerned, MYR 865 million. The lower profit from last year has been accounted mainly in D&A, which is around MYR 337 million, lower contribution coming from Ncell and edotco, and higher losses in ADS. If you recall in quarter 2 announcement, we did mention losses of around MYR 40 million on account of the e-Tunai Rakyat program, which was run. If I exclude that, then ADS numbers are pretty much similar to 2019. Quarter-on-quarter, PATAMI is down by 13.6%, and mainly again coming out of the contribution this time from XL for the quarter and edotco. If I go to the next one, I think this broadly explains how the movement between the last year normalized PATAMI. And this year, MYR 869 compares. If you see the larger part of that gap comes from the D&A, while we did see a positive MYR 150 million coming from EBITDA. Positive effect on tax is largely coming from the effect of deferred tax in XL, which has been lower than last year, as well as Robi. Because if you remember last year, in 2019, we did have adjustments on taxes. And in 2020, we got the benefit of lower tax rates consequent to the listing of company in December 2020. As far as the reported PATAMI and the underlying PATAMI is concerned, the large part of that gap comes from the impact of accelerated depreciation. Accelerated depreciation is mostly in XL, out of that MYR 604 million, MYR 372 million comes from XL; and around MYR 126 million comes from Celcom. And other than that, it's mostly the other factors, which includes partly the Celcom restructuring cost as well as the ForEx translation. If I go to the next slide, I think this is what we've been monitoring closely which is in terms of cash flow. Our OFCF has moved up from MYR 1.8 billion to MYR 3.2 billion on a reported basis. But as you know, now OFCF does have the ROU assets in the -- on the EBITDA side, which benefits the EBITDA growth. But if we normalize for that, the adjusted OFCF has grown from MYR 337 million in 2019 to MYR 1.6 billion in 2020. Adjusted OFCF, if you look at it, comes from all the operating companies, except Robi. In 2019, if you recall, we had challenges in Robi to import equipment because of the nonavailability of no-objection certificate, which has been caught up in 2020 and by increased investment in Bangladesh. But other than that, mostly coming out of the improvement in EBITDA as well as lower CapEx spend in 2020 versus 2019. If I go to the next slide, the balance sheet remains resilient. As I said, the strong OFCF resulting in a strong cash position of MYR 7.2 billion. Gross debt-to-EBITDA 2.57, which is lower from 2.89 because of around USD 500 million loan repayment, which happened in November 2020. And other than that, balance sheet is strong for a reason that most of our borrowing now are at fixed rates, which are at extremely low rates, which we got the benefit of using the window in August for our sukuk and the term loan program. And other than that, our maturities are much longer, which provides significant stability in the balance sheet for the group. If I go to Celcom, a strong performance in Celcom in quarter 4, with revenues holding on to what the quarter 3 numbers were. But if I look at including devices, quarter-on-quarter, revenue grew by around 2.7%. Year-on-year, 8.8% drop in revenue, mostly coming out of the lower revenue, which we got in quarter 2. After that, H2 over H1 has shown a strong recovery. We've also added around 300,000 customers, new customers in the year, which brings us back to pretty much the customer levels pre-pandemic. The impact on revenue is also being because of lower ARPUs in 2020. EBITDA, strong performance quarter-on-quarter with 10.6% growth in EBITDA. Year-on-year EBITDA growth of 2.54%, if I exclude the impact of the ERP program, which we ran in quarter 1 this year. Stable free cash flow and improved PATAMI if I adjust for the accelerated depreciation and the impact of the ERP program, the PATAMI has improved by around 11.5% over 2019. XL strong performance despite the price war and pandemic condition in Indonesia. Last quarter was a bit of a dampener because of heightened competition and also weakened economic environment and the impact of the government-run program for subsidized data offering in quarter 4, and that has basically resulted in lower EBITDA in quarter 4. However, on a year-to-date basis, we've seen a growth of 3.8% in revenue and around 11.2% growth in EBITDA. And that's basically -- that EBITDA improvement as well as lower CapEx spend in 2020 has resulted in a much stronger cash flow generation. And that has resulted in improved PATAMI if I normalize for the impact of tower disposal and the accelerated depreciation. Quickly on Ncell, as Dato' said, has been one of the challenging year for us for 3 factors: one factor has been the prolonged COVID-19 impact; second has been basically the spectrum constraint. If you recall, we did get spectrum last year, which has still not been allocated to us, and that has resulted in spectrum constraint limiting us from driving data growth and monetization in that market. And also the fact that the large part of Nepal market is also having the -- having the fixed presence where there has been a shift of consumption of data, resulting in lower active subscriber base relative to previous year, and that basically resulted in lower revenue for the year. Core revenue dropped by around 22.9%, and ILD dropped by 21.6%. ILD, we were expecting, but not at the pace at which it is reduced. But that said, we are seeing some positive signs, specifically on core revenue. Quarter-on-quarter core revenue grew by 5.7%. EBITDA for the quarter-on-quarter remained plus 3.5% year-on-year, mainly resulting from the lower revenue drop by around 25%. Free cash flow, positive 13.4%, mainly coming out of lower CapEx spend consequent to the delayed allocation of spectrum for us. PATAMI, resulting from the lower revenue as well as new borrowing, which we did in April last year of around NPR 20 billion. Robi, strong performance from Robi. Continued to have sustainable profitability development in the business, and we continue to aggressively expand our 4G network presence. Revenues have been impacted mainly because of the COVID impact. However, the company continue to focus on its cost initiative and efficiency plans, driving EBITDA growth of around 11.8% compared with 2019. And free cash flow marginally lower, as I said earlier, there was a catch-up CapEx in 2020 from 2019, which was delayed because of the absence of NOC in 2019. However, strong PATAMI development for the year, coming down from a good EBITDA improvement here. Next slide, Dialog. Strong earnings growth continues to deliver good performance despite the economic conditions and the COVID-19 impact. Quarter-on-quarter, revenue growth of 5.8%, and year-to-date revenue growth of 3%, resulting in a strong EBITDA development of 5.2% quarter-on-quarter and 8.9% on year-to-date basis, and also improvement by around 2.3% on EBITDA margin from 40% to 42.3%. And that basically translates into improved free cash flow of 21.9% and higher profits of 11.7%. But if I normalize the effect of ForEx as well as the accelerated depreciation, the PATAMI growth in Dialog has been around 33.8% on a year-to-date basis. So a very strong performance coming from Dialog. Smart continues to deliver well for us. And quarter-on-quarter, 17.6% is a bit of an adjustment reclassification from quarter 2 to quarter 4 -- quarter 3 to quarter 4. However, on a year-to-date basis, 3.8% growth, despite the fact a lot of tourism and roaming and revenues have been impacted in the Cambodian market. But the core prepaid revenue has done well despite the situation around the COVID at 3.8% and the EBITDA growth of 6.6%. The business continues to focus on efficiencies to drive the improved margin, resulting in strong cash flow generation. PATAMI marginally impacted because of the 3G write-off. But if you adjust for that, then PATAMI would be reflective of the improvement in EBITDA margin. Boost our -- sorry, the digital businesses, I think businesses continue to be developing in line with our expectation. With strong growth in terms of user base in Boost, reaching 8.8 million; merchant base reaching 224,000; and gross transaction value doubling from last year to -- so that's been a strong -- and also the fact that we are now looking at Boost delivering positive contribution at a very low-cost level. Aspirasi, which is the microfinance business and micro-insurance business, has been picking up steam, with around MYR 207 million worth disbursement of finance loans, to around 9,000-odd merchants and micro-insurance policies of 30,000 being distributed during the year. Digital advertising business continues to do well, runs another year of positive profit and has added new partners during the year and continues to be looked at positively by external investors to come in and participate into the overall growth of the business. And the business has moved away from being a pure agency business to much stronger outcome-based business, which provides end-to-end solutions to the companies. So that's on the digital businesses. edotco. If you look at edotco, revenue continues to develop well, marginally below our expectations because of delayed orders coming from the MNOs and some of the markets because of the COVID pressures. However, EBITDA impacted quarter-on-quarter by around close to 20%, mainly coming out of the credit losses of around MYR 78 million for the year from some of the Tier 2 customers, and some of them have been impacted either because of the COVID or they have been impacted because of the regulations, wherein Cambodia one of the licensee there where the license was canceled by the regulator. However, with moderated CapEx, the free cash flows remain positive. PATAMI impact, negative, mainly coming out of the credit losses booked at the end of the year. If I go to the next one, dividend, if you recall, we have paid MYR 0.02 interim dividend back in August last year. Pleased to inform that Board approved yesterday the final dividend of MYR 0.05, which takes the total dividend payout of MYR 0.07 for the year. And this is on the backdrop of continuing risk around global pandemic. if I go to the next one. This is just to give you a perspective in terms of how our cash flows are built for us to be able to go to what we are looking at an EPS target of MYR 0.20 by 2024. So if you look at our OpCos generate around MYR 4.4 billion of the operating free cash flow. If I adjust for the impact of ROU, total earnings coming from the operating companies is around MYR 2.4 billion. ADS consumes around MYR 265 million of cash flow. Going forward, we've been communicating that ODS -- ADS would, by and large, get external funding to support its growth, which would mean that the requirement of funding for the ADS business is expected to come down. We have MYR 316 million of net finance costs for the year. This is also with the new borrowing, which we've done. We should be seeing a reduction coming going forward on our finance cost. And the others is basically relating to the corporate center OpEx and some of the eliminations between edotco and some of our MNOs, which is around MYR 156 million. So the Group, as such, generates, and based on 2020 numbers, generates around -- generated around MYR 1.6 billion operating free cash flow, so which is a fairly strong cash generation for the year, which we believe is going to be the path forward for us to reach MYR 0.20 of dividend by 2024. With that, I'll hand it over back to Dato' on the [ section ] moving forward.

Thanks, Vivek. So as you can see, we are rather encouraged by the performance -- the pretty good performance of each of the Group. The good results, good efforts, strong efforts by the team at Celcom has manifested itself again in the fourth quarter. Of course, there's still plenty room and a lot of work that the Celcom team is doing. But I'd like to congratulate the team of Celcom for making the results for the fourth quarter and the -- we continue to monitor the performance going into 2021. As I said earlier, we do not intend to give any specific Headline KPIs for this financial year. However, the guidance we like to give is revenue and EBITDA growth of low single digit. At the same time, CapEx indication of about MYR 6.5 billion. Some of the deferral from last year has spilled into this year, no doubt. At the same time, we're mindful of looking at network capacity constraints that we're currently facing throughout the pandemic. Data traffic has gone up significantly and so it just makes sense for us to continue to invest. Now at the same time, the big question mark is the data growth, the traffic data growth, is that going to be sustained at that level, probably the answer is probably no. But then we are not quite sure where would be the equilibrium like post-pandemic. Then again, post-pandemic is anybody's guess right now. Of course, the vaccination program is going to help. But for all intent purposes, 2021 remains -- we remain rather cautious on the outlook for 2021. Next slide. In terms of opportunities and risks for the organization, I'd like to spend a bit of time here. Of course, from an opportunities point of view, we will continue to make investments in ex-Java, Indonesia as well as non-CCD and Bangladesh. The 4G network rollout, results thus far have been rather encouraging, and of course, given the penetration rates in those 2 countries, and these are 2 growth markets that we see in our footprint countries. And no doubt, the continued efficiency, the focus for us is on the continued efficiency improvements through the Collective Brain initiative. We are in the midst of finalizing the procurement for our core investments needs for the next 3 years. We hope to see a very, very encouraging price from the vendors that we can probably share down the road. In terms of ADS monetization, money in the bank from GE, that's a deal that's been -- that's included. But the focus now for the digital financial services as well as ADA, and by the way, ADA is -- we are going to explain a bit more later on, but ADA is morphed itself into a digital and artificial -- analytics and AI company, rather than -- it's moved on from the initial days of digital advertising, and that's simply because of the work that they needed to do to serve their customers in the digital advertising space. There's a lot of focus on analytics today these days as well as on AI. So the point here is that we continue to receive a lot of interest from would-be investors in those 2 businesses. Hopefully, we can make some announcements in a couple of weeks' time. That's a nice lead into the next item, the digital bank license. As you know, Bank Negara has announced the digital bank framework on the last year over the last year, and we are very encouraged with the, if you like, framework that's been announced, because we'd like to think that we are able to tick all the boxes, so to speak. In due course, I do hope to announce the partnership, the joint venture, the equity partnership for us to submit to the Central Bank in pursuit of this digital bank license. At the same time, hopefully, I can also announce the commercial partnerships that we have -- that we are working on, so that the ecosystem of the digital bank can be presented like as part of the submission to show the complete nature of what makes a digital bank. Of course, as we've alluded to, we'd like to think that the ability to raise USD 1.5 billion. If I remember the data correctly, August 19 last year it was when we raised the funds, USD 1.5 billion at very attractive rates. Vivek is always smiling since then. And from the ratios that we have, we are very encouraged that -- and cash position we have, we are encouraged that we can support the growth investments as well as the digital needs -- digital adoption needs of our businesses. Now so far as risks are concerned, as I've alluded to, we think the COVID-19 impact will continue for a bit of time in this financial year, way into perhaps second or even third quarter. It's not as straightforward as you all would appreciate, just everyone getting vaccinated. The -- if you like, the rollout of the vaccination program is also in itself a challenge, but we are rather encouraged by the progress that each of the countries are making, Sri Lanka, Bangladesh, Indonesia, and of course, in Malaysia as well. As I've mentioned, the strain that is in place on our network, rising from high data traffic and as well as physical rollout of our travel business and MNOs that in itself is a challenge. There are some regulatory uncertainties in Malaysia, Indonesia and Nepal, just to be -- just to clarify, in Malaysia, it's around the data and of course, the 5G SPV, which I'll talk about separately next below point. Indonesia, there's the Omnibus law, which we are still waiting for specifics. There's some announcements on ownership, if you like, for some of the businesses, which, again, is a very strong testimony in terms of the government's wish to attract foreign direct investments, so we're encouraged by that. And of course, Nepal, which continues to pose a challenge, not because of anything. Right now, as you would appreciate, there is no government per se because the parliament has been dissolved. So we're waiting for the developments on that front before we can actively and proactively engage with the regulator as well as the ministry to secure the L900 spectrum for our business to rollout the network for this financial year. Now so far as the 5G SPV announcement is concerned, as you know, well, first of all, Axiata is an organization, we've been part of the digital and technology space, we continue to support the country's aspirations, whether it's Jendela, and of course, the Malaysia's digital economy blueprint, because we believe that the connectivity that we can provide will develop countries not just nation. In fact, it's all other emerging markets that we operate in. And of course in Malaysia, the digital economy blueprint will be able to raise the country's capacity in our initiative towards digital economy as well as leveraging on the industrial revolution, IR 4.0 opportunities. Now -- and so far as the announcement of the 5G SPV is concerned that was made last Friday, Celcom continues to engage with MCMC, the industry and all other stakeholders on the establishment and tenant operations of the SPV to ensure the successful rollout of the 5G infrastructure. At this stage, there are -- there are no details on the construct, the commercial arrangements and so on. A lot of work still needs to be done so we rather reserve or not comment on any aspects of the 5G SPV. And of course, it's the subject of a lot of press coverage, comments made by rating agencies. But until and unless the details are spelt out, we, at this stage, rather not make our comments. Suffice to say, we will continue to engage the regulator MCMC, the industry and all other stakeholders to make sure that the intended operation SPV will ensure a successful rollout of the 5G infrastructure. So on that note, I think we will come to the conclusion of our presentation. Over to you, Clare.

Okay. Thank you, Dato'. So we move on to the Q&A session. [Operator Instructions]. So happy to take questions now. Okay. We do see hands up already. Perhaps we can start with Foong from CIMB. Foong, please unmute your mic and ask your questions.

A couple of questions from me. Let's start off with Celcom, as Dato' mentioned, pretty good quarter for the fourth quarter. So I wanted to ask a bit more questions on the operational performance. We have seen the third consecutive quarter of postpaid, positive net adds for prepaid. Can you provide more color on what's driving that? Is it short-term promotions that Celcom is doing? Or is it something more sustainable? And do you think that these subs would stick in the coming quarters? And also if you can provide some color on the postpaid net adds as well, which were quite healthy. Again, what's driving that? Was there any specific plans or promotions that is gaining Celcom this traction? And also my second question for Celcom is on the cost side. We saw a couple of cost items dropping a fair bit in the fourth quarter. Were there any exceptional items? If so, can you list them down? And what were the amounts in the fourth quarter? Okay. That's my question for Celcom. And then moving to Ncell. You talked about the greenshoots that we saw in the fourth quarter. What is driving that recovery in subscriber base? And also the improved data price elasticity that you mentioned in the presentation? And what is the outlook for revenue growth into this year? And is the EBITDA margin at high 50s sustainable, you think? And lastly, my question for edotco. After the bad debts that you provided for in the fourth quarter, do you think that's it? Or are there still some pending ones in 2021? Yes, those are my 3 questions.

Very good detailed questions. I'll touch a bit on the Celcom sort of experience in the fourth quarter. And then I like to invite Idham and Jennifer, CEO and CFO, respectively, who's also on the call, to provide better clarity on the questions that you raised on Ncell. Vivek, you can address the price elasticity as requested. And I can talk about edotco in so far as the second-tier customers are concerned. Now on Celcom, yes, I mean, it's an encouraging performance. If you look at the overall results of revenue, revenue came down by about 8.8%. But the good news is, we've managed to recover back the subscriber base. If you recall, we lost a fair bit of subscribers in the first quarter. So we're now back to where we were pre-COVID. So we managed to add on something like 306,000 subscribers. Now the explanation for that drop largely is because the number of subscribers we managed to achieve was in the third -- towards the end of third and in the fourth quarter. We were not be able to generate the revenue to recover from the revenue loss in the first 6 months. So hopefully, that trend will continue. In fact, looking at the January results, we are very, very encouraged. And so far as the nature of what's driving it, yes, there's a conscious effort to make sure that this is not a numbers game, but it's a profitable game. Perhaps Idham and Jennifer, and I get you guys to give a bit more details on that.

Okay. Firstly, thank you Dato' for that quick answer, and thank you, Foong, for the question. Yes, we have seen some good recovery in the third quarter and also the fourth quarter, I think, continued acquisition of new customers, about over 300,000 for each of the quarter. So it's a good trend that we are seeing. We believe it's a result of 3 main drivers: #1 is, post the CMO, we introduced some a little bit more competitive products in the market, especially with our unlimited prepaid. That seems to be resonating well with the public. So that was one of the first driver. The second also, we have improved in terms of our trade operation, the trade performance is showing a very, very good -- a very encouraging trend in terms of active dealers even to the long tail of the dealers. Last but not least, perhaps because of the MCO, the demand for the broadband and for the mobile services, has increased quite significantly. And the fact that we have the largest and the widest coverage also helps, because we're seeing demand from some areas that we have the best coverage out there. So that's probably the 3 main drivers in terms of growth from both prepaid as well as postpaid. So it's interesting to note that coming out during the MCO, we were able to transform our operations and work to adapt to the situation. And we're also seeing quite an encouraging increase in terms of sales and revenue coming into our digital channels. On the cost for the Q4, I'm going to pass on to Jen to talk a few of these big items.

Foong, thank you for the question. In Q4, generally, in terms of the operational -- the OpEx, it has been on a declining trend because we have been embarking on the cost optimization. But having said that, you're right, in Q4, we have got a one-off resulting from the -- we have a very prudent financial practice. But because of the settlement that we actually managed to finalize in Q4 from the tax front, we actually managed to have a reversal because of that, of close to about MYR 19 million.

Vivek, on Ncell?

Yes. On Ncell, I would say that -- I mean, I put a bit of a caveat because this is short 1 quarter we are talking about. So it just the green shoots on the recovery in that particular market. That said, I think we've seen positive development on revenue-generating base in the quarter, which had seen a decline throughout the year. And that -- one of the reasons for that was the -- once the pandemic hit a lot of our consumers, specifically the lower value consumers moved back to their villages, and we do not have still 4G coverage in that market, that resulted in the revenue-generating base coming down. Those customers have started to come back into the cities. And that's seen the effect on improvement in revenue-generating base. Second is, I think new products being launched by us in that market, which are data packs, which has resulted in improvement in ARPU coming in, which is the effect of basically elasticity of the higher data volumes, which have been given. And third factor is the voice revenue, which has declined because of the sporadic shutdowns happening in that market has also started recovering. So we've seen positive development, and we expect that to continue. But as I said, our biggest constraint at this point in time is the spectrum availability, because as you know, the pricing, the realization or yields in Nepal are probably one of the highest. And as we bring that down to be able to be more competitive, we require to give more data, and that's where the spectrum and availability puts a constraint.

Okay. Thanks, Vivek. We are fortunate to have Adlan on the call as well. Adlan, on the question of more provisions, should we expect more provisions from the second-tier customers in the year to come?

Yes. So yes, thank you, Dato'. So I think the provisions that were made primarily the Tier 2 customers in Cambodia and Pakistan, right? So primarily, those that did not survive the pandemic. And of course, one of the Tier 2 customer license was actually revoked in Cambodia, right? So we still do have operations with some Tier 2 customers remaining. However, these Tier 2 customers are part of bigger conglomerates, right? So we do not expect any more provisions coming from the Tier 2 customer, because it's either part of a bigger conglomerate or they have a corporate guarantee as standby in case of debt, right? So we think that we've taken the heat in 2020, and we do not expect any more coming from the Tier 2 customer this year.

Yes. Thanks, Adlan. Yes, as Adlan has articulated the second tier customers, unfortunate turn of events where the license got revoked. I mean, we wouldn't -- ordinarily, you wouldn't have expected that to happen. But now at the same time, it's a provision that's made. The team is consciously trying to arrive [indiscernible] so that we can recover some of the provisions that we've made. Essentially on this topic, Foong, maybe before anyone asks a question on the Myanmar situation, as you know, we have a business in Myanmar since Adlan is on a roll here, we have 1,800 towers in business in Myanmar. The good news is that the military seems to want to make sure foreign direct investors remain in the country, business goes on as usual. And because edotco is critical, if you like, for the telecommunications infrastructure, we -- well, I personally don't think that there's going to be any impact, while not in the immediate term, and nothing we can see so far, it's still early days. But we are treading it rather carefully to make sure that our business remain intact. Of course, from an operational point of view is slightly limited. But maybe Allan, anything you want to convey to the participants today?

Yes. I think from the operational standpoint, of course, I mean, there is Internet disconnection, right, from 1 a.m. to 9 a.m., right? I mean that's -- and there's a curfew from 8 p.m. to 4 a.m. that's been implemented in Myanmar. I think there will be -- the biggest challenge in Myanmar today is probably what you call the CDM, right? The civil disobedience movement, where you see the civilians, the people are going out to demonstrate, right? So -- and that, to a certain extent, have actually impacted the public service, right? Being doctors, nurses, banks, or even the custom office and all that, right? So operationally, today, there's not much impact to us. We are still keeping our SLE and all that. However, we can see that in the coming time, there would be a little bit of a slowdown in terms of rollout and all that given that the fact that permits and all that is going to be tough. And I think one of the other areas that we're also seeing a little bit of delay is clearance of equipment at the customer side well. Because today, you can see that customer even not coming to the office, right? So we are monitoring the situation. It's manageable at this point in time, but I think, yes, we'll need to see how things develop over time.

Okay. Thank you so much, guys, for those answers. Can I just go back to Ncell, right? With regards to the question on the EBITDA margin, for this year, is that sustainable at 50s? And maybe one more question, if I can throw in Dato', how much dividend per share can we expect for this year?

Well, I'll try to answer your margin question as well. I think, as Vivek said, it really depends on the spectrum availability the L900. So the team is working really hard to try to make sure that we get the spectrum in time because, as you would appreciate, rolling it out is another challenge. So 57%, 56.9% for 2020 is quite remarkable achievement under the circumstances. But we think around -- I don't want to speculate or give a number, but it hinges really on the availability of the spectrum.

Yes. I mean I think what I would add is that the cost of operations in Nepal are not that high, which allows us to hold on to a fairly good margins. And also the fact that ILD does give strong margins to that business. Clearly, the dependency on high margins is on the growth of core revenue. And if that positive direction which we are seeing continues to happen, then we should see high 50 percent margin remaining. So I think that's really -- and that, as Dato' said, is also quite dependent on the availability of spectrum.

And so far, as dividend is concerned, Foong, we are trying to move a transition towards a DPR as opposed to -- sorry, DPS regime rather than a DPR regime. For 2020, it's 74% of adjusted underlying PATAMI compared that at 86%, 85% in 2019, 2018, respectively. In terms of the quantum per share, we certainly will make an effort to improve on the MYR 0.07 for the year 2020. Directionally, that's where we're heading towards the MYR 0.20 for 2024. So expect better than MYR 0.07 in 2020. And of course, this depends on the performance for 2021. Again, we think that we were asked that same -- well, we had the same question in terms of our outlook performance for 2021. As I said, the challenges are still there. But we like to think that the business is sustainable so far as the telco industry is concerned.

Okay. We move on to the next question, coming through from Alex from Am.

I have a couple of questions. Thanks, Dato' for holding this session. One is regarding your CapEx. You've indicated that you're looking at MYR 6.5 billion, but last year, your CapEx guidance was MYR 6.6 billion, and you've only spent about MYR 5.3 billion. So including your MYR 6.5 billion, is that your -- that MYR 1.3 billion left over that you did not spend and you bringing into this year? Or -- and is there any likelihood that this will likely be deferred as well?

Well, again, the challenges is from a rollout point of view, the physical limitations that we face. It's not much of the [ equipment ] but because, like I said, it's trying to balance it because of the network demand that's been placed on our network. And so the capacity we need to continue to ensure that, and we might need to invest. Yes, mathematically, the delta of what was guidance that was given last year, it seemed like a lot of it was deferred into this year. The guidance we're giving this year includes some of that because we expect some savings from the procurement excise we are undergoing -- undertaking. We should be able to conclude that. Vivek?

Well, I think Dato' is right. I mean, it's very difficult to say how much is really the deferment to the next year and what is really new CapEx for next year. But that said, I think this is on a BAU basis, and which does include our continuing investment in non-CCD as well as ex-Java. So I think that's how the CapEx is moved in. But there are still uncertainties hanging around what could be the requirement of CapEx in Malaysia, for example, to meet the requirements of Jendela or the early shutdown of 3G, right? So that we don't know at this point in time. We also are looking at the implications of the merger happening in Indonesia and what would that mean in terms of the CapEx requirement. So this CapEx, what we projected of MYR 6.5 billion is to meet the growth numbers, which we talked about a low single-digit in 2021, to support that. If there are things going to change depending on how these 2 markets specifically move, we will have to revise the CapEx numbers.

Alex, on CapEx, we're trying to delineate the CapEx for edotco. So in the MYR 6.5 billion number, there's about MYR 860 million. That's attributable to edotco. Now why I would like to differentiate that moving forward, and you'll see this in the first quarter 2021 results later on when we do this same session for -- in May. Because edotco CapEx, as you would appreciate, is very different in the sense that the minute they commission a tower, revenue kicks in. So it's good that edotco has a high CapEx number because it's revenue-generating contractually. So it's just like trying to make sure that we are on the same page in understanding the nature of the CapEx. That's more a place marker or placeholder for our first quarter presentation later on.

I see. Okay. Could you give us a further breakdown of the MYR 6.5 billion? Like how much is Celcom? And the other regional operations?

Sure. So Celcom, we are looking at around MYR 1.1 billion. We are looking at around MYR 2 billion -- these are all in ringgit, right? MYR 2 billion for Indonesia; we are looking at around close to MYR 650 million for Dialog; around close to MYR 1 billion coming in -- or MYR 900 million in Robi; Smart would be around MYR 370 million; Ncell around MYR 300 million; edotco, as Dato' said, around MYR 860 million; and balance is for others, which includes platforms for ADS as well as CapEx required for our digital lab. So that's broadly the breakup of the MYR 6.5 billion.

Yes. Okay. And regarding your depreciation, since you already written down the 3G infrastructure by about MYR 600 million last year, could you give us a bit of guidance. Are you looking at a single-digit increase in terms of your depreciation this year given that you've written down quite substantial of your assets?

Yes. Firstly, Alex, quite semantics, and you and I are not the accountants in the room, but the I'd rather use the word accelerated depreciation rather than the write-down, just technicality more than anything else, because the assets are still in use. Customers are still using the 3G network. We still need to migrate the 3G customers to 4G, and that also means VoLTE licenses and capacity again and concern sometimes is that we still have a lot of customers on 2G. I know it's a separate topic, but that has a bearing on the CapEx we need to spend. Yes. So far as single-digit increase in depreciation in 2021, Vivek?

No. So I think, as Dato' said, it's -- first of all, it's acceleration of depreciation, and it's not a very large part of the overall base for us because a lot of 3G CapEx was already depreciated and new CapEx is largely coming from 4G, and some of the markets is pretty new. That said, also accelerated depreciation has short-term negative impact because it pre-pons. So it's not a write-off. So it pre-pons the charge into the P&L. So 2021, we will see some impact of higher depreciation coming in because of the acceleration, which has happened. That said, I think we do not see fundamentally very difference in the otherwise run rate of depreciation for us. But going forward from '22 onwards, we should see the positive effect coming in for this acceleration.

Okay, great. Can we go into Celcom? I'm just looking at the cost, just going a bit more granular on the expenses. I noticed for fourth quarter your dynamic expenses and your network costs have came down significantly. Was there any kind of adjustments there? Or the -- what sort of run rate should we be looking at?

Jennifer? Should you take that question?

Yes, sure. If I may start, I think the direct expenses is driven by a couple of things. First is the -- when we -- especially in terms of roaming and all that, but it actually goes away during the MCO, relative as compared to what is in the prior year, of course, the number continues to come down. And in addition to that, the device sale is also one of the key drivers in terms of the direct cost. So having said that, the direct cost in action has actually continued to come down, mainly driven by the top line actually. But on the other hand, like the network cost, there's quite a couple of things that has actually happened during Q4. There are some true-ups that we have actually done in Q4. But having said that, when we look at the network cost, it continues to trend down as we sit whilst the traffic continues to increase, we are finding new ways to actually try to fulfill the service, while maintaining the cost that we have -- we actually have in network costs. Hopefully, that answered the question, Alex.