Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Good morning, everybody. Maybe I'll take my mask off first. First of all, thank you for joining the call this morning. We're here to present the first quarter results for financial year 2021. And I do hope that you've had a chance to view our video on sustainability. It's a program we've started to launch last week. And the idea is to inculcate all the efforts around sustainability alongside our ESG program throughout the organization. Those actors, if you like, in the video are actually our staff. And if you look in some of the other videos that we've put up, they have on their own actually initiated their own sustainability initiatives at their very own homes. It's quite amazing actually what the team has done. Anyway, for the first quarter results, as we have picked up from the press release as well as the Bursa announcement on Tuesday, it was a rather encouraging start for the year, notwithstanding the challenges we continue to face as you would -- the press release carried a reported number of MYR 76 million PATAMI. And of course, after adjusting for the -- if you like, the accelerated depreciation, the underlying PATAMI is actually MYR 231 million, which is a rather encouraging comparable to -- if compared to the first quarter last year. You'll recall there was Celcom employee restructuring charge in financial year 2020. That's about MYR 101 million gross. But I think the point about the underlying -- the accelerated depreciation, that will continue to update. But so as far as Celcom is concerned, it will turn positive in the third quarter. And Vivek will provide more details as we go along the presentation this morning. So at the same time, the ringgit strengthened across the OpCo currencies as a result of the ForEx translation loss, again, noncash item, that is slightly bigger for this quarter compared to last year. And so far as our balance sheet is concerned, you can see that our operating free cash flow, that grows to MYR 1.1 billion. And this is driven largely by a high EBITDA, lower CapEx spend. And as a result, our cash balances at group level is about MYR 6.6 billion whereas at company level, it's about MYR 1.7 billion. The good news is our debt balance sheet capital structure, if you like, debts, 68% of our borrowings are fixed in nature. About 25% is due within the next 2 years. Now moving on to the digital telcos, on the Celcom, yes, again, Celcom achieved a very strong subscriber growth, about 1 million subscribers over the year. You can see that, again, the employee restructuring program costs that had brought down the number for 2021, had again accelerated depreciation. But revenue, excluding devices remained resilient and we have a stronger prepaid performance from the enlarged subscriber base. And so far as XL is concerned, despite the intense competition pressures and weak consumer spending, the margin remained strong at about 50%, yes. EBITDA remained strong also. And this is on the back of lower staff costs as well as network expense. Robi recorded strong data revenue growth. That's about 16.3% on data alone. And overall, revenue excluding devices a positive 2.4%. And of course, at the same time, Robi benefited from the listed status. As you would -- may recall, the listing would grant them a reduction of about 5% on the taxation rate. And as a result, reported PATAMI rose to about BDT 343 million and EBITDA margin is stable at about 41%. Now Dialog is, as we can see, there is a stop performer, double-digit growth across all metrics, yes, whether we're looking at revenue ex device, EBITDA of 12.3%, PATAMI growth was 64% and free cash flow about 10%, yes. And this entire contribution from all segments as well as the consolidation of the company that was acquired that was a cloud solution service provider that was acquired in January this year. In supply as far as it is concerned, spectrum constraints remain. As a result, the numbers were a bit challenging. And however, as we may have been informed that the L-900 was awarded without severe onerous conditions. So we think the second half of financial year 2021 will be better, yes. And in fact, the team was preparing itself for the award of the spectrum, the equipment that's been brought in and the rollout has started in earnest. And so far as Smart is concerned, there is an impairment of investment of about $5.4 million. As a result, PATAMI came down by about 31%. ADS benefited from increasing a cashless ecosystem. Year-on-year revenue grew by 30.5%. Net loss has narrowed down to about $29 million. Now that's largely because if you recall in last financial year, there was an e-Tunai program, which resulted -- the loss in financial '20 was about $52 million. So that's a significant improvement from a loss of MYR 2 million to MYR 29 million. Of course, at the same time, ADA continued to record better profits. In fact, it was MYR 10 million this year compared to MYR 2 million in financial year 2020. Now you will also see in the presentation today, for the first time, we're disclosing the performance of our digital businesses so that there's better transparency in terms of the achievements of these businesses. And so far as edotco is concerned, solid EBITDA margin that's continued to be sustained at about 64%. PATAMI rose to about 42% and the good news is the -- there is, right now, a limited impact from the Myanmar military group thus far. So that's a caveat there. We will continue to monitor the situation and obviously will be functions of any changes or any impact, if you like, on the business there. But -- and so far as we're concerned, there is no need for any impairment of the investment that we've made in the business in Myanmar. So far as our headline KPIs are likely to be in line, we expect the EBITDA and revenue growth. Revenue, excluding device is projected to be in line of the guidance that we've given of low single-digit percentage growth. And so far as the downside risk consumed for 2019, in view of the continuing challenges that is faced as a result COV19 across all our markets, the introduction of lockdown or restricted movements, this -- we expect that this will have an impact on the economic recovery, slower impact -- a slower consequence of the economic recovery. So that will continue to be something that will pose as a challenge to our business. And lastly, so far as ADA is concerned, you would have picked up again the announcement we've made of SoftBank Corp investment of about MYR 250 million into ADA. Valuing ADA is about -- valuing ADA at about MYR 1.1 billion. I think what's important is it opens up on top of the capabilities, the analytics, tools and AI tools that SoftBank Corp already had. What it does also open up the SoftBank Group ecosystem to ADA. I think that's the plan that SoftBank has for ADA to make ADA its digital analytics and AI company in the region with this 23% stake in ADA. Now that's in general and summary, the performance of the companies and the business for the first quarter. I'd like to hand over to Vivek to take us through the details of performance of the companies.

Thank you, Dato. Very good morning to all of you. It's quite early for some of you who are on the call today. So let me just go through the reported numbers first, then I'll go into more details by the -- each of the operating companies. Reported performance is flat around 0.5% growth year-on-year and marginally lower, minus 3.2% from -- on a quarter-on-quarter with the 7.5% improvement in EBITDA. The reason why this is 7.5%, whereas the underlying is 10% is because ringgit has strengthened across all operating currencies. Consequently, the impact on translation has been negative in terms of impacting the growth for the company. EBITDA from quarter-on-quarter was marginally lower at minus 1.4%, mainly because Last year, if you remember, in quarter 4, we had some GST refund coming in, in Celcom, which did lift the EBITDA for Celcom in quarter 4 last year. PAT at MYR 187 million higher than the quarter, but marginally lower than previous year. And mainly because previous year, we had this one-off gain coming from the sale of towers in Indonesia. And this year, we also had marginal negative impact coming because of the accelerated depreciation impact coming in 2 markets, which is Celcom and Robi. I'll just briefly explain the impact which is coming and how this will be looked at going forward. If you recall, last year, we did shut down -- plan to shut down 3G in most of our markets, except in Nepal, and we did take a MYR 600 million charge in quarter 4 last year. And in 2 markets, the decision was to take it forward to '22 and '23. '22 in case of Celcom and '23 in case of Robi. Now these 2 are where the depreciation has been accelerated. So we are seeing some impact on the early period. We don't expect this impact to continue specifically in Celcom. There would be some impact in quarter 2. But after that, we should start seeing the benefit of acceleration coming into the P&L. So that broadly what explains the performance even on PATAMI. If you look at last year, year-on-year, impact is around MYR 325 million on one-off items, which is explained by around MYR 260 million coming from the gains of tower sale, around MYR 77 million positive effect coming in from the VSS program which we ran in Celcom, a negative impact of around MYR 126 million on account of accelerated depreciation. So that's how the year-on-year performance on a reported number gets impacted. If I go to the next slide, which talks about the underlying performance, and that's where you would see the EBITDA growth year-on-year at 10.6% and revenue ex device growth of 2%. EBITDA margin improved by 2.9% coming to 44.4% and partly also explained because of the ERP program, the restructuring program in Celcom. But if you look at revenue, performance came strong from Dialog, from ADS and EDC, marginally offset by lower revenue numbers coming from Nepal and Indonesia. Nepal has been -- I think we'll go into more detail, but also partially explained by the continuing international long-distance revenue coming down year-on-year, which was expected and in line with our estimates. Quarter-on-quarter, if you look at our revenue has been marginally lower in ADS, mainly because of seasonality, quarter 4 tends to be a very strong quarter 4, both for DFS as well as for the ADA business of ours. Smart is minus 11.2%, and that's mainly because of change in some accounting. Earlier in the past, we used to report discounts net to the dealers netted off from the revenue, which has been changed last year. So the revenue has been grossed up, whereas expenses or discount has been treated as an OpEx. And that's where you see this impact coming into the revenue line because last year in quarter 4, we did the impact for the full year and strong performance on quarter-on-quarter coming from Robi and Dialog. If you look at EBITDA, I think I've explained most of it, but key thing which I would highlight here is the ADS performance, the losses coming from ADS have come down by around EUR 72 million on a year-on-year basis. And that's reflective of 2 facts. One is the lower overall losses, profitability of ADA business, which has been doing extremely well for us. And third is, last year in quarter 1, we had this one-off spend coming on from the e-Tunai Rakyat program in Malaysia. We continue to focus on our cost excellence program with savings around MYR 87 million. Our target is on OpEx and CapEx put together around MYR 1 billion for this year. We're pretty much in line. We will start materializing some of the savings later, and one of the main impact would come probably on the CapEx side savings because of the recent negotiations we've closed with our major vendors. On EBITDA, we continue to be in line profits, I think, mostly explained by contribution on higher EBITDA, lower losses coming from ADS, lower net finance cost, I mean, we have seen around 30 basis point overall reduction in the finance cost. This is despite the fact we moved from short-term borrowings to further long-term borrowings at fixed interest rates, locked in at a point in time when the interest rates were very attractive for us. Underlying PATAMI, as we mentioned earlier, has been mainly impacted because of the ex rated deposition, net impact of MYR 126 million and relatively higher tax on a quarter-on-quarter basis in Robi and XL. Robi got the benefit last year on IPO. The tax rate came down by 5%. That had an impact for full year. Similarly, on XL, we got some benefits on deferred tax adjustments last year, which did give us benefit. If I go to the next slide, which is really kind of a bridge on the underlying performance from last year to this year and I'd actually explained most of it, the effect -- positive effects coming from EBITDA, from digital businesses, from lower finance costs and benefits of tax, mainly in Robi where the tax rates have come down,subsequent over listing of the company. Negative effect comes because mainly of the D&A charges and largely impact of the accelerated depreciation, which I've talked about. So I think that's broadly the bridge in terms of EBITDA performance from last year to this year. If I go to the next slide, this slide talks about the operating free cash flow. Now one is the bars in blue, is what is the reported numbers of operating free cash flow, which is the EBITDA minus CapEx. However, if you look at the adjusted, where we adjust for the actual leases paid, during the quarter, you would see the one numbers on the top, which is MYR 273 million last year for first quarter and MYR 710 million, so nearly around close to MYR 550 million improvement in the operating free cash flow for the year, mostly coming from the OpCos which have delivered higher EBITDA and also OpCo like Robi where there's been some delays in the CapEx items for the quarter. If I go to the next slide, this basically gives our balance sheet. I think the actions taken by the company last year, middle of last year, when the interest rates were attractive for us and locking in debt for a longer period of time helped us move lot more from variable floating rates to attractive fixed rates for a period of time, which could bring between 10 years to 30 years. So 68% of our borrowings is actually fixed. Our debt maturity has been now much longer than what used to be earlier. It's only 25%, which is 1 to 2 years. A lot of it would also be kind of moved to a long term in the next one year. And the fact that we are pretty much in line with our guidance -- our guidelines on the coverage on hedging of our exposure on U.S. dollar. Having said that, I think there is an improvement on the gross debt to EBITDA from 2.57 to 2.5. Cash remains strong, MYR 6.6 billion, mostly at the group level at Celcom and at edotco. If I go to the next slide, this is some details around each of the operating company. So first one, Celcom. I think strong growth year-on-year, quarter-on-quarter on subscriber acquisition. Celcom has added nearly 1 million customers over the last one year. And in the last quarter, they added around 317,000 customers, mainly coming out of the prepaid where on a year-on-year basis, 893,000 new customers have been added. Having said that, I think there is a strong EBITDA performance, mainly because of the last year base having an impact of this restructuring program. If I normalize for that, even then EBITDA performance has been 6.6% improvement on a year-on-year basis. Quarter-on-quarter basis, you would see some lowering of EBITDA, mainly because of the GST refund, which was accounted for last year in quarter 4. Free cash flows remain strong for us at MYR 516 million in quarter 1. Profits mainly impacted from a year-on-year basis or quarter-on-quarter basis, as I explained, is because of the GST on a year-on-year basis mainly impacted because of the accelerated depreciation. The impact of accelerated deposition is around -- at gross level is around $166 million for Celcom. And that we expect should be marginally this quarter and would come down to a positive trend going forward in quarter 3 and quarter 4. If I go to the next slide, which is on XL performance, I think we do see continuing intense competition in that market. Also the fact that because of the COVID and its effect, there has been impact on the consumer spending, and that's been reflected in terms of the overall market development. However, I think XL continues to be focused on the EBITDA towards cost initiatives with lowering of the staff cost, adverse network expenses. The free cash flow is pretty much in line with last year, impacted marginally because of the lower EBITDA coming in. Profit lower mainly because of last year, we had a one-off gain coming from disposal of towers. Other than that, if I exclude that, then the profits have actually been reasonably good because last year around MYR 1.4 trillion benefit we got from the sale of towers. If I go to the next slide, which is on Robi performance. Robi continues to do well, and it's been gaining market share on data. In fact, at this point in time, on data revenue, Robi would be just around 94% of the data revenue, the largest #1 operator, which is significantly higher when it comes to total revenue. So there have been the strategy of putting debtor in the forefront and taking larger market share of 4G has been helping that company, which is reflected in a strong growth on revenue at 3.3% quarter-on-quarter, 2.4% year-on-year, translating into a strong EBITDA performance and free cash flow. Free cash flow mainly because of the delayed implementation of CapEx, and that translating into strong profit performance. Apart from the growth in EBITDA, profit is also reflective of much lower cost of borrowing for Robi where they've been able to convert some of the short-term loans into very attractive rates and also the taxation impact coming because of the lower tax rate post the listing of the company. In Dialog, overall excellent performance. Growth on EBITDA and revenue at 12.5%, revenue growth mainly coming from voice, data and the fixed line business. And there is a one-off or the incremental gain coming from the new acquisition, which we did on the enterprise side, H One. And this is basically strong EBITDA growth is translated into a much stronger profit development. So Dialog apart from focus on top line continues to be very focused on their cost initiatives. If I go on to Ncell. I think Ncell, we had a struggling 2020. And if you recall, we did see a big dip coming in quarter 2 last year after the impact of COVID. However, after that, we've seen quarter-on-quarter improvement in performance. Ncell on subscriber numbers is pretty much back to the revenue-generating subscriber numbers, they're pretty much back to the levels of pre-lockdown in quarter 1. However, on a revenue standpoint, there's still a catch-up to be done, which is still behind on the core revenue, mainly coming out of the fact that to attract customers, we've been moving prices to a level which is more attractive to get them to start consuming data. That's reflective in a 9.8% drop in core revenue. And ILD 23% which was in a way part of the plan and known item for us. However, they continue to focus on the direct costs and staff costs, which is reflective and not such a big dent on the EBITDA side and so on the profit side. So the good news, as Dato mentioned earlier that one of the constraints which we had was the absence of low-band spectrum to be able to roll out into the larger geography for us that, I think, now that it's available for us, is going to help us compete with the government-owned operator in those markets where we were not present at all. If I look at Smart, I think there continues to be strong performance. The only item which I would highlight here is the cash flows, which is coming of the fact that they've accelerated some of the CapEx investment, moving into more rural markets reflective of the opportunities which are staying in that market. So overall, performance continues to be fairly stronger. I think this is what Dato mentioned earlier, is the ADS. I mean, we've never been so explicit on the performance of our digital businesses. And there's been always a request for -- from the investor and analyst community for us to be more explaining. So that's where we have come down to. So if you look at performance on our revenue overall, has been flat quarter-on-quarter, but 15.3% higher is on the gross transaction value. But if you look at the revenue -- net revenue, it's up by 30.5%. If you look at net revenue quarter-on-quarter, as I said earlier, is mostly reflective of seasonality in the ADA business, where we do see quarter 4 always been quite aggressive. And the reason for that is most of the marketing companies tend to spend most of the budget around the last quarter of the year. And that gives the bump-up of revenue to us. As far as EBITDA is concerned, which is what I explained around MYR 70 million lower losses compared to the first quarter last year, and that's also reflected in improved profits or PATAMI for the digital business. The edotco, I think, continues to do well. We are seeing year-on-year 4% growth, mostly coming from Malaysia and Bangladesh market. On a quarter-on-quarter, there's been a bit of a dip, and this is just more a timing issue. If you look at the EBITDA performance, you would see a very strong performance quarter-on-quarter, mainly because last year in quarter 4, we did take some impact on account of bad debts from our Tier 2 customers. So that was one-off impact, which we had taken. Apart from that, there were some discounts, which were given to the anchor tenants, which was also reflective in the quarter 4 last year's performance. So you would see a strong improvement coming against that. But on a year-on-year basis, which is more like-to-like, it's still showing a EBITDA growth of 7.2% and continues to do well when it comes to profit for the quarter. So that's it from me. I'll hand over to Dato to talk about what's ahead for us.

Thanks, Vivek. As I've mentioned earlier, at the outset, our guidance is like for the headline KPIs that's in line for revenue growth as well as EBITDA growth, single-digit percentage growth for both items for the current financial year. This is a repeat of what we've made at the announcement on April 8 and 11th of May when we deliver the points, suffice to say that the preparation, if you like, of the definitive agreements so far as the merger is concerned, is well on its way. In fact, it's towards the tail end. We are hopeful to sign the definitive agreements very soon. And subsequently make the various submissions to the regulatory authorities, namely the MCMC as well as the commission and following which we will seek the approval of the shareholders. In SoftBank, as I've mentioned, again, on SoftBank, the 22.1% stake is a platform for both software as well as ADA in Axiata. As far as SoftBank is concerned, they like to make ADA its digital marketing partner in Southeast Asia. The footprint ADA as ready established in 11 countries will jump start, if you like, SoftBank's initiatives and from ADA and Axiata's point of view, the investment enables open shop rather the SoftBank ecosystem all its investments in the RinggitPlus. For example, if you think about it, Soft BanCorp or rather SoftBank Group is invested in Tokopedia, as well as Gojek. So that merger initial also provides an opportunity for ADA to accelerate its reach in the Indonesian market, which we all know it's a pretty sizable market. And so far as to risks, [indiscernible] one is concerned, as I've mentioned again, resurgence of COVID-19 cases in Malaysia and in fact, across all our operating markets, the reintroduction of lockdown or restrictive movements, this, we believe, will result in slower-than-expected economic recovery. Then there is that, of course, in Malaysia, the 5G SPV initiative, we are still in engagement -- we are engagement -- in custom engagements with Digital National Berhad -- sorry, Digital Malaysia Berhad, I think, it's international, Digital International Berhad, yes. And even the discuss -- as you all know, they are in the midst of conducting RFP with the vendors to mix submissions so far as the equipment is concerned. But we are hopeful that the commercial discussions will start in earnest. So that hasn't been done yet. And as Vivek talked about the 3G shutdown, that's an ongoing exercise. We are looking at how we migrate the customers from 3G so that they would be VoLTE-enabled under 4G. And of course, as again, as I've mentioned, the military coup in Myanmar, it has little impact thus far to edotco Myanmar. We're continuing to monitor the situation there. And of course, making preparations and looking at the risks associated with sanctions being imposed on Myanmar. And as far as opportunity is concerned, we talked about the spectrum that was awarded in April 2021, the L-900 technology-neutral spectrum that will certainly improve our network. And therefore, we're put in a strong position to compete effectively with the Nepal Telecoms company. Of course, we think that the impending merger integration of the competitors in Indonesia will provide an opportunity for XL to take advantage of disruption in the network, in the distribution outlets and so on. And of course, the -- we are very, very encouraged with the strong growth momentum from ADA at the same time, and so far as the digital financial services are concerned, we are also making preparations for the submission for the digital bank license. As you would recall, the guideline that was issued by Bank Negara stipulated 30th of June as the deadline in which submissions are to be made. So hopefully, we will make some announcements around that particular initiative as well. So thank you for the attention. And I guess, over to you, Clare.

Thank you, Dato. I'm Clare Chin, the Head of IR at Axiata and I'll be moderating the Q&A session today. [Operator Instructions] So I can see that we have 3 hands raised already. The first in queue is Ranjan from JPMorgan.

A couple of questions from my side. Firstly, on edotco. You have aspirations to grow this company amongst the top tower companies globally with up to 70,000 towers. The growth of digital colony in Southeast Asia and EdgePoint. How do your aspirations get affected with new competition in the region for -- in the tower space? Secondly, on the gentle initiatives of the government, if you can share like what has been the spend from Axiata and then how are you accounting for the contributions from the Universal Service Provision Fund?

Okay. On edotco, competition is always good. But we like to think that we really established a strong footprint across all the operating markets. We like to believe that the economies of scale that we can already offer on day 1 will make us pretty competitive. So in the home country, Malaysia, we have been successful in acquiring additional towers, 250 towers. I think that was done on -- in April. That was put on the block. We're looking at the Indonesia market. And we think that with the capital structure that we have, which could easily be get up, we have a very strong shareholder base at edotco as well. And again, the economies of scale know how we think we are a step ahead of the competition. And at the end of the day, the challenges that the region provide, again, is something that we're also familiar with, the new entrants to the market, if you like, no disrespect to them, but it could be a different ball game altogether for those at the entrants. But we welcome competition in the markets, not an issue. We are encouraged by the lifting of the ownership restrictions in Indonesia under the Omnibus law. So we're looking at that market as well. And again, that's a pretty big market, not just where it stands today, but also the projected growth of the tower business in Indonesia and the other markets. On Jendela and all these other initiatives by the Malaysian government, I mean, thus far, the expenses we've incurred are only in relation to the marketing cost that has been incurred by the likes of Boost, for example. So the point about the first quarter results last year where the first initiative was rolled out, we had a bit of -- some costs that we incurred as part of that marketing cost. But subsequent to that, the subsequent programs, we've been able to minimize the marketing spend because we brought in merchants to share some of those marketing costs. But as far as USP is concerned, that is a continuing obligation under the CMA. So I wasn't quite sure, Ranjan, where you're coming from that -- on that question, because the government will continue to -- they've in fact ordered several contracts utilizing the funds from the USP that's been built up over the years. But so far as the MNO is concerned, we would have to contribute our share of revenue of 6% share for the USP fund. So the understanding from the engagements currently is that if the government wants to roll out, let's say, network coverage in areas which are not profitable, the one model that has been implemented is actually the government will incur the CapEx, but the MNOs will then have to carry the O&M cost, if you like, yes, to make sure that the business is sustainable, yes. Over a 5-year period and then at the end of the 5-year, the MNO will have a choice whether to continue providing coverage or not depending on the traffic that's built up. Sorry, I hope I answered that question, Ranjan?

Yes. Yes, you did.

Thank you. Next.

Let's move on to Foong from CIMB.

Congrats on the good set of results for the first quarter. A couple of questions from me. Firstly, I wanted to ask about Celcom. Despite the encouraging revenue and subscriber trend, EBITDA was down Q-on-Q and I think that was due to high direct expenses in the first quarter. Can I get more color on that cost item? What drove that up? Second question for Robi. I think Vivek mentioned earlier on that there is some delay in the CapEx in Bangladesh. What is the risk that this would impact the future growth momentum? Third question on ADS. Good to see the narrower losses in first quarter. Should we expect that to be at least the base going forward with potential for further improvements? And my last question, any initial feedback from MCMC or the government on the Celcom Digi merger and any additional conditions you think that the regulators may apply? Those are my 4 questions.

Thanks, Foong. Very good questions. Second is on the line, but why don't I try to address question number 3 and number 4. And then I'll invite Idham. I think he is online. Is Idham on the call?

Yes.

Yes. On the ADS, yes, in fact, the marching orders, if you like, for -- as you recall therefore, there are 2 arms to the ADS business, the digital financial services and then as well as ADA. ADA, as you have seen in the news reports and what we put out there as we're making profits. In fact, for financial year 2020, we recorded USD 8 million profit on the back of USD 137 million revenue, which is pretty decent because ADA today only came into shape in 2018. Of course, the precursor to EDA was a bunch of the few companies that we've invested in. But we've bundled them together and started in 2018 and over a 4 year -- 3, 4-year period, they've done pretty well. So we expect it to do better in quarters to come. Now so far as DFS is concerned, the marching order is for them to be -- well, to break even actually in 2022, so for financial year 2022. So the losses are -- the narrowing of the losses have been along the projections we've made 2, 3 years ago. And we think that it will be positive so far and after 2022. Now of course, that's without the digital bank sort of financials just yet, yes? So I qualify the losses that we expect DFS to Jio rise like, yes, by 2022 is without the digital bank sort of numbers for the time being. Now so far as the digital bank is concerned, looking at the time lines that have been prescribed by Bank Negara, it will take maybe 18 months after 30 June before the banks, the licenses can be -- or the banks, the successful bidders can operationalize their banks, yes. So that will take us after 2022, yes. So the first operation could be in 2023. So we're looking at just 2022 for the time being and then hopefully, that -- the team can make sure that we will profitable at least for 2022. So far as the initial feedback, yes, we had already several engagements with MCMC, very positive feedback. We have also appointed a consultant to come up with the econometric projections -- economic projections of the merger -- the impact of the merger on the economy, the growth looking at base and so on and so forth. And the feedback so far has been rather positive. We are not aware of any additional conditions that's been imposed. And of course, the big one on the table so far as we were concerned is the spectrum. We definitely have articulated our position about the need to keep the spectrum to make sure that the quality of service that's going to be provided by the merged entity will be better than what it is today, yes. Because we need that additional spectrum to make sure that the quality of service is improved, if you like, for the customers. So can I invite Idham and Jennifer to address question number one, and perhaps Vivek and I can address question 2.

Okay. Thank you. Good morning and thank you, Foong, for the question. I'll pass to Jennifer, but on -- to give you that detail on what's the difference between the Q-o-Q, the impact to EBITDA. But overall, I think EBITDA year-on-year, we have seen improvement. Even at the operating level, we have seen a little bit flattish at the -- even at the quarter-on-quarter at the operating level. But I'll pass to Jennifer to take you through the details.

Good morning, Foong. Jennifer here. I'll try to add a bit more color in terms of the EBITDA number. I think if you look at the Q4 number, the Q4 number was actually impacted by quite a couple of items, right, mainly the GST recovery that we had that actually bumped up the EBITDA number. If we were to take off the recovery on the GST and also some other settlements, the true-up that we tend to do at the Q4 level, on an operational basis, the EBITDA is actually kind of flattish. I wouldn't say that it has actually gone down. But if we were -- if we refer back to the slides and we look at it on a year-on-year basis, doing -- taking out the one-off in Q1 last year, taking out the ERP, which is the employees restructuring program, essentially, we have actually grown by 6.6% on an operational basis in terms of EBITDA. But on the Q-on-Q, you're right, it's actually a bit flattish. That's mainly because there's another area that is also driving it as well, is because if you look at the Q1 number in 2021, we did quite a good device run. As we all know, in Q4, we had iPhone 12 launch and because of that, we had quite a bit of a pent-up demand in terms of the iPhone 12 which we couldn't actually address all of them in Q4 last year because of the shortage of stocks worldwide basis as well. So when we actually complete that -- that's why when you look at the devices sale in Q1 was actually quite high. And that also has driven the direct cost a bit higher in Q1 this year. So net-net, I will say that operationally, the EBITDA is actually flattish. I hope that addresses your question, Foong?

Yes, it has.

On Robi, I can explain Foong. I think it's just a matter of time because we were waiting for the spectrum auction to get over, which has just got over where we got the 7.6 megahertz of spectrum. So around MYR 200 million of CapEx, around MYR 110 million of CapEx orders have already been placed and the remaining would be going out shortly. So we don't see a risk -- any risk on the top line other than what would be the market situation, et cetera, for this year. And there is no restriction from our side, it is just a matter of us closing the negotiations on procurement and waiting for the spectrum to be allocated that delayed the process a bit.

Yes. Just a bit more on the ADS form. These days, with the 236,000 merchants, we have 8.9 million users on Boost, we are able to command a better dealer from the merchants. Those days, we have to carry a lot of this cost. But now our customer acquisition costs are a bit lower because we can pass some of this to the merchants and merchants provide sort of rebates as well to us or share some of the -- give us a part of the commission as well when the transactions are done. And of course, the more -- the revenue mix is now shifting towards more to become -- to be online, that will certainly help boost the performance at ADS, yes.

Okay. Thanks Foong. Moving on. Our next question comes from Isaac from Affin Hwang.

Just 2 questions from me. Number one is on the Celcom and we come to the subscribers and ARPU. First, the subscribers have been growing very strongly on a year-on-year basis. Can we just hear a bit more on what's driving it and what will be the trend going forward? And on the -- in contrast, the ARPU has been trending lower. When we see a bottom and what happened? That's question number one. Question number 2 is when it comes to Digital National, have we seen any updates? And any updates on digital national would be helpful.

I'll tackle the second question. So far, the discussions has revolved around the technical aspects of setting up the 5G network and the commercial discussions have not even started. We know, as I've mentioned earlier, the Digital National had undertaken an RP with the vendors, you've read that in the papers. But again, we have no line of sight as to the -- like scope or what the details go, we do know that the Digital National's RFP includes the O&M aspect of the network as well. We're not quite sure what the business models are at this stage. But certainly, we will keep everyone updated if and when that becomes -- when there's a lot more clarity on the business model that Digital National wish to adopt and because that will have an impact on us, the MNOs, yes. Idham, Jennifer, can I ask you to tackle the first question on the ARPUs?

Okay. Thank you. Thank you, Isaac. There are a few factors that kind of drive the improved performance on our subscriber in the past year. Of course, the overall -- having the network coverage and all that really becomes very, very important during this period. But as what we introduced with the new product lineups that we have, our product has become a lot more competitive than we were before. So we are actually speaks better with the consumers. But most importantly, I think the improvement that we have done at a trade level, our active trade -- the number of active trade has improved, the number of trades that -- the long-tail trade also has improved. And we see this as a program that is quite sustainable because we're seeing the activities and the excitement is coming up quite strong despite the lockdown, despite the lower traffic -- footfall traffic that we have seen. We have seen also the investment that we have made in the digital space is starting to pay off the improvement in terms of the digital channel and also how do we help to get our trade to become active in the social commerce as well. So all these activities help in terms of bringing up the number of subscribers. In terms of ARPU, I think, yes, you have seen the industry is -- all industry trend as we've see in ARPU is declining. But we have also seen some internal trends that help to actually sustain our ARPU level better. We have seen higher, for example, in terms of monthly subscription in our prepaid as opposed to weekly and daily debt actually helped to sustain our ARPU and then also get a little bit more certainties in the lifetime value of our customers, which is a very good trend. We're seeing also in terms of increase in data adoption or data customers in our prepaid. So there's also a very, very good trend that we see. Jennifer, you have anything, 1 or 2 things to add?

Yes. I think the -- if you look at even the ARPU, right, the main reason why the blended ARPU is a bit slightly down, mainly because the contribution from the prepaid is a bit stronger as compared to before as well. So that's the reason when we look at it in terms of ARPU, one -- once we actually look at the blended ARPU as it is, we also need to analyze a bit further in terms of the postpaid and prepaid ARPU. And if you look at the postpaid and prepaid ARPU in that sense, I think we're actually sustaining pretty well, especially from the postpaid front because they emphasize in terms of the plans that is with the devices and the plans that is a bit on the higher side. We're also on the prepaid, as what Idham has actually mentioned, the take-up from the monthly kind of like sustained prepaid output. Thank you.

Just short follow-up questions. Can you share a bit more on the subscriber for the prepaid again? Like is there any particular segment that registers such a strong growth in terms of the uptake? And should we expect similar growth quantum for the next 2 quarters ahead? And that's all of my questions.

Jennifer?

At the moment, when we actually drill down a bit further in terms of the sub base that we have, We see that we are actually appealing -- in the past, we appealed a lot in terms of like the rural customers and the more mature customers in that sense. When we drill down a bit further this time around, we are actually approaching a bit better in terms of the segment, which is of a younger age group as compared to the previous products that we have.

Yes. Actually, if I were to add one component on the ARPU is -- which is a good trend to see is that we have seen an increased contribution of data revenue inside the ARPU. So which actually address some of the decline that we see from the voice-related contribution of the ARPU. So we foresee that this data revenue will continue to grow.

Okay. Thank you. Let's move on then. We have questions coming through from Prem, Macquarie. Prem, you want to unmute your line?

Good. Hopefully, you can hear me.