Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Good afternoon, everyone. Ladies and gentlemen, my name is Clare Chin. I'm Head of Investor Relations at Axiata Group. Thank you for standing by, and welcome to Axiata's Second Quarter Results Briefing. Today, we have with us Dato' Izzaddin Idris, Axiata Group CEO; and Vivek Sood, Axiata Group CFO; as well as representatives from our operating companies. There will be a short presentation, followed by a Q&A session. Lastly, 2 housekeeping reminders. You will be on mute throughout the presentation. Also note that we will end the call promptly at 4:30 p.m. As we understand, there is another results call, which you may need to attend then. So without further ado, I hand the conference over to Dato' Izzaddin. Please.

Thanks, Clare. Hi, and good afternoon. Thank you for joining our second quarter results presentation today. I see there's a lot of attendance today. I know there's a handful of our own colleagues. But I think, Clare, we have a good set of attendance this afternoon. Again, thank you for joining us. Happy to report the second quarter results today. You would have picked up from the press release that we've issued the performance of the group for the second quarter and year-to-date, strong performance for year-to-date despite the business environment caused by the pandemic. You can see the revenue excluding device at 7.2%, EBITDA 11%, EBITDA margin rising to about 44.2%. And these numbers are lifted predominantly entirely by Celcom dialogue. Of course, a narrow set of performance from Axiata Digital. Specifically at this time last year, we had the e-Tunai program that had cost MYR 40 million then. There is none of that nature this year. And specifically, ADA has reported a profit of MYR 20 million, whereas the losses at DFS has narrowed to about MYR 77 million this year compared to MYR 171 million the year before. So as I've said, underlying PATAMI, driven by improved EBITDA contribution as well as lower net finance costs, but the accelerated depreciation of 3G asset at Celcom and Robi continued. That's about MYR 177 million. But that will still carry on for a bit into the next quarter. By the fourth quarter, that will turn around. Now at the same time, the group recorded OpEx savings of about MYR 225 million. So that's the other boost, if you like, to the EBITDA numbers. Vivek will cover that in much greater detail. As I've said, solid second quarter results compared to the first quarter. As a result, high EBITDA, coupled with lower accelerated depreciation of 3G assets. Of course, OFCF, operating free cash flow, rose to about MYR 1.6 billion. Balance sheet has improved further. Strong cash position of MYR 7 billion. Our gross debt-to-EBITDA ratio trended down to 2.48. You'll recall last year, this time last year, it was about 2.64. And our threshold, if you like, is 2.5x, yes. So that's the other good news so far as the results are concerned. Insofar as Celcom, [ full marks ] to the team, very visible results for the transformation program. And on this, I'd like to play some record, my appreciation to the Celcom team for showing good set of results. They added 1.02 million customers. And as you can see there, the results are driven by a 12.5% growth in prepaid revenue. Now of course, the challenge is always to make sure that this is sustained in the continuing quarters to come. Yes? So whilst the addition to the customer base is very, very encouraging, managed to impact the customers, but the more important thing is to ensure the stickiness, if you like, to the Celcom brand. Of course, MVNO also did quite well, in particular Tune Talk. Now this time last year, we had the ERP cost of about MYR 77 million net. And of course, this year, we don't have such a expense, and therefore, that has also boosted the numbers year-on-year. Insofar XL is concerned, the first quarter was a bit of a challenge because of the competitive pressures, weak consumer spending, but the Lebaran or Hari Raya period had helped the numbers as well as the easing of the price competition. So you see that revenue, excluding device, is up by 7.7% quarter-on-quarter and bottoming up by about 23.4%. Year-to-date, however, it's still flattish at negative 0.8%. And EBITDA margin is still resilient at about 50% as a result of lower network and direct expenses. Robi recorded strong data revenue growth. We see this as always an opportunity for us to continue to grow the business. But the challenge is with the higher data consumption. Even in Malaysia, for example, the data consumption has risen to -- as of June of about -- sorry, has risen to 23.9 gig per customer per month. Now this time last year, it's about, I think, 15 gig. What that means is we have to continue to invest in the capacity to make sure that the quality doesn't suffer and that the network can cater for the higher traffic as a consequence of the continuing lockdown. Dialog has performed considerably well in the 4 segments -- in all segments of its business, mobile, fixed and TV. In all the metrics, you can see the EBITDA, revenue, PATAMI, free cash flow as well, yes. Ncell is a bit -- the one that's the outlier, if you like. It's for -- to start with, we don't have the same coverage as our main competitor, NTC, and as a result of the continuing lockdown because there's 2 effect. First, with the population back in the rural areas, because we don't have coverage, they opt to jump on to the other competitors' network. Secondly, with the lockdown, a lot of the consumers opt to switch on the ISP sort of network, yes? So what that means is the mobile network will be disadvantaged in that sense. And of course, the spectrum constraint, although we've been awarded the spectrum in April this year, it will -- we need to make sure that the rollout will be effective. And again, the rollout is affected by the continuing lockdown. It's not as fast as we'd like it to be. And hopefully, the benefits, if you like, of the relief in the network will kick in, in the fourth quarter this year. Yes? Next slide, Clare. Smart, as before, recorded a very steady performance. Year-to-date, PATAMI, negative 11.3%. That's due to impairment of investment in an associate company called Pi Pay. It's basically an e-wallet business. Their business model is to give out vouchers. And as a result of the lockdown, there's no consumption to encash those vouchers. Now we believe that this is just a temporary setback to the business. When the economy opens up, we believe that Pi Pay will be able to recover and therefore perhaps even write back our investments that we impact. Axiata Digital, as I've said, ADA recorded a profit of about MYR 8 million -- sorry, MYR 20 million compared to MYR 6 million last year and narrowed losses because last year, we had that e-Tunai that has affected the business by MYR 40 million last year. Higher GTV, gross transaction value, for the financial services -- digital financial services, up by 15.4% as a result of higher online transactions. And of course, Boost, our wallet has increased users up to 9.1 million, that's up by 1.2x, whereas merchants have signed up is about 250,000. edotco continue the resilient performance, particularly driven by the Malaysia and Bangladeshi markets, continue orders. EBITDA margin has gone up to about 53% -- sorry, margin up to 65%. It's -- PATAMI is up by 53%. And the good news is, unlike you may have read, the pressures some of the MNOs are facing in Myanmar, [ iroko ] is facing no such sort of constraints as it were. So therefore, there's no significant impact from the coup in Myanmar thus far. The Board has approved an interim dividend of MYR 0.04. That's equivalent to about MYR 367 million payout. And this is in line with us in our commitment towards becoming a high dividend company by 2024. We believe the second half will be very much in line with the headline KPIs we have indicated. So headline KPIs of both will be low single-digit percentage, yes? Downside risks. We believe that the continuing COVID-19 pandemic lockdowns and so on will put further strain to the overall economies across the footprint, not just Malaysia. Of course, the vaccination rate in some of the countries is not as rapid as we all like it to be, Indonesia, in particular. But Indonesia, my understanding in Java is a much, much higher percentage than the overall number that we've been reading. I think the overall number is about 15%, whereas in Java, it's much higher, more than 50%, if I'm not mistaken, 60%, 70%, yes. So that's -- and of course, the continuing discussions we are going -- we're having with the Digital Nasional Berhad on the 5G rollout, that's ongoing. So until and unless that's anchored down from our perspective as well as the industry, that remains an uncertainty in that sense. And of course, slower-than-expected recovery in Ncell because of the restricted movement as I've mentioned earlier. So all in, for the first 6 months, you would have read the announcements we've done, in particular, Celcom-Digi merger. We've made submission to the MCMC. We're looking forward to the decision. Since the submission done in July, there have been various meetings already. Request for further information have been submitted -- have been given to us, and the team is responding quickly. My direction to the team is to try to block all the gaps in information so that the MCMC can make a decision sooner rather than later. Barring unforeseen circumstances, we expect that to come, at least the approval, before year-end. And we like to think that if we submitted in July, year-end will be 5 months, that should be more than ample time for MCMC to come back. Again, not wanting to put pressure on anybody, but that's the sort of time line that we hope the MCMC will enable us to proceed with the merger either way. Yes. And of course, information of ADA's strategic alliance with SoftBank, we are continuing discussions with SoftBank on how to reap the synergistic benefits that has been potentially discussed across the SoftBank ecosystem and as well as for the rest of the Axiata Group to partner with SoftBank and other initiatives, particularly on the enterprise. ADA has also made this acquisition called Awake Asia to boost its digital e-commerce capabilities. And of course, the joint venture between Boost Holdings and RHB Banking Group to make the submission for the digital bank license in Malaysia. At the same time, Boost has made an acquisition in Indonesia. That's more a platform. And of course, the ongoing discussions that XL and Axiata is announced for the proposed acquisition of majority stake in a company called PT Link Net, fixed broadband business in Indonesia. As part of our continuing commitment to support the government insofar as pandemic response and support is concerned, the Board has approved a MYR 5 million contribution in the form of medical equipment to Malaysia and medical frontliners through the Greater Klang Valley Special Task Force under the Ministry of Health. So we'll continue to evaluate other avenues for us to support the government in its initiatives to cater -- to tackle the COVID-19 pandemic. One last slide from me. Next slide. Yes, this is just meant to track the monthly revenue trend prelockdown. Prelockdown being before March 2020. And you can see that the trend, if you like, for all the companies, except Ncell, which is the purple line right at the bottom, is in good shape, yes? Hopefully, the trajectory will continue for all the other companies. Ncell, as I've said, with the continuing lockdown, this will remain to be a challenge for us in terms of their performance in the quarters to come. Now on that note, I'd like to hand over to Vivek Sood. It's still -- I mean if you see the gentleman that will appear soon, he is Vivek Sood in case you can't recognize him.

Thank you, Dato', and very good afternoon to all of you, and maybe good morning to some. Let me start with the first slide, which is on the reported numbers. I think what Dato' covered was really the underlying, which I will cover later on. So the first slide is talking about the reported numbers. So year-to-date revenue has been up 5.3%, and EBITDA has actually outpaced revenue by growing at 8.2%. And performance has been essentially a strong performance from Celcom, Axiata Digital and also Dialog, offset by ForEx. I think one of the challenges which we had in the first half was the report in currency, which is ringgit strengthened against all our operating currencies. To the extent against Sri Lanka, LKR, it actually strengthened by around 9%, and that's had an impact of around 2% to 3% on the revenue and EBITDA growth numbers. Quarter-on-quarter, also revenue and EBITDA did show a strong improvement, 5.4% growth in revenue and 4.4% improvement in EBITDA margin. PATAMI was uplifted because of higher EBITDA and also lower finance cost. If you recall, we did do certain fundraising last year, which did bring out -- bring down our finance costs quite substantially. Last year, if you recall, we had a one-off gain coming from sale of towers around MYR 300 million, which did have an impact -- has a positive impact on last year's profit. And also this year, we've been impacted by the accelerated depreciation in 3G assets across Celcom and Robi specifically, which is a negative impact coming in this year. So I think overall, a strong performance coming from operational revenue growth and operational EBITDA performance here. If I can go to the next slide. On an underlying basis, we have seen an excellent 11.2% EBITDA growth and 7.2% revenue growth ex devices. EBITDA margin improved by 1.2 percentage points to 44.2%. And year-to-date PATAMI more than doubled in the first half of 2021. And also, this is after inclusion of around MYR 1.77 million on account of accelerated depreciation in the first half. Performance came from mostly all OpCos except Ncell. On revenue, if you look at Dialog, grew by 18.6%. Axiata Digital more than 100%. Robi grew by 8.3%. And Celcom grew by 4.6%. This was partly offset by a decrease in XL by around 0.8%. But having said that, I think the XL was challenged in quarter 1, but second quarter has been an extremely good improvement coming in from quarter 1. Ncell, as Dato' said, remains a bit of a challenge. But coming out of both the core revenue growth not being sufficient enough to offset the lowering of the ILD revenue, and I'll cover a little bit of more details as we go along. Quarter-on-quarter, revenue ex devices went up by 6.4% coming across most of the OpCos except in Ncell. EBITDA, 11.2%. If I normalize for the last year one-off employee restructuring program and Celcom, EBITDA grew by 9%. And this has come mainly from Celcom, Axiata Digital, where the losses have been substantially reduced, and improvement coming from Dialog and edotco. We continue to focus on our excellence program on cost, which did deliver around MYR 225 million. This is on the OpEx side, while on the CapEx also, we had substantial savings. OpEx savings were around MYR 225 million, and that's really reflective of the fact that EBITDA growth has outpaced the revenue growth. As far as quarter-on-quarter concern, EBITDA of 4.1%, partly offset by lower Ncell impact of around 9.5%. As far as profits are concerned, PATAMI coming from higher EBITDA, lower finance costs, lower losses coming from Axiata Digital and offset by -- partly by the accelerated depreciation of 3G assets here. Quarter-on-quarter, 38.2%, mainly coming from all OpCos except Ncell. Can I go to the next slide? This is just a bridge between the underlying performance of MYR 172 million first half last year versus MYR 547 million first half this year. And mainly, if you see coming from the effect of EBITDA improvement, and also lowering of losses coming from digital businesses, improvement in finance cost and improvement in taxes, specifically Bangladesh, partly because of the lower tax rates after we got listed and also the deferred tax impact in Indonesia, offset by the accelerated depreciation, which is around MYR 177 million, and in addition, the additional depreciation coming from continued investments. Reported PATAMI, mainly between what is reported and what is underlying, is reflective of the ForEx impact coming in this first half. If I go to the next slide. Operating free cash flow, after we've had this whole challenge of IFRS 16, it's never reflective of the 2 cash generation. So what we try to do here is to remove the effect of the depreciation on account of ROU assets to reflect what would be closer to the 2 cash flow generation. So that's up from MYR 492 million to MYR 786 million, which is around close to 60% improvement, mostly coming from all OpCos except XL. XL has been advancing of the CapEx spend in first half of 2021. If I go to the next slide. Balance sheet, as Dato' explained earlier, remains fairly strong. We've seen our gross debt-to-EBITDA steadily coming down over quarters. This quarter was 2.48 and net debt-to-EBITDA at 1.85. We have borrowings essentially around 43% in local currency versus dollar borrowing in -- pretty much in line with what our target of 50% is. And a lot of that borrowing is on fixed interest, locked in for a much longer period of time at good interest rates. Around 68% is fixed. And our maturity has come down substantially over the last 1 year, with only 21% of the maturity between 1 to 2 years, which would -- as I speak, would have also further come down because some of the repayments, which we've done in the month of August here. And MYR 7 billion cash, a lot of it at the group level, MYR 1.4 billion; Celcom at MYR 2 billion. Celcom, obviously, would be partly reduced by paring down some of their debt as well as payment of dividend and edotco around MYR 1.2 billion. If I go to the next slide. Quickly coming on each of the OpCos performance. I think Celcom, Dato' alluded to, a strong prepaid performance, partly offset by the accelerated depreciation on profits -- profit line if you adjust for that 12.4% growth in EBITDA and 28% growth in the PATAMI. Even quarter-on-quarter, the numbers look strong for Celcom. And free cash flow at MYR 961 million, up 31%. Profits being fairly flat, and the reason for that has been the around close to MYR 140 million -- or MYR 160 million on account of the accelerated -- MYR 174 million on account of accelerated depreciation, which has been impacted this year's profit numbers. If I go to the next slide. XL, as I said, a strong quarter-on-quarter performance with 7.7% improvement quarter-on-quarter. Though year-to-date, it's been flat. And EBITDA growth at -- quarter-on-quarter at 8%, mainly coming out of the fact the revenue was up during the Lebaran period as well as somewhat easing of the competition in the market. Cash flow's been down, mainly because of the higher CapEx. And then also profit's been impacted because last year, we had one-off around MYR 300 million equivalent and profits coming in the first half on sale of towers. If I go to the next slide. Robi continues its strong performance. We -- revenue ex devices up by around 8.3%. EBITDA has been relatively flat because of the onetime reversal of some of the provisions, which we made in quarter 2 last year. If you adjust for that, the business continues to deliver a strong performance on EBITDA as well as on the profit line. Next slide. Dialog, excellent performance in all parameters. Revenue grew by 18.6%. EBITDA grew by 21.9%. PATAMI grew by 86% and cash flow improvement by 18.1%. And that performance came from all segments, be it mobile, fixed or television. So -- and this is in spite of difficult economic conditions in that market. I think we have had impact coming in on the reported numbers mainly on account of ForEx. As I said earlier, LKR depreciated against ringgit by around 9% during this first half. Next slide. Ncell, I think we've explained on what are the reasons for the Ncell's performance being lower. But one was obviously expected. ILD, we did expect to come down even more given pandemic and a lot of migrants actually going back to Nepal. So the ILD is down by around 21.7%. Core revenue has gone up by 3.5%, but not sufficient enough to offset the drop in the ILD revenue. EBITDA is still better and also the free cash flows and profit remaining much strong. I think the challenge in this market has been on account of competition coming from the government-owned NTC, a lockdown impact. This was one market which had most frequent lockdown as well as impact of the coverage, a lack of coverage on 4G as well as spectrum deficit. Now with spectrum being available in April, the investments are ongoing to match the coverage deficit. Next slide. Smart continues to remain steady in its performance and the business, which has consistently delivered on the -- on steady growth as well as profits with 9.8% growth in our revenue, partly impacted because of the accounting difference. If you adjust for that, it's around 4.3% growth in revenue and 4.8% growth in EBITDA and an improvement in cash flows. Marginally down on profits, mainly coming out of the one-off impact of impairment on the wallet business, which was something we acquired 2 years back. And the impact has been because of the COVID where the business has not really been able to operate in this environment. Hopefully, things once open up, you should see some recovery happening in this business. Next slide. Axiata Digital, 2 businesses, ADA, the digital advertising business, strong performance coming in with a positive EBITDA of MYR 44 million during the quarter and improvement of MYR 370 million in terms of the revenue for the first half and reflective of the improvement in profit of around MYR 20 million for the first half. And DFS business, Digital Financial Services, lowered down its losses from MYR 171 million to MYR 77 million, partly on account of the e-Tunai effect of last year around MYR 40 million. If you adjust for that, even then around MYR 60 million improvement in the losses in the DFS business. And this is coming on the back of a very clear management of costs as well as looking at opportunities of revenue, which are monetizable. Next slide. edotco continues with strong performance in Malaysia and Bangladesh, however, somewhat impacted because of the lower activity in Myanmar as well as some of the Tier 2 customers in markets like Cambodia. However, EBITDA margins remained very strong at 64.9%, and profits PATAMI growing back 53%. And that's on the back of some of the discounts which were given last year as well as overall improvement in performance on top line. Next slide. So Dato', I'll hand it over back to you to cover a couple of slides on moving forward.

Yes. Thanks, Vivek. Very quickly. We think that the performance for this year will be in line with the headline KPIs that we have indicated earlier on in the year, a single percentage of both revenue as well as EBITDA. Yes. Next slide. Insofar as risk and opportunities are concerned, of course, the COVID-19 pandemic will pose us further strain to the overall economy across the footprint markets. But the good news is, at the outset, when the pandemic started and everyone started to think that telco sector is resilient, I was a bit nervous at the time to lay claim to that, but as the result show, in fact, if you look at the performance revenue-wise, EBITDA-wise, it's actually better than 2019. If you do the numbers and do the analysis later on, it's better than what we have achieved in 2019, slightly better. So the good news is we believe the business will be able to withstand, although we hope the vaccination program will continue to be rolled out in all the markets we operate. Regulatory developments in the various markets, in particular, in Bangladesh, in Cambodia as well. And of course, the -- as I've said, the commercial negotiations on the 5G rollout, that will continue to be a risk to the extent that the, if you like, commercial terms are not favorable or not favorable to the -- if we were to do it, otherwise, if you look at that comparison, are slower than expected recovery in Ncell because of restricted movement, notwithstanding the award of the new spectrum. Because of the lockdown, we are not able to roll out the network. So that will continue to pose as a challenge. But we believe that so long as it is caused by that, we think that once the economy opens up, the team will be able to roll out the network to improve the service to the customer. So far as opportunity is concerned, we believe that the growth momentum from ADA with the synergistic benefits arising from the investment by SoftBank, we're working on that to harness the opportunities within the SoftBank ecosystem. At the same time, identifying new areas which Axiata itself can partner with SoftBank in the other segments of the business. Of course, Dialog will continue to -- we're confident that we'll be able to sustain its growth momentum despite the economic challenges of Sri Lanka. We have read enough reports about the potential risks insofar as the Sri Lankan economy is concerned, but has again proven that the Dialog business is something that we'll be able to withstand the challenges -- the other sectors of the economy might face. And of course, the group momentum in Robi, we've always believed that with the operation base of MYR 165 million, while the challenges are there, I believe that the group momentum will continue in the Bangladeshi market. So that in a nutshell insofar as recent opportunities for the 2021 -- for the rest of the financial year. I would like now to pass back on to Clare for us to take the question and answers from all of you.

Okay. Thank you, Dato' and Vivek. [Operator Instructions] As usual, just to highlight that we do have our colleagues from the OpCos joining us. From Celcom, we have CEO, Idham; CFO, Jennifer; and CMO, Allan; from XL, CFO, [ Pak ] Budi, and edotco CEO, Adlan; as well as Dr. Hans, our Group EVP. So feel free to engage with them, too, if you wish, all right? So let's move on quickly to Q&A. I see Foong has his hands raised. So please unmute your line and go ahead, please, Foong.

A couple of questions from me. Firstly, for Celcom, you've had a couple of good quarters on subscriber growth, right, since the second quarter of last year and it's continued to improve. Could you share with us a bit more color on the drivers specifically relating to the second quarter that has seen Celcom continue to improve in terms of the operational numbers here? And in particular, which products are you seeing still a pretty good traction. And was there also any boost from the [indiscernible] program? So that's the first question. And while staying in Malaysia itself, looking at the market as well, I mean we do see a couple of the MVNOs coming out recently with new offers that are quite aggressive. It looks like the price points are coming down to the MYR 1 per GB level. And of course, most of these MVNOs are hosted by Celcom. So can you share your thoughts a bit on Celcom's MVNO strategy? That would be the second question. And then my third question, I guess, a question for Dato'. With regards to Indonesia, beyond this potential acquisition of Link Net, do you foresee further in-market consolidation in the mobile sector that may involve Excel? And in particular, I just want to get your thoughts as well with regards to Axiata's philosophy on such potential deals going forward, whether we will be willing to do deals that where it depresses our profits in the near term, but could potentially put us in a better position longer term. Or are you still more keen to focus on profitability here and now with investments that have shorter payback periods. Yes, those are my questions.

Okay. What I'll do is I will touch a bit on the second quarter results and what's driving it and then talk a bit about the MVNO strategy. But perhaps then after that, I'll get Idham to elaborate on the details on what's really driving. I mean essentially, your question is, is this sustainable, yes? So if we compare the first half last year where we lost a lot of customers, you remember the [indiscernible], Foong. So if you compare that compared to now, we've actually recovered our position in terms of the number of subscribers lost. The big change is the way we work, I'd like to think. The go-to-market strategy is much more efficient and faster, if you like, the response to customer, the quality of service and also the engagement with the dealers, notwithstanding the pandemic. So all hands on deck. And the team has really rose to the occasion to really make sure that it's not just about increasing subscribers. It's also making sure we have the right subscribers. Making sure that the revenue is much more sustainable. Insofar as MVNOs are concerned, yes, I saw that announcement by Tune Talk the other day -- yesterday, yes? Ngam Ngam I think it's called. So I guess at the end of the day, it's a question of sustainability. We have commercial arrangements with the MVNO. At the same time, we are reviewing our strategy insofar as MVNO is concerned, especially in light of the pending merger, yes? Because like it or not, the MVNO, there's about 5 million of the customers under MVNO that we have -- we can count towards our customer base. Now whether that is going to continue or not, I think we need to sort of review that in line with the merger discussion or merger submission. We don't know what the regulator stands on that. Perhaps it's even premature to discuss the question that pose. And perhaps I'll get Idham to provide more details, and then I'll come back to the Indonesia strategy for you, Foong. Idham?

Thank you very much, Foong. Good afternoon. Yes, we've been having quite a good quarter in terms of subscriber growth. We see some of our products. We are able to be a little more competitive in the market across the board. We're quite happy with -- of course, we participated in the [indiscernible]. It has been one of the growth area for the second quarter. The postpaid also has been stabilized. We're starting to see some growth coming in back into the postpaid area as well. But the real driver behind the growth in Q2 and the past few quarters came from our prepaid. I guess we have find a sweet spot in terms of our product, the product structure, the pricing that speaks well to the Malaysian consumers. We have also -- as what Dato' Izzaddin has mentioned, we've also done quite a lot of work in terms of transforming our retail and also our trade practice, which is something that one of the major drivers to the more efficient of getting the customers from the market in the prepaid segment. At the same time, during this pandemic, we were able to adjust as well our trade as well as how we go to market to reach our customers. And whatever investment that we have made on the digital platforms, our apps, which is doing very well today actually in terms of our apps from app ratings, is one of the highest ratings on the App Store as well as the Google Play Store, which has increased quite a fair bit to support our business during this pandemic. On the MVNO, yes, overall, we are working with most of the MVNOs in the market. The MVNOs in a way is -- goes or targeted different segments than what Celcom is targeting. The MVNOs also use different go-to-market strategy, which in a way to help us to reach some of the segments that the Celcom brand could not reach on its own. Of course, some of these segments has a different strategy, different pricing strategy and on and so forth. But together, Celcom and the MVNO continue to capture the growth in the market, both in the prepaid as well as some in the postpaid as well. I hope that answered your question, Foong.

Insofar as Indonesia is considered, I mean if we go back 2, 3 years, if we look back, we've always talked about industry consolidation. And truth be told, at one stage, all 3 MNOs were talking to each other. It just so happened that they've decided to [indiscernible] I mean, have decided to partner. And I guess the challenge that they're facing now is with the third extension of the deadline, perhaps is to find a common ground. So for us, what we're looking at now, just if I can sort of give you guys a sneak preview on the announcement we've made on Link Net, yes, that's pivoting away into providing a convergence proposition into the market. So we believe that whilst there are -- there will be opportunities that's been presented even with the merger because they'll take time to do the deal, they'll take time to consolidate and streamline their -- integrate their businesses, that we believe can provide an opportunity for us to take some market share. Now at the same time, we believe that the convergence strategy is something that we should -- that we are pursuing like for the Indonesian market, yes?

Okay. Maybe I can just throw in a couple of quick follow-ups. Firstly, for Idham, the subscriber numbers that we are getting, we sort of know where these are coming from. Are they coming from the smaller rivals? Or are they coming from the other big 2 MNOs? That's question -- the first follow-up question. And I guess the second follow-up question for Dato' is coming back to Indonesia. If you are presented with an opportunity to acquire another mobile operator, but it's going to be dilutive to earnings in a big way, would you do it? Or would you say we need the spectrum so let's think long term and...

Yes. Yes. Sorry, I forgot to address that, but why don't, Idham, you go first?

Okay. Where these customers are coming from? I guess we're seeing these customers coming from everywhere in the market. As you know, the market has reached over 100%. But from some of the indication, yes, they do come from our competitors. I wouldn't be able to tell you publicly from where it comes from because a prepaid market typically is not where they would tell us where they were coming from. But if you look at some of the other indicators from the other operators, you'll probably see where possibly these customers are coming from, whichever they are coming from. So that's what I can tell you on this.

So far as your question, Foong, on Indonesia, I'm sorry, I meant to answer that when I say that we've always looked at industry consolidation. So the answer to your question is yes, but it's always a question of valuation. Because we believe in the need to create scale in this business in the markets that we operate. In fact, if you ask me, it's long overdue. So that's why in doing the Celcom-Digi merger, I talked about the future proofing of the business 3, 4 years down the road. It's not about this year. So we're prepared to see the dilution if we know that it will certainly secure the future of the mobile business in years to come. Now when it comes to valuation, that's always the challenge, like all transactions. Yes, it's a question of whether we can strike a deal. I mean why we are able to do the Celcom-Digi merger is because Axiata and Telenor [indiscernible] share the same vision, the same aspirations, the same concerns of the industry and the same belief that the industry needs to scale. So if there was a party in Indonesia, I wouldn't mention who is my preference, if there was such a thing. Yes, it's about having the same strategy intent of doing the merger, yes. If a party wants to just cash out and don't see the mobile business as the future, then the discussion will be very different. You know what I mean? Yes? So -- and probably be [indiscernible]. I'm just guessing here, if I was involved in that sort of transaction. But the answer to your question, yes, we would be considered to merge with another operator if it means future-proofing the business. There is such a concept called joint control, like what we're doing in Malaysia between Telenor and Axiata. Yes. So Foong, I hope that answers your question. Clare, next.

Okay. Next, we have questions coming through from Izzati from Macquarie, the new and improved version of Prem and previously from Axiata also.

I know. She knows all our secrets.

Can you hear me?

Yes, loud and clear.

Yes, we can hear you.

All right. Just 1 question from me. Since you talked about the M&A just now, maybe you can give us some color in terms of any you talked about having postmerger integration teams between Celcom and also Digi having started the work already. So if you can share some of the progress, how has that been? Or if there's any potential hiccup? Or what do you worry about post merger? Because I just want to get a sense of how much like Axiata we can prepare preimplementation versus like postimplementation when it comes to like network planning, CLM, IT infrastructure. Yes, that's all.

Very good question. Actually, that's the challenge that's been faced by the 2 organizations. We have the BAU work, and we have the integration planning that's going on. So what we've done is created 2 groups of people, the integration management office and integration functional teams, in total of about 70 people, if you look at both organizations. Now the great news, Izzati, is that everyone is working so well together. Everyone is very driven. Everyone shares the same vision. Everyone are really, what you might call it, blending in and jellying getting in very well. And so that's the good news. So if you ask me how the progress is, the progress is actually very good, yes, in all the various work streams or tracks when it comes to whether it's HR, network, finance and so on. If there are challenges, it'd probably be the regulator -- from the regulatory point of view. So on that one, I've mentioned, we've made submission really to MCMC. Let's give it, I don't know, 3 to 5 months, maybe before year-end. Hopefully, we can get the approval or decision rather. But insofar as the submission is concerned, they've asked for several clarification already. Ever since the submission, we've been engaging with them very, very closely. So there shouldn't be any gaps, if you like, in the information that they might need. But insofar as progress is concerned, the good news is the teams from both sides, those who have not been selected to be part of the merger integration process are rather disappointed and constantly asking Idham and [ Albin ] whether they can be part of the integration process, which is always a good sign. I mean I take that to be a positive sign. And the staff continue to be enthusiastic and excited with the merger.

Okay. Maybe I can get some comments from Idham as well. Like what do you think in terms of the postmerger integration or if there's any challenges that you foresee, if there is any that keeps you up at night?

What keeps me at night, a lot of things keeps me at night -- up at night. But the merger, I think as Dato' Izzaddin mentioned just now, is going relatively well, in a way, I would say, better than expected. The teams is working together quite well. We have put together the various streams to prepare for day 1. We also provide not just for day 1, day 30, day 365 and also the various plans that we need to do. The good thing that I can say is one of the key success factor that would be very critical for us to get right is the -- how the 2 teams work together in terms of the way they work, the culture and so on and so forth. What has apparent come up, so far that we see a lot of similarities in the culture. Digi -- with the Digi and the new way of Celcom, which we have worked very hard in the past couple of years also to transform and modernize the way we work. When the team comes together, we see a lot of similarities. And I think this is a good sign. And then we hope that we can get all the planning, preparation and all that in place before day 1. So, so far, so good.

I think, Izzati, so far as post completion integration exercise is concerned, the one thing that worries me is when the 2 networks are combined. Because invariably, you're going to have some impact on the quality of network momentarily. And so the planning is very important, how we switch off and integrate the 2 networks, yes. So that's almost like a very precision partner, if you like, and trying to make sure that the quality of service, level of service to the customers are unaffected, both customers, actually, Digi and Celcom. So that's one thing that we are really focusing on to try to make sure that once we do this, you can plan, but the execution is always key.

Okay. I don't see any more people raise hands or any questions on the group chat, actually. So we do not...

Too soon.

Yes. So please go ahead, [ Raman ].

[indiscernible] and team, congrats on the strong set of results. I just want to get a bit more clarity on the thinking of the strategy in Indonesia, right? So first question is if the -- I mean in the discussions on the potential acquisition on Link Net, can you share a bit about the structure? Is this something that will be done via XL's balance sheet? Or would it be a combination of Axiata Group and XL's balance sheet? Or -- yes. So that's on the structure. And on the second question is, how does this convergence strategy fit into XL's idea of growing its customer base outside of Java?

No. To the first question, that's why we are exploring and we kept it flexible by announcing that it is both Axiata and XL negotiating with the 2 shareholders of Link Net. I can't share with you the details as yet. But you are right. Perhaps, Vivek, we could invite [ Raman ] to come and help us structure the deal. No, because there are many considerations, the funding side of XL, the minority shareholders, we have 66% of XL, the tax implications. And then more importantly to your point, this convergence strategy. For convergence to be effective, the businesses need to amalgamate. So the challenge is without 100% of Link Net, you can't do a proper amalgamation. Well, not that you can't, you can with all the commercial arrangements in place to integrate the back house -- or the back haul there. Now on the second question, in a way, XL is really preparing itself by offering the home product, yes, to its product called XL SATU. We're already seeing a rollout of bundling, if you like, of mobile services along with the home service. So the team at XL is, in a way, already psyching themselves up with the customer base and home passes of 2-plus million that Link Net has. It will certainly be able to jump-start this convergence play that XL will be pivoting itself into, yes? So you talk about outside Java? Yes. You see, the advantage of Indonesia is MYR 285 million thereabouts. The challenge is 17,000 island. And to your point, we've looked at the income sort of capacity of the major cities outside Java. And the business is still viable. In fact, that is the opportunity insofar as Indonesia is concerned, yes? It doesn't, what you want to call it, negate the opportunity. And as you know, yes, for mobile businesses, for mobile service, the rates outside Java is like, what, 2x, 3x more than Java itself. Well, those days are -- perhaps with us going to those markets now, the differential is like narrowing because the justification is the extra costs to lay out the infrastructure. But we've done the homework. We've looked at the major cities we wish to cover with the convergence strategy, and it's certainly a opportunity for XL.