Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Good evening, ladies and gentlemen. My name is Clare Chin, Head of Investor Relations at Axiata Group Berhad. Thank you for standing by, and welcome to Axiata's First Quarter 2022 Results Briefing. Today, we have present with us that is Dato' Izzaddin Bin Idris, Group CEO; Vivek Sood, on my right, Axiata Group CFO; Dato' Idham Nawawi, Celcom CEO; Jennifer Wong, Celcom CFO as well as our representatives from our operating companies dialing in. As usual, there will be a short presentation followed by a Q&A session. Lastly, 2 housekeeping reminders, you will be unmuted throughout the presentation. Also note that we will end the call promptly at 7 p.m. this evening. So without further ado, I would like to hand over the conference to Dato' Mohammed bin Idris.

Okay. Good afternoon -- good evening to all of you. Thank you for joining us on this call for the first quarter results. We had an AGM this morning and an EGM that followed for the PT Link Net Tbk acquisition. Happy to report that all resolutions were passed. But on the first quarter results that we announced yesterday, you can see that our first quarter results were affected by the foreign exchange -- unrealized foreign translation losses. I mean I don't have to emphasize that anymore to you guys. What it is, is a noncash element of ForEx losses. That's why we recorded loss of MYR 43 million. ForEx losses in total is about MYR 392 million. And this is stemming from the product losses at Dialog and Axiata itself. Dialog, it has a foreign U.S. dollar loan. Hence, the translation, like the losses that's been recorded because of depreciation of the Sri Lanka rupee. Underlying because quarter results, certainly very encouraging, driven by the operational -- improved performance across all cores except Ncell. Challenges in Nepal continues. On a constant currency basis, year-on-year revenue, excluding device grows by 7.8%. EBITDA margin is stable at 44.8%, and underlying PATAMI rose by 70.7%. Now a bit of the explanation there because there is no accelerated depreciation of 3G assets in '22, yes? So -- but I think the numbers are offset by higher tax from Cukai Makmur. We estimate that for the full year edotco as well as TowerCo would to pay something like MYR 100 million in total. We've made a provision of MYR 3 million in the first quarter. Now adjusted OFCF rose to about MYR 904 million. This is largely due to high EBITDA and CapEx. Our gross debt EBITDA is just a shade below 2.5 -- actually 2.49x, and this is the mother of all guardrails that have been observed because of the rating agencies sort of prescription, if you like. So -- and the higher cash flow is a result of higher EBITDA from Celcom/edotco. Happy to report that the good operational performance of Celcom continues. There are earlier concerns about the quality of the subscribers, level of bad debt and inventory management, that's all under control. So good job to the team at Celcom. Cash balance stood at MYR 5.8 billion, slightly below the year-end number of above MYR 7 billion, but that's attributable to the continuing CapEx investments we need to make in Excel. Company by company, if you look at the Celcom subsidiary maintaining cost momentum and EBIT is a bit distorted because of the known 3G accelerated depreciation in 2022, but there is also lower direct sales and marketing costs and PATAMI rose significantly, but offset from the high impact of Cukai Makmur. XL Group revenue growth, although there's a slightly higher OpEx spend in terms of higher sales and marketing costs due to the expansion of the distribution footprint. EBIT reduced by 12.3% as a result of the network -- next investment that we have to make. PATAMI was affected by the higher finance costs and one-off again and [indiscernible] sales in quarter 1 and the year before. Globally, the performance of moderate while intense competition led to aggressive competition. You can see that data revenue has gone up significantly by 14%. This is in higher intent with the higher data subscribers and usage, EBITDA rose about 4.9% attributable to lower direct and staff costs. But overall EBIT declined slightly because of higher utilization from the new spectrum that was applied last year. Dialog, yes, this is a story that featured prominently during the Q&A session at the AGM today. Shareholders were concerned about the developments in Sri Lanka. We've all read about what's going on there. Now the good news is operationally, Dialog seems to be doing very well, yes, or rather steady performance. You can see the strong growth across all segments of mobile, fixed broadband and TV. EBIT growth lagged by about 2.1%, rose about 2.1%. That's a result of higher direct anemic costs. But suddenly, it reversed into a loss of IDR 15.8 billion. Now this is impacted by the noncash ForEx made loss arising from the U.S. dollar-denominated debt. We will touch a bit more about Dialog and Sri Lankan economy, macroeconomic challenges and all that later on as considerations for 2022. XL, as I've mentioned, international long distance revenue came down by about 16.2%. That affected data growth, but not withstanding data growth of 19.8%, EBIT down by 20%, that's impacted by higher costs and PATAMI dropped slightly by 9.7% as a result of lower tax. Smart, this is a good description. In the past quarters, as Clare would tell you all, we keep using the same -- well, adjective to describe the steady performance on all metrics. So that's the good news. We continue to be able to consistently maintain the revenue growth, higher subscribers and usage. Heavy growth muted slightly at about 2.5%. Higher direct costs and D&A and PATAMI rose by about 23%, as a result of investment impairment of financial services. This is the [indiscernible] business in quarter 1 2021. So there isn't any investment impairment in '22, so a bit sorted by that number. Boost, steady growth in GTV. We're happy to report that GTV grew by about 25% to MYR 1.4 billion. As a result of higher offline transactions on the payments business, increased loan disbursement was credit resulting, in net loss of about MYR 48 million in the first quarter. That's because of the ForEx recognition in the year before. Boost life users are now up to 9.9 million and Malaysian merchants went up to 469,000 merchants. ADA, I'm happy to report that it continues to retain the revenue momentum. Year-on-year, revenue doubled to MYR 189 million, and this is driven by the improved contribution from the Customer Engagement business as well as the contribution from the e-commerce enablement business from the acquisition of Awake Asia. At PATAMI dropped slightly to about MYR 6 million as a result of higher opex, taxation and ForEx loss. And I guess the big item here as far as ADA is concerned, is staff cost. That's the feature of their P&L. They went through the same experience as a lot of tech companies staff churn, if you like, in excess of 30%, and that's a pretty high number to manage in terms of staff costs. Insofar as edotco is concerned, very strong operational performance driven by the acquisition of Touch Mindscape and organic growth in both colo and new B2S sites. Now just to highlight this, as of the year-end, as you are aware, we completed this transaction on 24th of December. So for the period 2021, we had to include the debt -- correspond the debt amount as a result of the acquisition, but we were not able to record or consolidate the EBITDA numbers. I'm happy to report the first quarter, the EBITDA is about -- sorry, about MYR 30 million if I'm not mistaken. So we continue to make sure that the revenue flow-through and lower staff costs continue. PATAMI is slightly impacted by the higher finance costs because of the acquisition of such Mindscape. The good news is tenancy ratio, and this is not a metric that we track, yes. And so far, concern has moved from 1.57 to 1.63x in the first quarter. Overall, we are confident of meeting the 2022 headline KPIs that we've announced, but mindful of risk sectors. We are rather cautiously optimistic for revenue at device growth and EBIT, but we think it will be in line headline KPIs. Risks for 2022 include macroeconomic challenges, especially in Sri Lanka, sustained global chief supply issues and regulatory uncertainties and I think so far, supply chain is concerning, it goes beyond chips, flowers, also restricted and Malaysia supply of chicken is also causing price of chicken to go up to MYR 11 per kilo if you go to the market, just so you know. Yes. So there are issues on Dialog for 2022 dividends because of the pressures on the translation loss and dividend trap, yes, because a lot of companies -- in fact, all companies, organizations in Sri Lanka are unable to remit U.S. dollar. So the good news is as the key shareholder -- majority of shareholder of Dialog, we are providing the necessary support to the Dialog team. The vision of 5.0 continues. We are executing for next as the integrated annual report to describe our efforts for 2021, but this will continue in 2022. Various acquisitions are made. The PLDT towers by edotco, happy to report that we should be completing the transaction in phases because the handover of the towers will spread between this month, June, September and year-end. So if you like, the debt that will be consolidated will be over a period of time. And I think the point to note here is that whilst we have made an acquisition, 100% of all the towers, we've always been in talks with several parties to take a stake in this SPV that holds the tower assets in Philippines. That's the first thing. We hope to make appropriate announcements shortly. So that will enable us to degear ourselves from the, call it, the debt that was raised to buy over these assets. The second bit is, it is a stand-alone acquisition in the sense there has no recourse. There's no support that Axiata has to provide to edotco. And they set up with SPV to make this acquisition and hopefully, we'll be sub-funding. As you know on 9th April, we announced the successful announcement of the digital bank license, 1 of the 5 digital bank license has been issued by Central Bank. And in measure, we've completed the acquisition of Hipernet Indodata as part of our enterprise proposition. We've announced the Link Net acquisition. The shareholders today has approved this acquisition. The 1 of the 2 vendors, one vendor is CVC, the vendor is PT -- PT First Media. That's a subsidiary of Lippo. They are going to be shareholders on 6th of June. Once that due is completed, we will have an obligation to undertake a mandatory thing we will offer. And hopefully, we can complete the mandatory takeover offer in the third quarter. Celcom Digi merger, another question that was prevalent during the AGM. As you know, this is the first time a major transaction of this nature, MYR 60 billion in value that's been done understandably, and it took a bit of time to try to evaluate the issues to make sure that it is not anticompetitive. We have been engaging with MCMC on the statement of issues that was issued on 1st of April. And we hope to conclude this soon. And hopefully, we can complete the whole acquisition by the second half of this year. We've also announced today -- launched, rather, our net zero carbon road map. We're committed to achieving net zero emissions no later than 2050 with a near-term target of 2030 to reduce operational cover emissions by 45% from the 2020 baseline. So we should take 2020, baseline basically using 2020 as a anchor year, if you like, and moving on to improve the carbon emissions by 45% by 2030. In fact, based on the [indiscernible] we've done for Scope 1 and Scope 2, the company issues a tally up to 1.2 million tons of carbon oxide equivalent CO2 in small, GCO2e. And we've also announced today the key objective strategy for Climate Action, which includes carbon emissions, reduction avoidance and removal. I think on this one, I think we need to be mindful that when it comes to reducing and pursuing a net zero coverage road map, there'll be investments that we need to make. But at the end of the day, if we are serious about climate concerns on climate issues, this is something that every other company should pursue. The threat is real. And the point I'm trying to make is that the investment we make will be much more if we have to do it in 5 years, 10 years down the road. But that's how we see the investments in maker as climate action is concerned. Now on that note, I would like now to hand over to our new CFO, Mr. Vivek Sood.

Thank you, Dato. Very good afternoon, evening, to all of you. Let me start with the results. Firstly, the reported numbers. The year -- the quarter on a year-on-year basis for the revenue growth of 6.7%, EBITDA growth of 7.7%. On quarter-on-quarter, a drop of 6.3% on revenue, EBITDA minus 4.7%, partly because of the seasonality. Quarter 1 is generally lower than quarter 4 and also on account of translation of productive from the operational currency to our reporting currency, and so that's the impact on the revenue. Profit, as Dato mentioned, is being impacted because of the unrealized ForEx losses. Most of it is unrealized. I think it's around MYR 14 million, which was realized and large part of it, around MYR 390 million, large part of it comes from the depreciation of LKR, which happened around the closer end of March -- between December and March, the LKR depreciated by around 31%. And that's correspondingly resulted in loss on PATAMI of minus MYR 43 million. On an underlying basis, the business grew 7.8% ex-device and 7.4% on EBITDA. Margin remained fairly stable, in fact, better than previous year by around -- at around 44.8%. Underlying PATAMI grew by 17.7% and EBITDA contribution from all OpCos except Ncell resulted in overall profit improvement during the quarter compared to last year. If you look at the numbers on the left, most of the OpCos showed a high single-digit or double-digit growth coming in during this quarter on a year-on-year basis. On a quarter-on-quarter basis, except Dialog and edotco, there was a marginal dip across all the ons. As far as our initiative on costs are continuing, which we saved around MYR 241 million in the quarter, out of which a large part of it came from CapEx saving, around MYR 163 million, and around MYR 78 million coming from OpEx savings. EBIT growth, strong growth compared to last year at 44.5%, mainly coming on improvement in EBITDA to the extent of 7.4%. But in addition to that, EBIT improvement also came to the last year, specifically in Celcom had accelerated depreciation impact in quarter 1, which wasn't present in this particular quarter. And that improvement translated down to higher PATAMI of around MYR 317 million translation improvement of 7%. So just to give you a perspective on the movement from last year to this year, mainly [indiscernible] as I mentioned earlier, also on account of the impact of extended depreciation, which was around MYR 194 million last year during the first quarter. As far as the reconciliation between the reported numbers and underlying numbers, the largest part is around MYR 404 million is account on ForEx and derivatives impact coming in this quarter, essentially on account of unrealized translation losses for ForEx movement. If I look at the adjusted OFCF, the adjusted OFCF is basically EBITDA minus adjusting for the lease liabilities. So if you look at on adjusted OFCF from last year on MYR 710 million, we improved MYR 904 million, mainly coming out of the improvement in EBITDA and also lower CapEx during this first quarter compared to last year on the same quarter. By OpCo, a significant part of the improvement comes from XL, and that's essentially on account of the CapEx which is a matter of phasing issue, I would say, or a timing issue, then will saving coming out of the OFCF, but still fairly strong cash generation during the quarter of around MYR 904 million. As far as balance sheet is concerned, I think one of the concerns raised by some of the investors has been on our ability to support the expansion of the growth plans we have. As far as this point is concerned, I think the balance sheet still remains fairly strong at under 2.5x debt to EBITDA -- gross debt-to-EBITDA and under 2x on net to debt to EBITDA was around MYR 5.8 billion cash. The borrowings are around 45% in local currency remaining around close to 55% in foreign currency and mostly USD with around half of it has been hedged as we speak. The good news is about most of the borrowings have been on fixed interest rates, even though interest rates are going up, the impact has not been that significant so far. And the other point is that our tenure of our debt has been fairly normal, more than 65% of our debt, more than 2 years maturity. So I think balance sheet has been fairly stable with cash balance around MYR 5.8 billion March end. Yes. Let me quickly run through performance of each of the OpCos. On a year-on-year basis, Celcom grew 5.2%. On a quarter-on-quarter basis, there was a bit minus 3%, and that's mainly on amount of one-off revenues coming in, in last quarter of 2021. As far as EBITDA is concerned, Celcom did see the impact -- I mean 3.6% improvement on EBITDA really coming because of the lower cost of sales and devices in the first quarter of this year. Translated into improved FCA at around MYR 598 billion million, around 16% improvement and also translating into improved profit for the -- of MYR 160 million in quarter 1 2022. We did consider in our accounts around close to MYR 23 million effect on account of Cukai Makmur. We estimate the full impact for Axiata for the year would be anywhere between MYR 80 million to MYR 100 million for the full 2 years. XL, good revenue growth on a year-on-year basis, around 7.9% though coming out of the expansion activities, specifically on distribution or network, translating to lower improvement on the EBITDA as compared to the revenue improvement. As I said earlier, phasing issues of CapEx translated into FCF of around MYR 1.9 trillion and slightly lower profit because of higher finance cost -- net finance cost. Most of the debt in Indonesia has been on floating, which we are trying to move to fixed. And also last year, we did have some one-off gain coming out of sale of picocell which is in building solutions in quarter 1 last year. I think the performance impacted by intense competition in the market and intense competition comes from the fact that all the operators did acquire spectrum last year, and there has been a fair amount of high growth happening on the data consumption in that particular market. Having said that, still the improvement coming in the revenue of around 2%, a much stronger outcome in the eventually EBITDA improvement. That's largely coming on account of lower direct costs as well as staff costs during the quarter. However, EBIT getting impacted because the higher D&A driven from the additional amortization from the spectrum, which was purchased last year. FCF remains fairly stable with CapEx in line with what the plans are, translating into improved profits by around 16.1% over last year at around nearly MYR 400 million. Dialog. I think this has been on operations which has got contradiction, operationally extremely good performance with revenue growing at 16.6%, contributed across all lines. However, impact came from ForEx and also on account of the OpEx mainly coming because of the -- because large part of the OpEx in Dialog is also U.S. denominated and effect of the inflation in that particular market. Rise in D&A effectively on account of the investments made last year, resulted in an overall loss of LKR 15.8 billion for the quarter. And if you exclude the ForEx impact, it was still a strong performance and profit of around LKR 4.3 billion for that particular quarter. So I think in terms of performance operationally, good performance, but the headwinds on account of the current macroeconomic factors is something which impacted the results, and this is something which we are watchful, will have impact during this year on overall performance of [indiscernible]. Ncell. I think this is one market where we've struggled. This quarter was impacted by lower international long distance revenue, which is something which we expect overall deterioration in the long ILD traffic. However, the business was also impacted because of the regulation introduced in lowering the interconnect rates, which had an impact on revenue as well as profits because of the lowering of the rates, the company has no choice but to also lower the on-net rates reducing the margins on the voice business. So I think we still struggle there with -- while there is an improvement happening on the data monetization side, but it is not sufficient enough to take care of the lower international traffic as well as impact on the voice side. Having said that, I think the company does continue to manage its spends reasonably well, in fact coming on account of EBIT coming mostly on account of the increased investments on the network side, which we've taken last year to expand our coverage ratio. FCF, lower, mainly on the continuing spend on the spectrum and activating that spectrum, which was bought last year, but only pretty much flat compared last year. Smart, I think, as Dato said, has been a fairly stable business for us, continues to show improvement year-on-year. Quarter-on-quarter impacted because of mostly because of seasonality but remains fairly steady when it comes to the EBITDA and EBIT line. And similarly, I think the profit improvement happened because of the overall improvement in top line and increase in the EBITDA. Let me go to the digital businesses quickly. Boost showed a good improvement on the revenue. Quarter-on-quarter, does see a dip mainly on account of one-off revenue, but through the partnership last quarter with Mastercard as well as carrying out some of the government-led initiatives. So that's not been there in the quarter 1, but still revenue has been growing compared to last year. EBITDA has been quite flat coming to last year. FCF, I think there's not much of CapEx in the business. And profit has been marginally lower. Because last year, there was some one-off products, which was recognized on account of the investments made by [indiscernible], which was not there this year, resulting in lower profits compared to last year. Having said that, the business is still working on improving the profit lens with contribution, which is a gross margin seeing improvement when compared to last year. ADA remains strong when it comes to the performance overall. Revenue continues to be growing at a fairly fast pace, more than 100% improvement on the revenue line compared to last year, but marginally lower on a quarter-on-quarter basis. And that's more of seasonality because our marketing budgets do not come up from the enterprise customers during the first quarter of the year. EBITDA translating into strong growth in EBITDA and also profit margin is lower because of the translation losses coming from the operations, which are mostly on U.S. dollar operations and slightly higher taxes in some of the margin markets where they have been making profits. On edotco, strong operational performance with around 19% growth, partly contributed by the addition of Touch Mindscape and also organic build mostly in Bangladesh during the year. And that basically translated into a strong EBIT growth of 34.5%, mainly on account of the lower staff costs. PATAMI grew at 3.5%, mainly on account of higher borrowing costs essentially coming out of the debt-funded acquisition of Touch Mindscape. The improvement on the good news has been the improvement coming on tenancies that have moved up from 1.57 in '21 to around 1.63 in 2022. I think there are still strong orders on new tower builds, specifically in Bangladesh, which should continue to deliver a good performance during the year for [Technical Difficulty]. Moving forward, I'll hand over back to Dato.

Thanks, Vivek. I think as far as our headline KPI is concerned, we are cautiously optimistic for the revenue, ex-dividend growth in line with our -- what we've announced as our headline KPIs. The guidance for CapEx whilst it's not a headline KPI, we indicated MYR 7.1 billion. Out of this, about MYR 1 billion is attributable to edotco. And again, the business is very different 6 months after -- sorry 9 months takes to put up a tower [indiscernible] after commission, you will get the revenue. So a slightly different consideration as far as is edotco is concerned, yes? Now the consideration for 2022. As I said earlier, on macroeconomic, inflationary pressures, increased energy costs, high interest rates, currency volatility, all this put pressure on our financials. Impact of M&A transactions, I think this is key. The execution is always key to try to crystallize and extract the synergies from the acquisitions that we've made. We as leader for Axiata and so on have sustained global chip supply issues exacerbated by the Russia, Ukraine war. This has increased our costs, geopolitics as well, and this is going to continue to pose us a challenge. Increased taxes -- potential increased access, high inflation in ForEx challenges in Sri Lanka and we are watching it specifically. The good news is the government has put in place an incredible -- sorry, the President has put an incredible government in place. These are people with experienced significant IMF and so on. So we hope that is going to help provide a real lifeline to businesses and the people of Sri Lanka. As I've said earlier, we continue to provide the support for Dialog to make sure that we can continue to provide the quality of service to its customers, connecting, as you all know, is key engine in any markets and Sri Lanka is no different. And especially in times like this, when people need to be connected. So at the same time, we are prioritizing the CapEx to just critical ones, especially maintenance CapEx in Sri Lanka. So there is no sort of undue pressure on the balance sheet and cash flows of [indiscernible]. Okay, in due course, things in Sri Lanka will then fall back, so that business can come back to where it used to be. Just a bit on net zero growth metric we launched this afternoon, three objective strategy. First, to accelerate decarbonization of our network operations. Scope 1 and 2, as I mentioned, 45% from the 2022 baseline. That's going to be done through enhancing energy efficiency, increase renewable energy consumption from self-generation or purchase electricity. The second strategy is to reduce energy emissions under Scope 3. And this is the big challenge because Scope 3 are third party sort of responsibility. But what we do is we're going to track our suppliers, operational carbon emissions as we progress, and we believe this will contribute to positive event impact across our value chain. And of course, the objective strategy is to contribute positively climate actions to carbon removal and enable avoidance through technology and digitalization. And this is going to be done by us decarbonization futures to enable efforts across society. So that's something that we've announced and hopefully, we will be able to make an impact for this. So that in a nutshell is the presentation for third quarter results as well as on some net zero carbon road map that we've launched today and I hand over now to Clare.

Thank you, Dato. Thank you, Vivek. So we'll move on to the Q&A session. [Operator Instructions]. So as usual, we are also joined by our colleagues from other OpCos, Celcom, CMO, Allan; XL, we have CFO. Pak Budi; edotco, CEO, Adlan; ADA CEO, Srini ; Boost, CEO Sheyantha as well as Dr. Hans, Group EVP. So feel free to direct your questions to them as well, if you wish.

So let's move on to the Q&A session. We have the first question perhaps coming from Foong, CIMB.

Yes, I can -- okay, I just got myself unmuted. Firstly, for Celcom, if I look at the service revenue, it fell by about 3.5% Q-on-Q, going from 4Q to the first quarter of this year, looks a little bit softer than what the -- what your peers reported for the quarter. So I appreciate if you can give us a bit more color as to the trajectory. Was there a pickup in competition for Celcom or perhaps the MVNOs, any softness in terms of the performance there? Secondly, on Dialog in Sri Lanka, apologies if this was already covered earlier. What has the revenue you expect in May so far from the economic crisis? And with regards to the U.S. dollar-denominated debt that they have, when is that due? And then third question for Boost. Now that it has won a digital banking license, what do you expect in terms of the earnings trajectory and any change to the breakeven time line that was previously guided? Yes, those are my three questions.

Okay. Here's the advantage of chairing this session. I can direct the questions now to Dato' Idham and second one to Vivek and the third one to Sheyantha. Sorry, guys. I have been doing a lot of talking today. So give chance to everybody else.

Thank you, Foong, for the questions. Yes, it's slightly softer. If you see it across -- compared to the other -- couple of reasons. Of course, in Q4 last year, we had a very good quarter. So there was quite a good quarter that we have compared to the industry. And then what also happened in the -- towards the beginning of the -- towards the end of last quarter or the beginning of the first quarter, we have seen also the competition responding to our offer to the market, which we decided not to respond just yet, because we think whatever that we offer is still very, very competitive. But I think that cost slightly softer than the rest. However, some of the latest trends that we see in the past couple of months that we're seeing that whatever the decisions that we have made to hold on to our own tactics and strategy is -- was the correct decision. So yes, it is. It is due to some of the response from the competition, but we decided not to respond just yet.

Okay. Any comments on the MVNO ones?

On the MVNO, there's nothing out of the ordinary that I've seen at this point in time, but when the competition responded to our offers, that's the Celcom but also touched with the offer from the MVNO as well.

Okay. Vivek, take on the second question on the...

Yes. So I think as far as our revenue is concerned, I think it's still holding well across lines of businesses. So we have been very okay. I think where we're seeing a bit of a challenge is the platform cost and our ability to pass on the effect of inflation to the consumers. And the reason for that is the in Indonesia -- in Sri Lanka, we require the regulatory approval on any price increase. As far as debt is concerned, we have around close to MYR 144 million of debt, out of which close to MYR 72 million is the shareholder loan given by Axiata which is for a period of 3 years, but that can be managed because it is between the two companies. In addition to them, the balance there have what we call single gain loan where there is a payout every quarter of around $18 million.

1-8.

1-8. $18 million. And that's -- the next one is to be paid in July this year. But the good news is that we've been having discussions with IFC to step in. And IFC is -- it's in the final stages of discussion would provide around $150 million of long-dated debt for us in Sri Lanka, and that should basically take away major impact on account of realized losses coming in Sri Lanka. So I think that's the good news.

Sheyantha, do you want to take the third question on the digital bank plans, breakeven time line in so far as Boost is concerned compared to the previous guidance that we have given to the market?

Yes, yes. So Foong, thanks for the question. I think in terms of earning trajectory overall, the digital bank obviously helps us because it -- if you think about our earnings trajectory, the primary lever is really our lending business in terms of growing our top line and also flowing through the bottom line. So the constraint in that has always been how much of funding we can source and the digital bank gives us the ability to deposit rates, right? So from a 3-year perspective, the trajectory shifts to a much higher trajectory than it would have been had we not got the license. Now having said that, in the short term, yes, there will be some start-up losses because as opposed to our existing lending business, we have to build some infrastructure, et cetera, obviously, in the bank that is needed to operate a bank. So in year 1, there may be some losses that were not originally forecast in our trajectory. Having said that, a lot of the investments we would make our CapEx, so a lot of that will be depreciated over time. So net-net, what I would say is it definitely puts us on a higher earnings trajectory. I think that was the question. In terms of the immediate profitability, I think there may be some losses, which we will have to bear next year. But I think the good news is that a lot of the infrastructure that we have already is in place in our lending business. So if you really think about core banking systems, some of the additional infrastructure, a lot of that would be CapEx. So net-net I don't see a very, very significant impact. But overall, I think the key point is it really puts us on a very, very much higher earnings trajectory over the next 3 years than would not have been the case if we didn't get the license.

Very good. Thank you. Foong?

Yes, if I can follow up with two questions. Firstly, maybe for Sheyantha again. When -- just to clarify, when you mentioned some startup losses in year 1, are you referring to year 1 of commercial operations or this next 12 months before you start your operations? So that's question number one. Secondly, for Celcom, just going back to the earlier -- I mean, the comments in the PowerPoint about the enterprise business. Just wanted to get an understanding of the contribution from BridgeNet Solutions and -- in front and -- in the quarter? And how do you expect enterprise to grow and what contribution to revenue are you targeting over the next 2 to 3 years?

Sheyantha, first.

Yes, a very short answer. Yes, it's a year 1 of commercial operations, I was referring to.

Thanks, Foong, for the follow-up. Yes, at this point in time, our enterprise revenue is that predominantly our mobile enterprise plus the connectivity revenue. The two acquisitions came in, yes, they contributed to about MYR 30 million, about perhaps 15% of the total enterprise revenue. Currently, enterprise revenue is around 12% to 13% of the overall Celcom's revenue, and we hope to see this grow to about 15% and north of 15% reaching 18% in the next couple of years.

Okay. Next, we have an in [ Hong Yin Hao from Ninvest ].

I think Isaac from [indiscernible] first. Yes. Yes.

Hong, do you want to go ahead first, since you...

Right. Right. Sure. Okay. So I guess one question is on Dialog's. Given that the uncertainties of the economy is right now in Sri Lanka, would the group expect any impairments into that segment? And also, I noticed that Dialog actually raised additional MYR 72 million drawdown of dollar loans in the first quarter of 2022. Would that further strain the balance sheets of the group and also incur furthermore ForEx losses? That's all.

So I think first question on the impairment, I think we've done a number of analysis as part of the quarter earnings. We still think there is enough -- based on that, there is still enough headroom available for us to have any short-term impairment coming in. So I think we are closely watching it, but there is sufficient headroom to -- for avoiding any impairment. As far as drawdown is concerned, I think the MYR 72 million is mostly to replace the existing loan, which I talked about, which was the syndicated loan, and this is where Axiata [indiscernible] shareholder loan to pay down the existing syndicated loan, which has been due every quarter around MYR 18 million. So overall debt to EBITDA has actually come down for Dialog. Having said that, yes, the March exchange rate was around 292, which is currently at 361. So there would be further impact coming in quarter 2 on account of the translation of the loan into the local currency.

Does that work in [Yin Hao]?

I see.

Yes. Okay, Isaac from [indiscernible].

Two questions for me, please. First one is on the -- both on Dialog actually. First one is in terms of the operating costs. Can we just roughly know how much of it is U.S. denominated? And on the local denominated costs, what are the cost inflation should we expect comparing on a year-on-year basis? That's question number one. Number two is on the accounting related. Can you just share with us what's the average exchange rate that you're booking for the Dialog's revenue for the Sri Lanka Rupee? Because if I compare the revenue in ringgit year-on-year based on the report, it's still very firm. So I was wondering what's the exchange rate? And to follow up, last question, what's the book value for Dialog at the moment?

So let me start with the first one. I think around 43% or 45% of the OpEx for Dialog -- operating cost is in USD mainly for the network IT, P&C, the content cost for their TV business. So I think that is the U.S. dollar exposure on the OpEx side. And on the CapEx side, around close to 80% of the CapEx is U.S. dollar. As far as the inflationary impact is concerned, currently, the inflation in the market is around 30%, mostly driven by the increase in food price and energy. So the effect for us would be largely on account of energy and increase in staff costs relating to the effect of the overall affordability, which should be there. At this point in time, we are seeing around close to 13% to 14% impact coming on to gross side kind of due to inflation. As far as the ForEx is concerned, you're right. On a P&L line, you do not see that kind of a big impact on account of cost deposits because it's only averages. But as I said earlier during the presentation, on a quarter-on-quarter basis, the impact was around 30% depreciation, which at this point in time is around 63% depreciation. So the impact is largely coming on the balance sheet side, not that much reflected into the operating expenses yet.