Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Good afternoon, 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 second quarter results briefing. Today, we have present with us Dr. Hans Wijayasuriya, Joint Acting CEO and CEO, Telecom business; Vivek Sood, Joint Acting CEO and CFO; as well as reps from our operating companies. There will be a short presentation as usual, followed by a Q&A session. So lastly, 2 housekeeping reminders. You will be on mute throughout the presentation. Also note that we will end the con call at 6 p.m. sharp. Without further ado, I will hand over the conference to Dr. Hans for welcoming remarks.

Thank you, Clare, and welcome, everyone, to Axiata's second quarter investor briefing. Indeed, a pleasure to have you all and thank you for taking the time. I will start off the briefing with a short description of the segregation of responsibilities between Vivek and myself and to give you a flavor of how the joint acting group CEOs are managing the company. First of all, it's important to stress that we have the Axiata 5.0 vision and strategy very much anchored, and we are working on the 5.0 strategy as well as ensuring that it's business as usual as far as operations are concerned. As we all know, there have been headwinds from the external environment during this period as well. And we are managing together with our colleagues in the OpCos to face these externalities, take immediate actions as well as corrective actions for the immediate future and ensuring that the group as a whole tracks on its targets and will carry through to deliver and exceed the expectations for 2022. Back to this diagram. The SLT stands for senior leadership team and just to spell out that acronym. And both Vivek and I were members or are members of the SLT at Axiata Group and our accountabilities, which are shown here in the orange box, and the capacity of our SLT portfolio. So for example, Vivek will be looking after edotco and the digital businesses, Boost Holdings as well as the ADA. And in line with my SLT responsibilities, I will continue to look after Celcom, XL, Link Net, Robi, Dialog, Ncell and Smart, the telco operation. The separation of -- or establishment of a check and balance is implemented here via the CEO LOA, which we both have separately. We have the full CEO LOA not between us but separately. So that the CEO LOA which is with Vivek would be exercised in -- on the areas where I would have line accountability or SLT LOA. And likewise, I would carry the CEO LOA for areas where Vivek carries the SLT or line responsibility. We believe this enables a check and balance while maintaining the fundamental of a full CEO LOA being carried by both of us. Independent functions such as internal audit remain as such with just administrative lines to Vivek and myself's perspective. Today, it's coming up to the end of the third month of this arrangement, and the group is running, as I described, on a BAU basis. And the CEOs of OpCos as well as the SLT at Axiata have come together to ensure that operations continue. And Axiata 5.0 strategy continues to be implemented as [indiscernible]. Yes. So with that, let me hand over to Vivek to take you through the presentation.

Yes. Thank you, Dr. Hans. A very good day to all of you. It's my pleasure to announce the results for quarter 2 2022. I'll run through the executive summary. I think we'll -- I'll spend very little time on this because we've got pretty much all the bullets covered in more detail in subsequent slides. Happy to announce that the results -- reported results in terms of top line growth were good with a 5.8% growth in revenue and 7.4% growth in EBITDA. However, the profit was impacted because of the ForEx and macro implication, more so ForEx, as well as one-off taxes in Sri Lanka and Malaysia paid during the first half. The year-to-date, there was a loss of MYR 149 million versus a profit of MYR 353 million same period last year and mostly coming out of the unrealized ForEx losses predominantly coming from Dialog, where the currency so far during the year has devalued by nearly 80% from the levels of LKR 202 beginning of this year to around LKR 360 as we speak now. And the other is essentially on account of the losses on the ForEx movement between dollar and ringgit, where we have some unhedged dollar positions in the group. So apart from that, if you look at the second slide, when you look at the constant currency normalized for the ForEx, mostly, as I said, unrealized ForEx losses, the performance on an underlying basis has been fairly strong. We saw revenue growth of 8.1% and the -- sorry, 7.9% and EBITDA growth of 8.1% and EBITDA margin nearly 45% with an EBIT growth coming at 34% and underlying PATAMI growth of 37.5%. All this came from extremely good performance from all the OpCos except Dialog, for reasons we are aware of, which is the macro situation in that country and hence, where the recovery has been slower than we had anticipated. The cash flows, which is adjusted operating free cash flow, which is basically the OFCF adjusted to the leases -- payment of leases, is MYR 966 million coming from EBITDA growth. And however, the balance sheet is at 3.03 with additional debt being acquired during the year -- during the quarter for the acquisition of Link Net and the acquisition of towers in Philippines. As you recall, we closed a transaction to buy around 3,000 towers from PLDT sometime in the previous quarter. And however, this number of 3.03x is because while the debt has been acquired, we have deconsolidated the performance of the EBITDA coming from these acquisitions. If I adjust for that, then we would have an EBITDA -- debt-to-EBITDA of 2.86. Celcom, very good performance from Celcom, which came out from continued growth in prepaid business as well as some of the new enterprise acquisitions which we did, smaller acquisitions we did during the year. XL, again, I think you would have heard the announcements from the XL team earlier this week, extremely good performance. And we also see some level of price hardening in that country. Robi, operationally, good performance, however, from a profit standpoint, impacted because of the depreciation of taka against the dollar. During the quarter, the taka depreciated by around 10% against the dollar, and Robi does carry around USD 100 million of loan. Plus, the CapEx is mostly dollar denominated. Dialog, I think the -- while the impact came very hard on account of the 80% acquisition in LKR, the revenue growth continuing to remain strong coming -- from mostly all the segments, mainly coming from the international traffic. EBITDA impacted because around 48% of the OpEx of Dialog is U.S.-denominated as well as the overall impact because of the fuel price increase as well as the overall inflation in the market resulted in the impact coming on the EBITDA line and consequently going along with the profits. The ForEx loss was around LKR 34 billion during the period. Ncell impacted by continuing ILD deterioration as well as impact on voice revenue because of certain lowering of the interconnect charges. If I go to the next slide, Smart continued to have steady performance. The business continued to grow at 6.5%. Boost, the revenue from Boost increased in line with the GTV increase as well as the acquisition of new customers and also continuing buildup of the loan portfolio, which Boost has been driving as a precursor to the digital bank, which would be possibly -- probably launched sometime in 2023. ADA, strong performance, continued strong performance coming in from customer engagement and e-commerce. e-commerce was coming out of the acquisition we made of Awake Asia last year, some challenges on the marketing solution because of lower marketing budgets being allocated by the companies given the pressures on the inflation side. edotco, good performance, again, coming both from organic and inorganic, organic essentially in the -- in Bangladesh, where new build-to-suit as well as colos improvement as well as from Malaysia and from acquisitions coming from the Malaysian acquisition earlier or end of last year from Touch Matrix, which has been delivering the performance. The Philippines towers have just been consolidated at the end of June. So you may not see much of an impact yet in the -- on the performance of edotco. I'm happy to say the headline KPIs which we had set last year -- beginning of this year, which is revenue and EBIT, we had mid-single-digit growth in revenue and around high single-digit growth in EBIT. We are likely to exceed -- or we are confident to exceed that -- the KPIs by the end of this year. Macroeconomic headwinds continue in frontier markets. I think Sri Lanka as well struggled throughout the year. However, things are improving as we see -- speak. But we are also watchful of the other frontier markets like Bangladesh and Nepal. Dialog has been doing an extremely good job working through this resilience during these difficult times. I'll cover in more detail in subsequent slides. The Axiata 5.0 had certain plans on consolidation, value elimination, monetization and also looking at opportunities in the growth segments like edotco, fiber, et cetera. So we continue to deliver on those transactions in line with what was defined under Axiata 5.0. I'm happy to say, most of these efforts are now coming to completion. And hopefully, most of them would be completed by the end of this year. Dividend, which we usually will declare in quarter 2, the interim dividend, the -- we've decided to defer that dividend. Given the macro situation in the markets, we are watchful of how the developments are happening in these markets, and we will come back to the shareholders with dividend in the subsequent period. I'll just quickly run through the reported results for the year and the quarter. Quarter-on-quarter, revenue grew by 3.6%, coming from all the OpCos as we speak and year-to-date, the growth in revenue of 5.8%. EBITDA grew in line with the growth in revenue by 3.9% for quarter and 7.4% for on a year-to-date basis. However, as I said earlier, profits impacted because of the ForEx impact there. Underlying performance. As you see on a constant currency basis, quarter-on-quarter revenue growth was very strong at 6.4%, where Celcom, XL and edotco were the star performers, and revenue growth on a year-to-date basis at 7.9%. EBITDA, in line with the growth in revenue, grew quarter at 5.6% and year-to-date by -- with 8.1%. All OpCos did well on the EBITDA growth, except Dialog for factors I talked about earlier and Ncell, where the challenge has been on the top line growth and the deteriorating ILD revenue. EBIT. Consequent to higher growth in EBITDA, EBIT was -- grew at 10.2% for the quarter and 34% year-to-date, resulting in the PATAMI growth of around 37.5% on a year-to-date basis. This just reflects the waterfall on underlying performance. If you look at the table on the top, it basically compares the year-to-date 2021 versus year-to-date 2022. And if you look at from MYR 521 million to MYR 716 million, coming mostly out of the growth in EBITDA, but offset by increased finance costs because of the higher interest rates as well as higher leverage during this year. And taxes, MYR 165 million taxes, MYR 100 million is on account of the one-off taxes in Malaysia, which is the prosperity tax, as well as the surcharge tax in Sri Lanka. But if I look at the reconciliation between reported PATAMI and the underlying PATAMI, large part, which you can see here, MYR 799 million is on account of the movement in ForEx, of which nearly around MYR 600 million is -- or in fact, MYR 630 million is on account of unrealized impact. Balance would come as a realized impact. Adjusted OFCF, this is basically reflective of OFCF minus the leases, improved for the quarter -- for the year -- for the half -- first half from MYR 786 million to MYR 966 million, which is a 23% improvement, mainly again coming from EBITDA improvement and marginally from lower spend. Lower spend is essentially on account of the timing. And if you look at the reconciliation between the adjusted last year versus this year, mostly is improvement in XL. XL improvement is mainly because of the improvement in EBITDA as well as the CapEx from a timing perspective and Robi. Balance sheet, I think that's where you see a blip during the quarter from a 2.49 gross debt-to-EBITDA moving up to 3.03 and largely coming out of the new acquisition or new debt for the acquisition of Link Net, for the acquisition of PLDT towers and also debt coming consequently, consolidation of Link Net into the portfolio, which the transaction got completed on 22nd of June this year. Having said that, we still have a fairly strong cash position with around MYR 6.6 billion, mostly in Celcom, edotco, Ncell as well as the holding company. You would see the increase in the short maturity dip, and most of that is coming on account of the acquisition of Link Net as well as the towers in Philippines. Both of them are either being pared down as we complete the merger between Celcom and Digi. All would be converted in a long duration bond issuance. Both edotco as well as XL have been in the process of carrying out that activity. I'll hand over to Hans to talk about the digital telcos performance.

Thanks, Vivek. I'll start with Celcom, a stellar performance from Celcom. Datuk Idham and team are also online, a great job, well done. Revenue grew 4.2%, driven mainly by prepaid and also, as Vivek explained, incremental revenues coming in from the new subsidiaries Bridgenet and Infront, which are ICT solutions providers acquired by Celcom during this period. Also, a significantly improved performance in OpEx, sales and marketing as well as reduction in bad debt, which has led to EBITDA increasing by 13% and a hardening of the EBITDA margin by 5 points. Likewise, EBIT grew by more than 100% due to the EBITDA flow-through but also due to the benefit accruing from the absence of accelerated depreciation in the current year relative to the accelerated depreciation recorded in the previous year. However, even if we correct for this anomaly, EBIT grew by over 40% on an underlying basis. EBIT margin increased by 14 points and on an underlying basis by approximately 7 points. So overall, all the way from revenue to profitability, Celcom did deliver an excellent result at half year. PATAMI in absolute terms, MYR 542 million, driven by EBIT flow-through as well as -- or rather, also offset somewhat by the higher taxes, as Vivek explained, the Prosperity Tax being charged during this period. EBITDA flow-through has also led to FCF growing by 17.9%. Year-on-year CapEx has been flat, giving rise to increased cash flows from Celcom. Moving on to XL. Also, excellent performance by Ibu Dian and team in XL. Revenue grew by 8.5%, driven by post-Lebaran opening of segments of the economy and also, very importantly, price hardening in the market, which has also led to increase in ARPUs from IDR 31,000 to IDR 38,000. This is on the backdrop of a traditionally hypercompetitive market, and these are very positive trends we see in terms of the top line. However, EBITDA and EBIT lagged revenue growth with some OpEx increases in sales and marketing deployed and invested to drive revenue growth and also some increase in depreciation and amortization. EBITDA accordingly grew by 3.8%, albeit lagging revenue growth. And margins were compressed by 2 points at EBITDA level. EBIT grew by 4.4% with a flat margin at around 12%. PATAMI, however, was -- contracted by 14.1%, driven mainly by higher finance costs and also the lower one-off gains this year relative to the previous year. This year, again, saw recorded -- to do with the sale and leaseback of towers whereas the previous year had to do with picocell selloff, and this reduction in one-off gains has also led to the PATAMI contraction. Free cash flows increased by 63.1%, a flow-through of EBITDA plus CapEx reduction of approximately 20% -- 21% in the -- relative to the corresponding period in the previous year. Moving on to Robi, a solid operational performance. However, unfortunately, impacted by ForEx loss, the devaluation of the currency. Riyaaz and team have delivered 3.2% growth in revenues and very importantly also an OpEx reduction, where lower direct and staff costs have led to EBITDA growing at 9.1%, outstripping revenue growth of 3.2%, and EBIT growing by 12.1%, which again outpaced revenue growth. The EBITDA margin improved by 3 points and EBIT margin by 1 point. From a profitability perspective, a great outcome in Bangladesh with revenue growth being expanded at the profitability level. PATAMI, however, contracted by 65.8% due to the ForEx loss arising from U.S. dollar-denominated borrowings that Vivek also explained earlier and also due to finance costs relative to the corresponding period in the previous year. Free cash flows grew by 31.9%, driven mainly by EBITDA flow-through as well as a degree of CapEx reduction as of the half year mark by 19.6%. Moving on to Dialog. Solid performance at the top line. Supun and team is also on this call and will be available to discuss the specific challenges that they are facing from the macro economy later on. Cost escalations were driven mainly by inflation, again, accruing from the devaluation of the currency, both direct and indirect consequences of which have led to inflation across multiple inputs to the business and the economy at large. Depreciation and amortization has also increased accordingly, and this has led to a contraction on the EBITDA front to minus 1.4% relative to the corresponding period in the previous year and EBITDA contracting -- EBIT, sorry, contracting by 25.3%. EBITDA margin and EBIT margin both compressed by 6 points relative to 2021. PATAMI suffered a reduction of greater than 100% with ForEx losses alone accounting for LKR 34 billion. If we were to exclude the ForEx loss, PATAMI contracted by 36%. Free cash flows likewise contracted by 76.4%, driven largely by a 3x increase in CapEx related to the corresponding period. And a major part of this, again, is due to the revaluation of booked CapEx based on currency devaluation in the rupiah books, resulting in the increased input CapEx in LKR terms. Ncell, led by Andy and team, had a challenging period with a shortfall in voice revenues, in particular, driving down profits. The revenue stack in Ncell needs a little bit of dissection. The core revenues comprise of voice revenue and data revenue, and we supplement it with ILD revenues. The behavior of these 3 revenue segments is somewhat disparate, and we just split it up for you. Voice revenue contracted by 11.3%, driven largely by a reduction in interconnect rates in the market, which took place during the period. Data, however, performed excellently and delivered growth of 17.6%. The net of voice and data dynamics led to core revenues being -- core revenues contracting by 1.9%. And moving on to ILD, exhibited a contraction of 15.4%. Revenue overall, therefore, contracted by 4.4%, the main driver there being domestic voice, which is a key component of core revenues. Revenue reduction was compounded with cost escalation in network and sales as well as marketing expenses, leading to EBITDA contracting by 10.9% and EBIT by 18.8%. Both EBITDA and EBIT margins compressed in the range of 4 to 5 points on a year-to-date basis. PATAMI had negative 24.1%, however, did benefit from some lower taxes during the year. And free cash flows, at negative 19.1%. CapEx was increased during the period by 31.9%, mainly due to the L900 deployment to compensate for lower band asymmetries in the LTE network relative to competition. And of course, negative EBITDA flow-through also led to the contraction of free cash flows. Smart, excellent performance, steady momentum as always, consistent. Feiruz and team delivered a 6.5% growth in revenue and significant -- the data grew by 11.7%. Some direct cost increases, featuring mainly regulatory expenses, leading to an EBITDA growth of 5.3% relative to the revenue growth of 6.5%. EBIT grew by 20.9% driven, in addition to EBITDA flow-through, by lower depreciation and amortization since in 2021, there was a one-off of an impairment of the financial services business [indiscernible]. PATAMI grew by 14.2%, boosted by the EBIT flow-through. However, if you were to exclude the one-off PATAMI, contracted by negative 2% due to -- mainly due to increased taxes. Free cash flow of negative 67.9%, driven mainly by the CapEx reduction of 33.1% as well as a EBITDA flow -- I'm sorry, FCF grew by 67.9%. I'll pass on to Vivek to carry on with the digital business performance.

Yes. Thank you, Hans. Let me start with Boost first, which is the digital financial services. I think Sheyantha and team has been doing well in terms of building the Boost credit portfolio, and that is the one which has been very good for the Boost business with around 11.9%, also the growth happening in GTV by around 27% as well as user increase in Boost Life by 10.5% or 10.1 million customers. The impact on the EBITDA has been -- or the losses have been on account of higher OpEx buildup coming from the depreciation of the platform as well as the increased staff cost to serve the growing customers in the portfolio. Cash flows as well as the profits pretty much remained flat compared to last year. ADA, which is the advertising, digital and analytics business, has continued to show good growth in revenue and mostly coming out of the A2P SMS business, which is customer engagement as well as e-commerce enablement business. There's been flattening of the marketing solution business in the first half because of the marketing budget in the customer's end, which we could see. Having said that, the growth in revenue of around 15%. EBITDA impacted because of the higher OpEx, mainly coming off all of the higher staff cost as well as the increased marketing spend. And that's basically resulting in lower profit this year first half when compared to last year by around 17.6%. edotco, the infra business of ours. I think the team -- Adlan and team has been extremely busy both on the organic as well as inorganic front during this first half. The business showed an improvement or growth in revenue, extremely good growth of 23.7%, coming all of increased colo opportunities and even build to suit in Bangladesh as well as the inorganic impact of the inorganic acquisition, Touch Matrix, end of last year, resulting in the top line improvement as well as improvement of the EBITDA line by around 32.5%, resulting in EBIT growth of around 37.4%. Free cash flow, you can see a significant dip on free cash flow because here, we've also considered the acquisition of the Smart PLDT towers as CapEx, which is around MYR 1.9 billion. So if you exclude that, the free cash flow would be pretty much in line with what was there last year in the same period of time. PATAMI, flat, mainly coming out of the increased finance costs required for these new acquisitions. Now edotco continues to build its portfolio in line with what is the direction under the Axiata 5.0. Let me go forward on how we look at the year ahead of us. As I said earlier in my opening executive summary that we are likely to exceed our headline KPIs. So we are guiding the market to a higher outcome during the year from our KPIs of mid-single-digit and high single digit -- mid-single-digit revenue growth and high single-digit EBIT growth. CapEx, we are expecting it to be in line, if not marginally lower, but it's more a timing issue because so far, against MYR 7 billion, we've only spent MYR 2.7 billion. I think we alluded to the continuing macro challenges in some of the frontier markets, specifically, Sri Lanka, Nepal, Bangladesh, where we see a much stronger headwind. More so in Sri Lanka, I think we've talked about it. And Bangladesh and Nepal is still relatively okay because we are a net dollar earning company in Nepal. The impact coming out of energy cost increase, higher interest rates, strengthening of U.S. dollar across as well as the overall pocket of the consumers in these markets is something which we are cognizant of. However, we are seeing of late yield improvement in most of the markets, more specifically, as you heard Hans talk about, hardening of prices in Indonesia. We've seen a similar trend in terms of improving yield in Bangladesh. And some of the other markets, I think it's basically regulated pricing. So I think regulators are also fairly open to discuss the increase in prices. So that's what we are working on at the moment. M&A transactions. There's ongoing discussions on 5G, single wholesale network. I think we are progressing well in terms of our discussion with DNB. And hopefully, at some time in time, we would be able to close both the transaction related to the investment in that company as well as the access agreement. Digi-Celcom merger, I think, is progressing well. The fact that we've got the no objections from MCMC is the next steps. Next few steps are now to be carried out. We are working towards the time lines of completing it this year. Link Net to MTO, which is the mandatory tender offer, should be done by October. And it should be -- by November, around that time, we should be completing the rights issues in XL. And supply chain issues, specifically related to the SIM suppliers, remains a concern. But we do see some delays on the other equipments, but not something we would be extremely worried of at this point in time. This is just a quick slide on where -- how do we rate our -- from a risk standpoint, the macro impact in some of the markets. I think it's clearly visible here on the start, Sri Lanka is one big concern. But most of it is actually already built in. We think now the developments happening in Sri Lanka in terms of government formation as well as the dialogue with the IMF and likelihood of the credit facilities from IMF and eventually funding by IMF should bring some stability in that environment. The other market, as I said, were Bangladesh, I think we've seen some bit of turmoil on the ForEx, BDT over the last couple of months, but now it's kind of stabilizing at levels of BDT 95; Nepal, essentially, again, to do with the overall net negative current account impact. But Nepal, less concerned because most of the debt is through bilateral agencies, which are fairly long-dated. Myanmar, I think the business, which is edotco business, which is just 5% of their portfolio, is doing -- I mean, impacted by high inflation. But as such, the business continues to do well. The only challenge for us in Myanmar is the inability to convert into ForEx, U.S. dollar and repatriate it. I think we just thought we should highlight a little bit around what is being done in Dialog because we see this while on the face of it, it is a macroeconomic crisis with high inflation, high interest rates, U.S. dollar depreciation and the impact on the overall economy. But the fact that this also brings an opportunity to reset the organization and build resilience for future effective operations here. So the company has been focused a lot on continuing to grow top line. And this is continuing. Growth is coming from more from an efficiency standpoint, not necessarily putting more capital. Rescaling of costs, which is really looking at cost on a 0 cost -- zero-based budgeting. For example, I think looking at how do you optimize the organization as such. The balance sheet resilience, balance sheet restructuring, which is really looking at how do you -- how do we manage the vendor -- currencies in which we pay to the vendor, how do we restructure the debt which is on the balance sheet. Then the modernization of network is essentially focused around looking at faster shutdown of 3G, consolidation of data center; in-sourcing of some of the operations which were hitherto through third parties, and some of them were dollar-denominated operations; converting most of the dependency on fuel being reduced by bringing in green energy, setting up lithium batteries, solar sites, et cetera, to drive the efficiencies in -- or resilience in this current environment. Also, looking at how digitization and analytics could be maximized to simplify and eliminate friction in the operations. Localizing more businesses, for example, instead of buying CPEs for the fixed wireless business, they're looking at refurbishing CPEs, converting some of the dollar -- the AMCs into local LKR-based AMCs. So a lot of activities being done to make the company resilient in this current environment of macroeconomic challenges. And as I said earlier, we do see this crisis as a placeholder for opportunities to come in the future. So that's pretty much what we wanted to cover now. So I'll hand over to Clare.

Okay. Thank you, gentlemen. So we'll move on to the Q&A session. [Operator Instructions] So as usual, we will have -- we do have the OpCos representatives joining us. So we have colleagues from Celcom, CEO, Datuk Idham; CFO, Yap. From XL, we have Pak Budi on the line. This time, we also invited Dialog CEO, Supun; as well as Robi Acting CEO, Riyaaz, in anticipation that you may want to also better understand our operations on the ground. So feel free to direct your questions to them, if you wish. So I think we can start the Q&A session. Yes, please go ahead. We do see in the queue is Foong from CIMB.

Yes. A couple of questions from me. Firstly, for Celcom, the revenue is -- has done quite well in the first half. How do you see the outlook moving into the second half of this year? In particular, do you see any risk of perhaps revenue softening a little bit from the end of the Prihatin program? That's question number one. For -- the question number two, on Dialog, how is the top line doing so far into July and August? And I understand that you are trying to get approval for price increases. Any updates on that? And is there a risk that the regulator will not allow for it? And how much price increase are we planning for? And then my third question, I guess, for Vivek on -- in terms of the leverage for the group, gross debt-to-EBITDA at 2.86x. Do we need to consider doing an equity fundraising? Or do we just sort of wait for the Celcom-Digi merger to be completed and cash there would resolve the issue? And my final question, on the MTO for Link Net, you mentioned that it's expected to be completed in October. If I can just ask for a bit more granularity here. Is that going to be by the end of October or earlier? And is my understanding correct that the MTO itself will have to be launched a month for that? Yes, those are my 4 questions.

Thank you. Thank you for the questions, Foong. On Celcom, may I request Datuk Idham to throw some light.

Datuk Idham, please go ahead.

You're on mute, I think.

Maybe we circle back. Perhaps -- shall we circle back? maybe we get -- yes.

Supun can take the second question on the top line and also thoughts on the regulatory.

Yes. Thank you. Good afternoon to all of you. Yes. So second quarter and thereon, we are seeing somewhat of a slowdown in the top line growth because on the back of heavy inflation coming in the second quarter. However, we continue to outperform the market and in sustaining the core revenue growth, especially in our data business, enterprise business as well as our international business. We see a slowdown especially in our voice business. In terms of the price increase, price increase has been technically approved by the regulatory commission. However, it requires approval of the minister in charge, in this case, the President of the country. And we are hopeful that it will get approved in the coming weeks. The price increase that has been approved by the commission, pending President's endorsement, is 20% for telco services and 25% for our pay-TV services, 20% on telco and 25% on pay-TV. And it will be applied across the industry by all operators.

Datuk Idham, yes?

Datuk Idham, can you hear us? No, we can't hear you. Okay. Let me take the last 2 questions. And in case we are not able to get Datuk Idham, then probably I'll answer that question on Celcom, right?

Okay.

Well, from the balance sheet at 2.86, we are reasonably confident that we should be able to go through the merger between Digi and Celcom. And as you know, around MYR 4.4 billion, which is around USD 1 billion, of the money would come as part of the repayment of the shareholder loan as well as the settlement amount on equalization within a period of 6 months from the completion of the transaction. So that's, I think, clearly an element which is going to bring down the leverage for us. Second, we also did talk about when we actually acquired the towers in the Philippines, we did look at -- talk about getting investors to partner with us, either Philippines level or at the group level, so I think we are -- on edotco. So that's something which has also been evaluated at this point in time. And we should be able to guide the market in terms of how we're going to deal with that. We don't see the need for equity infusion at this point in time. Even if you look at the rating agencies, I mean, I think we did get -- because most of the investments is actually going through the tower business, which they understand is better from the cash flow standpoint and more guaranteed cash flow. So Moody's had given us around 3x headroom for us from a ratings standpoint. S&P did put us on a credit watch, mostly to do with the merger between Celcom and Digi, not based on the credit profile we have. So I think we are very comfortable at this level when it comes to the leverage of the balance sheet. But having said that, the merger as well as looking at partners on the edotco side are the 2 major activities we will carry out, which should bring down the leverage for us. The MTO, we -- as we speak, we got the final approval from OJK to carry on the MTO. Once we have, then we need to complete within 30 days' time. So it should be sometime early part of October in my view.

I think Celcom is online. Datuk Idham? No.

No. So I think -- I mean, so far, as we get into August, I think there's no major surprise for us in terms of the revenue development. Having said that, I think the improvement is obviously coming from a lower base last year. So I think from that perspective, the run rate, you may not see that kind of changes happening. So, so far, I think the business has been performing in line with the -- how it has performed in the earlier part of the year.

Okay. If I can just throw in some follow-up questions. Firstly, for Supun, right, in terms of the price increases that you are planning for, does that -- will that resolve the issue in terms of covering the increased cost? Or do you think that consumers may find issues paying that much increase in the price of the service and you might have some reduction in the demand there? And secondly, just to reconfirm, Vivek, with regards to the MTO, you mentioned early part of October to complete the MTO or to launch the MTO?

Well, to complete the -- see, MTO is open for a period of 30 days. So if we announce or commence after our announcement, as I said, we got the final approval, let's say, we announce in early part of next week, then it will take 30 days. It will be open for a period of 30 days for the minorities to participate. And then eventually, payment period would be maybe another week from there. So we are talking about the whole process getting over by around the 1st week of October.

Yes. On the price increase, in terms of elasticity, the last indication we have is on the tax increase, there was a value-added tax increase in the month of June, which was passed on. And what we saw was that in that case, there was no real reduction in demand. And then it was completely translated to incremental top line. But in this case, again, we are not expecting a significant drop per se because it's -- the packs that we are increasing, mostly the standard packs they are used to, the pay-as-you-go rates will not have an impact. So overall, we are expecting about 0.75 elasticity in terms of net price increase flowing into EBITDA. However, this wouldn't completely resolve the margin dilution that got impacted -- or EBITDA that got impacted due to inflation and currency devaluation. If you look at, we have seen about a 12 to 13 percentage point drop in margins due to cost escalation, and that cannot be fully resolved through the price increase. And that's why we are aggressively driving the resilience program, which Vivek explained, to get back the EBIT margins to about 45% by next year. So it's a mix of top line growth and through price increase as well as focused initiatives on reducing the cost base.

Datuk Idham, is there any additional comments you would like to share on the first question from Foong? Understand you're online. No. Okay. That was fine. Let's move on then.

I mean, Celcom has done a good job, a good performance. He need not answer, right?

Okay. All right. Next in the queue is Ranjan from JPMorgan.

I know it's a pretty tough macro environment, but maybe I can just ask 2 related questions. Firstly, how should we think about your interest expense going forward considering your free cash flow position, rising debt and the other macro challenges that you talked about? And secondly is like how should we think about the impact of the global chip -- sorry, of the global chip supply shortages that you have alluded to?

So let me take the first question, which is on the interest. I think, first of all, Ranjan, we have a fairly large debt of ours, which is on a fixed coupon. And if you recall, nearly around MYR 2 billion of our debt -- out of the total dollar debt of around close to MYR 3 billion total at this point in time, around MYR 2 billion is on fixed coupon, which is for a period of until 2026, 2030 as well as 2050. So we will not have any impact on account of that. And 50% of that is actually hedged. So we would have -- and that's hedged into ringgit. So to that extent, we are protected both in terms of fixed interest rates on dollar as well as the hedge. When it comes to local currencies, local interest, I think a 5% -- sorry, the interest rates increasing by -- again, I mean, let's say, 1% would have an overall impact of around close to MYR 80 million to MYR 90 million for us. So it's not that material when we look at from -- at this point in time. However, having said that, the -- how the things develop in the future is something which we are watching out. In fact, even in Indonesia, they've recently gone for the sukuk, which actually provides them the interest coupon between around 6.5% or somewhere between up to around 8.5%, which is locked in for a period of 3 years to around 10 years. And this is all IDR-denominated debt, which is pretty much in line with what they are paying at this point in time, our interest rate. The second question was?

The global chip supply.

Chip supply, I think -- I mean, we do see -- from the equipment standpoint, I think there has been some issues in some of the markets where there have been delayed, but it hasn't impacted big-time projects. For us, there have been some delays. I think the major impact is really coming on the SIM cards supply, which now is kind of easing out. And we, of course, have taken a long view on that by procuring in advance. I think the issue has been that they've been procured at pretty much 3x or 4x higher than what has been the ongoing price. So it's more an impact on the prices of SIM cards versus unavailability of these SIM cards. So I think that's really the impact for us. But we understand some of our vendors are also Chinese vendors, which are now getting equipped to have domestic supply starting from next year.

Yes. That was going to be my follow-up question. On the radio equipment, are you facing any shortages? Or is this only on the SIM supply?

No. So we are facing delays, I would say. I mean, for example, we've got a project going on in Indonesia, which is really about swapping part of the region with Central Java. Now that obviously is getting somewhat delayed, project implementation, because of the delay in supply of equipment, radio equipment. So there have been project delays, for sure, but nothing that has been impacting the rollout plans for us as such at this point in time.

All right. Thank you, Ranjan. Let's move on. We have Izzati on the line from Macquarie.

Can you hear me?

Yes.