Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

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 2023 results briefing. Today, we have present with us Vivek Sood, Group CEO; Dr. Hans Wijayasuriya, Group Executive Director, CEO of Telecom; Lila Azmin, acting Group CFO, Group Chief Development Officer; as well as representatives from our opcos. There will be a short presentation followed by a Q&A session, as usual. [Operator Instructions] Note that we will end the call promptly in about an hour. Without further ado, I would like to hand the conference over to Vivek, please.

Thanks, Clare. A very good afternoon to all of you and good morning to those who are on the Europe or U.S. time. I'll go through a few slides on executive summary, and then I hand over to Lila to cover the financial part of it. This first quarter has been a little different in the sense we have a large opco, which is Celcom, which is not consolidated into our results compared to last year. Hence, our performance has been reflected specifically on revenue and EBITDA on the continuing business, whereas when we report the PATAMI number, it does take into account the share of profit from CelcomDigi as well as on the base number of full year -- or first quarter Celcom 2022. The year has been -- first quarter, we did deliver a strong performance when it comes to revenue and EBITDA with around 7.9% growth in revenue and 7.6% growth in EBITDA. Profits were at RM 74 million, but coming out of [indiscernible] gain -- a marginal gain this year versus a loss which was incurred last year. If you recall, last year in March as well we were hit by a significant depreciation of Sri Lankan currency. Flowing from EBITDA and ForEx losses and lower taxes, also, we've been offset by -- partly by the CelcomDigi results, where the share of profit is lower than what we had in the first quarter coming from 100% ownership of Celcom. On an underlying basis, profits have been -- our revenue was a very strong growth of 19.7% and EBITDA growth of around 16.8%, contributed by all, of course, except ADA and ANSELL. ADA has been mainly because of the renegotiation of contract on A2PSN business between the ADA and XL in the first quarter. The profits were impacted mainly on account of high net finance cost and lower share of profit coming from CelcomDigi. And cash flows were also lower, again, because of higher CapEx, early advanced CapEx in supermarkets and higher net finance costs. As I said earlier, ForEx translation, specifically on the revenue and EBITDA line, coming from Sri Lanka as well as Bangladesh were the main impact when you look at the growth on an underlying basis versus growth on the reported basis. The cash flows were behind at around MYR 352 million and gross debt to EBITDA was 3.6x. The increase in gross debt to EBITDA from 2.9x to 3.6x was mainly contributed by deconsolidation of Celcom effective 1 December last year. We are also expecting the MYR 2.4 billion, the shareholder loan, which was given to Celcom consolidated now as part of CDB to be paid soon expecting in this quarter -- by the end of this quarter. Before I go to the operating companies, and I will not spend too much of detail here because that, I think, will be covered between Hans and Lila. Just a summary from my perspective. I think the businesses which did well during the quarter were XL, Smart, Robi both of them showed -- all 3 of them showed excellent top line and profit performance. The businesses which remained average are edotco, Boost and ADA, while some of them have shown a good top line growth, but impacted on profits by -- because of the higher cost as well as the higher capital -- CapEx investments and the businesses which we have to focus on for recovery are Dialog, Link and Ncell. So I'll not spend time on individual lines because the details would be covered as we go through the specifics. Let me come to the last 2 sections. I think the communication which we gave on 10 May regarding the delayering exercise, which is creating a wholesale FibreCo and Converged ServeCo in Indonesia is one of the critical moves for us, which we believe is going to help in creating further value of our operations in Indonesia and focus on scaling up the fiber to home with the plans of around 8 million home passes in the next 5 years. Overall, on KPIs, we still believe that the KPIs, which we said at the beginning of the year, which is low single-digit revenue growth and the high single-digit EBIT growth is going to be maintained. With that, on financials, I'll hand over to Lila to take you through that.

Good afternoon, all. Thank you for joining the call. So, I think we'll go straight to the reported results. Year-on-year, as Vivek mentioned, the revenue grew by 7.9%, which is driven by all of our opcos except for Dialog, Robi, Ncell and ADA. As you can see from the graph, PATAMI has also increased by 100% versus a loss incurred in Q1 2022 from negative MYR 43 million to a profit of MYR 74 million. And this is flowing through from a higher EBITDA and lower ForEx losses and lower taxes. This is also moderated by the share of results of CelcomDigi for Q1 2023, which was lower than the PATAMI contribution from Celcom as a subsidiary back in Q1 2022. We see also the weakening of frontier market currency relative to Ringgit Malaysia has resulted in adverse translation impact on revenue and EBITDA. If I go to the underlying performance for Q1, year-on-year on constant currency, revenue ex device, as Vivek mentioned, has grown strongly by 19.7% contributed by all opcos except ADA and Ncell. Growth is largely coming from Dialog, where revenue increased by 31.1%, mainly contributed by hubbing and data revenue and also edotco increased by 26.4%, mainly due to inorganic acquisitions of towers in Philippines and also Indonesia. Further, we consolidated Link Net 3 months revenue post its acquisition last year in June, which was not shown in quarter 1 in 2022. ADA's revenue, as mentioned just now, was impacted by the renegotiation of contract with XL, where the revenue sharing reduced. And Ncell's top line was also impacted by the call rate revision in Nepal. On the underlying PATAMI, this has reduced by 79.4%, mainly due to the higher depreciation and amortization, increase in net finance costs and lower share of results of CelcomDigi of MYR 160 million in quarter 1 2023. The increase in net finance costs, maybe I elaborate, is mainly due to the increase in borrowings, mainly from Dialog and edotco for its acquisitions -- recent acquisitions and increase in the average cost of debt as well. For example, Dialog's increase in NFC is due to increase in average cost of debt from 3.14% in Q1 in 2022 to 8.07% in Q1 2023. They've also increased their borrowings from MYR 855 million in Q1 2022 to MYR 1.4 billion in Q1 2023. Adjusted OFCF is down 20.6% due to higher CapEx and net finance costs and mentioned depreciation of LKR and other currencies against Ringgit Malaysia resulting in adverse translation impact on reported results. Weakening of these foreign currencies relative to ringgit have also resulted in adverse ForEx translation impacting the revenue and EBITDA largely contributed by Dialog and Robi. Year-on-year, Sri Lanka Rupee depreciated 35% to ringgit and Bangladesh Taka depreciated around 15% year-on-year to ringgit. So you see the 572 transition losses there at the revenue line can be broken down to MYR 338 million by Dialog and MYR 166 million by Robi. As for the MYR 194 million transmission loss at the EBITDA line, some -- most are contributed by Dialog and Robi as well. Next, on the adjusted OFCF, this, we see a decrease by 41.7% from MYR 604 million to MYR 352 million. As you can see from the movement of line items, this is largely due to the higher CapEx of MYR 264 million, mainly by Link Net, XL and Smart and also increase in net finance costs of MYR 189 million, as mentioned, just now contributed largely by edotco and Dialog. On the opco basis, Dialog's adjusted OFCF was impacted by, as mentioned just now, higher NFC, whilst Link Net's year-on-year movement was due to it being only adjusted for this year because last year, it was not in the reporting. Next, on the balance sheet. As mentioned by Vivek, the gross debt/EBITDA rose to 3.6x adjusted for the dividend from CelcomDigi, of course, compared to 2.89x in quarter 4 2022. This rise is primarily due to the exclusion of Celcom's EBITDA post the completion of the merger in November last year. Net debt to EBITDA is actually 3.08x. So as mentioned, we do anticipate the repayment of the shareholders' loan of MYR 2.4 billion in quarter 2 2023 and these proceeds will be used to partly reduce the debt. And this ratio is expected to improve to 3.4x level with net debt-to-EBITDA improving to 2.9x. If you recall, the SPA under the merger gave 6 months from the date of closure to CelcomDigi to repay this shareholders' loan back to Axiata. Cash balance stood at MYR 5.5 billion. I hand over to Hans to go into detail of the digital sales performance.

Thank you, Lila. Starting with XL. XL delivered strong growth based mainly on growth in prepaid data as well as digital services. Revenue growth recorded at 11.9% year-on-year and the increasing -- increase in digital services, in particular, was due to the high revenue share post contract renegotiation with ADA following the review of the contract based on market changes for the predicted services. ARPU also was very encouraging at 11% growth year-on-year, which are as well for the price -- the hardening of revenues as well as downstream of the price hardening that we see in the market. XL Home, the fixed and mobile convergent service also grew 44%, which evidences a positive trend in XL's convergence trust. Downstream of revenue, EBITDA also grew 12.9% year-on-year and margins improved by 0.4 percentage points to 47.5%, attributable mainly to higher revenue flow-through and lower sales and marketing costs, which is in fact in line with the channel digitization effects, which XL is engaged in at present. Likewise, EBIT grew 37.2% year-on-year and margin improved by 2 points, quite significant, ending at 11.1%. Higher EBITDA flow-through as well as which was partially offset by higher D&A resulted in this improvement in EBIT margin. PATAMI grew 44% year-on-year, ending at to IDR 201 billion resulting mainly from higher EBIT flow-through and partially offset by higher NFC, net finance costs, as well as also additional borrowings and a share of Link Net's losses of IDR 48 billion. Cash at AOFCF level 10.4%, up year-on-year, resulting from the high EBITDA float and partially offset by higher CapEx, which CapEx grew by 24.9% and net finance cost by 12.8% in that year. Moving on to Robi. We see very robust performance in our operations in Bangladesh. However, the bottom line was clouded by ForEx losses resulting from devaluation of the currency. Revenues grew 16.7% and ARPUs by 14.1% year-on-year. Good flow-through to EBITDA, EBITDA growing faster than revenue at 23.6% year-on-year with margin expansion of 2.6 percentage points. EBITDA margin now -- has now reached 44.8%, and we see potential for this margin to increase going forward, both due to higher revenues as well as tight cost management at Robi. Flow through to EBIT was also very attractive with the 50.9% growth in EBIT year-on-year, and EBIT margin ending up at 16.1%, improvement of 3.7 percentage points relative to the previous period. PATAMI, again, grew 5.5% year-on-year to BDT 420 million, resulting from higher EBIT flow-through, but partially offset by higher net finance cost of 46.5% and ForEx losses on the USD loans, which I mentioned earlier, which unfortunately depressed the PAT, the PATAMI relative to what it would have been if not for the ForEx losses. If not for ForEx loss, in fact, PATAMI would have grown 89.9%. Moving to Dialog. Dialog's revenue momentum continues 31.3% growth year-on-year, driven by international business as well as mobile data -- driven by international business as well as mobile data. Very encouraging top line growth and strong performance in the market relative to competition. At EBITDA level, however, we see a compression of margin by 12.5 points ending up at 26% EBITDA margin, largely due to higher direct costs, network costs, energy as well as staff costs being driven by the inflationary environment in Sri Lanka. EBIT also depressed by 49.2% year-on-year with the margin ending up to 5.5 percentage points. Higher EBITDA flow-through and the offset of higher D&A at an increase of 9.9% year-on-year, resulted in, or led to the reduction in EBIT as well as in margin. PATAMI, however, grew more than 100% year-on-year to LKR 8.7 billion. This was due to higher EBIT flow-through as well as a ForEx gain. You would recall that in the previous year, we recorded large ForEx losses due to the devaluation of the currency and we also know that the Sri Lankan currency has since strengthened. I think year-on-year, it has strengthened from LKR 360 in April last year to around LKR 310, LKR 312 this year. The significant ForEx gain, which has boosted PATAMI, somewhat of a recovery from what we have faced in 2022. At cash level, again, negative 51% year-on-year, lower EBITDA flow-through and higher NMC were the main contributors to the reduction at AOFCF level notwithstanding lower CapEx with the CapEx controls coming in at -- to the tune of 18.3% year-on-year. Moving on to Ncell. Ncell's voice revenues were significantly impacted by lower interconnect rates. Revenues overall fell by 5.4% year-on-year, core revenue by 7.9% due to the interconnect rate reduction that I just mentioned coupled with lower voice usage with MoUs falling 15% here. This impact was, however, partially offset by higher revenues increasing for the first time by 7% year-on-year. EBITDA fell 7.7% year-on-year, ending up at a margin of 55.2 percentages, 1.4 points below that in the previous year. We see lower revenue flow-through impacted by higher staff costs and also network costs expanding by 18.8% year-on-year. Some work to be done in terms of mitigating the cost increases in the subsequent months and quarters at least. PATAMI at negative 16.7% year-on-year recorded at NPR 1.1 billion resulting mainly from lower EBIT flow-through offset by, however, the lower NFC and lower taxes. In Nepal as well, we enjoyed a higher ForEx gain of approximately NPR 86 million on a year-on-year basis. Smart strong performance, sustained growth in profitability, revenues, and we see positive markers across the P&L, starting with revenue at point 2.6 -- sorry, revenue at 2.6% year-on-year, mainly driven by data revenues as well as international revenues, including application A2P and inbound roaming. EBITDAs Grew by 9.9%, resulting from higher revenue flow-through supplemented by strong cost management as well as a one-off reversal of revenue share provision. EBIT improved 20.3% and PATAMI 37.2% year-on-year, driven by higher EBIT flow-through and further supported by lower taxes and the absence of government grant or [indiscernible]. Cash, however, reduced 29.2% year-on-year at AOFCF level mainly due to the higher CapEx relative to the previous year and also partially offset by higher EBITDA growth. Last, but not least, Link Net newest opco. We have seen some positive movement on the ARPU side with growth in ARPU from 346,000 to 330 -- relative to IDR 335,000 in the previous year. Having said that, revenues declined by 7.1% year-on-year due to subscriber churn. Home pass have increased to 293,000 year-on-year to a total of 3.2 million as at the end of the first quarter, whereas homes connected have reduced from -- by some of 102,000 to 750,000 due to the churn impacts that I just mentioned. EBITDA contracted by 23.5% and the margins also contracted by 9.5 points to 44.7%. Performance at EBITDA, driven mainly by lower revenue flow-throughs as well as high marketing cost, network costs and debt. As the churn impacts are being addressed through a very focused performance improvement program under the ages of board appointed subcommittee, which has set the company stringent targets for performance improvement during the course of this year. PATAMI declined by more than 100% year-on-year as a result of EBITDA as well as decline at both EBITDA and EBIT level, which is a direct flow-through compounded by higher D&A of 20.8% year-on-year. At cash AOFCF level, we have scenario, which reflects pretty much a flat outcome with lower EBITDA flow-through and higher NFC, offset by lower CapEx, which with CapEx controls, bringing CapEx levels to 17% year-on-year. Now that sums up the telco opcos and I hand back to Lila.

Thank you, Hans. For the retail business, we start with Boost. We have shown a strong revenue growth year-on-year from MYR 16 million to MYR 31 million. This is mainly driven by Boost Life and Boost Credit to growth in off-line payment with the introduction of merchant discount rate and also increased loan disbursement. Gross loan book has grown in Malaysia by 89% and Indonesia by 30% on year-on-year basis. Year-on-year GTV also remained flattish at MYR 1.5 billion, while users increased from -- by 6.4% year-on-year to 10.5 million and Malaysian merchants rose by 24.9% to 586,000 for this time. To recap the quarter 4 2022 revenue spike was mainly due to the MasterCard deal earlier. EBIT remained flat year-on-year as revenue growth was offset with higher OpEx from provision for estimated credit loss for compliance with auditors, Boost has taken a higher provision upfront for its loan book. Clawback can be expected should the loans repaid. Losses widened to MYR 52 million from MYR 48 million last quarter due to higher net finance costs. Next, on ADA. Year-on-year, we see a revenue decline by 21% from MYR 189 million to MYR 149 million, largely due to a lower contribution from the customer engagement solutions due to the contract reacquisition with XL that Hans and I mentioned earlier. With the loss of this high-margin business, EBIT in PATAMI slipped into losses as ADA is further impacted by higher professional fees, which is used for consultancy and technological improvement and also ForEx loss -- one-off ForEx loss impact within the quarter of about MYR 2.6 million. Next, we go to the infrastructure front, where we have edotco. Edotco has grown its revenue and EBITDA by 14.3% and 14.1%, respectively, mainly from inorganically driven acquisitions of the PLDT towers in Philippines and towers in Indonesia and higher [ colo ] rollout in Bangladesh. If we wanted to dissect Philippines contributed to about MYR 60 million to revenue in quarter 1 '23 and Indonesia contributed about MYR 9 million. EBIT is flat year-on-year from higher depreciation and amortization, while bottom line turned into a loss due to higher net finance costs from increased debt of MYR 2.1 billion to MYR 5.8 billion from the recent acquisitions mentioned earlier, and also unrealized ForEx loss of MYR 27 million incurred in Q1 2023. Adjusted OFCF has also been impacted by higher CapEx from Philippines and also higher finance costs, as mentioned earlier. I'll hand over to Vivek for the messages on the way forward.

Thank you. So a little bit touching upon the efforts in Indonesia to create a FibreCo and Converged ServeCo. As we explained earlier, the plan to deliver 8 million home passes for XL are already in place. The steps are being taken now to carve out, and we do expect by the end of the year we should be able to finish the carve-out exercise. I think delayering of Indonesian assets, in our view, will eliminate value as well as provide strategic focus to Link Net as a wholesale provider not only for XL but also other potential ISPs. This will also allow us to tap growth potential under the under-penetrated fixed broadband market and drive scalability and unlock opco synergies where the assets on both sides and go-to-market efficiencies can be best utilized. These maximizing synergies will reduce cost of implementation. We are already seeing the effect on the cost of home passes with focused negotiation and intervention from Axiata procurement center. In addition to that, I think the potential to accelerate fixed mobile convergence and fixed broadband play would be done. As you know, XL has been doing a reasonable good job on fixed mobile convergence. But with this, they will be able to accelerate the market. Having said that, I think as a company, we run a high leverage balance sheet. This will periodically come down, starting with the repayment of some of the loans once we get the shareholder loan from Celcom and also some efforts on monetization of the assets as we see going forward. The KPIs, which we set at the beginning of the year, mid-single-digit revenue growth and the EBIT growth of high single digits, I think we're still maintaining that. We believe that we will be able to deliver on those key pays. CapEx still remains at MYR 7.1 billion, though there would be an accelerated investment coming in Link Net to provide that home passes for XL to use it. Like any other business, the risks and opportunities exist. I think the currency effect and increased interest rates, we do see playing out to our performance through the year. Though so some of the markets specifically, for example, Dialog, we are cutting down on the USD exposure, but that would have an offset of increasing interest rates from local borrowings, which will come. Regulatory risk, I think this is nothing new, but we are seeing post COVID the demand from the regulator on quality of service requirements would mean more capacities to be put. The industry landscape, this is both positive is negative. I think consolidation in the markets is helping. We are ourselves looking at consolidation in Sri Lanka, as you are aware. And I think the market consolidation in Indonesia so far has played well when it comes to the price rationalization and future investments will be impacted because of the balance sheet limitations I think our focus would be to continue driving the deleverage our balance sheet. Having said that, I think we do see EBITDA growth remaining strong to support the ratios on the leverage which we want to maintain. Opportunities, I think rationalized competitive landscape, having consolidated in Malaysia, consolidation happening -- happened already in Indonesia. We've done that in Bangladesh and now focusing on Sri Lanka, I think, it should make a much rational environment for us to operate in. Synergistic benefits between XL and Link Net, I think we should start seeing once we have finished the delayering exercise and potential monetization opportunities post delayering. And as I said earlier, the combined operations between Dialog and Airtel should not only provide synergies but also should help in rationalization and market repair in a highly strained market environment. And that's pretty much from us here. I hand over to Clare to open up for Q&A. Thank you.

All right, thanks, Vivek. So moving on to the Q&A session. As per our usual practice, we are also joined by our opco colleagues including from Link Net represented by CFO, Kanishka Wickrama So feel free to direct some of your questions to them also. [Operator Instructions] So let's start with the Q&A session. So we see a hand raised, maybe we start with Luis from Citi.

I have 3 questions. The first one is towards Link Net. Can we get more color on why there is such high churn given that there should be strong organic demand for fixed broadband in Indonesia? And if we can get sort of an outlook for the coming quarters, like is the first quarter like the bottom of the performance in your view operationally. The second question is at the group level. You've maintained guidance for revenues and EBIT given the momentum we're going to see in the coming quarters, but could we have some rough guidance on finance cost direction for the full year given that is the drag on profitability in the first quarter? And last question is given that pressure on the bottom line, any indications for how you'll decide payout for the full year?

Okay. I will take your first question with respect to Link Net and the churn rate. First of all, we need to acknowledge that we have a performance issue there, which, as I mentioned during my presentation, we are addressing through a very focused and aggressive performance improvement plan. However, tracing back on the reasons. The -- there are several pivots in the Indonesian broadband market that we have to take into consideration here. One is that during the COVID period of 2020 and 2021, what we might call a pandemic bump in the demand for broadband services, the gross adds as well as net adds at Link Net were doubled those in the previous pre-pandemic year. So in a sense, exceptional growth -- a period of exceptional growth. Post pandemic, I think demand, especially in residential areas, normalized to pre-pandemic levels, resulting in the propensity of our churn. Now as to pre and post pandemic dynamic, this period also represented a period when many new competitors joined the market. And they all focused on the same high networth zones where Link Net was present. Also Link Net was in the process or is in the process of converting its HFC infrastructure to fiber, whereas many other new players came in with fiber networks from get-go. So these are some of the factors. And I would also add to that the fact that Link Net was a premium provider of premium services, highly priced at premium levels and reach in terms of the breadth of services ranging from broadband to pay television as well. The emerging trends, additional transient that we are seeing is there's a movement from a pay-TV towards OTT services, which strip out some of the premium potential of Link Net. So these changes have challenged us now to reset to adopt multiple approaches to improving operational metrics and bringing performance back to where it was previously. And as Vivek mentioned earlier, we have in addition to perform addressing the performance issues and churn, net adds and bringing [indiscernible] back to that there. In addition to that, we have embarked on the transformation program, whereby we will do a structural delayering, focus Link Net on broadband access on a wholesale basis and transfer the ServeCo or the ISP to XL, where XL would be Converged ServeCo serving both mobile and fixed customer. So that's a major step in terms of realigning other assets in Indonesia to best suit and best respond to the new market environment.

Lila, do you want to cover the interest cost, finance cost?

I think on the finance cost direction for financial year 2023, I think for -- we think or you may refer to the current quarter run rate where we reported about MYR 540 million finance expense. So I think you can use that as a -- for the full year 2023, while we manage our finance costs. I think you can see that for balance sheet, most of our borrowings are also hedged, about 40% is hedged. So we are trying to manage this going forward to the end of 2023.

So with the last question on performance of the profit for full year guidance. I mean we don't give a guidance on profit. What we have given a guidance on EBIT, as you can see, there would be an effect of interest costs coming in for the year based on what Lila just mentioned, but we do expect ourselves to be able to hold on the dividend per share commitment of around MYR 0.10 for the year. And they are likelihood of lower taxes compared to what we had earlier. So I think that's how the profits would be arrived at. But EBIT, as I said, we do expect high single-digit EBIT growth.

And so the MYR 0.10 dividend, the number is intact.

Okay. Thanks, Luis. Let's move on to the second questions coming through from Foong at CIMB. Can you hear us? Maybe we circle back to Foong, perhaps suggest that you may want to dial in again. Maybe we move on to Prem from CGS. Welcome back, Prem.

Hopefully, you can hear me.

Yes, yes, we can hear you, Prem, very well.

All right. Sorry, I'm going to jump on this Link Net bandwagon as well. I suppose the key question here is, given the performance that we've seen from Link Net do you think there is a need for us to potentially do some form of an impairment down the road or even sooner rather than later? That's one. Two, with regards to the monetization of your assets. Do we feel that given the current state of the balance sheet, then we are being forced to do things at lower price points than we would have loved to do that? Or is demand sufficient to allay that fear for those assets. And I suppose this then leads on to the most dangerous of the questions, which is, do we think we are being hamstrung in some way, given the current balance sheet. And should we look at some way of monetizing something or even shock horror going for additional funding?

So on the Link Net impairment, I think we do an assessment on a quarterly basis based on what is the most recent discount rates, risk factors as well as cash flows. As at quarter end, we had a decent headroom with what any impairments could be instituted. And we will continue to monitor that. And also as far as Link Net is concerned, you would realize the structure, the format of Link Net as an organization would shift once we have a split between the fiber wholesale and the retail or the ServeCo which would be XL. Based on that, in our view, the value given the opportunity and the existing customer base, which is already there with Linked Net, the value would be preserved, if not improved, by doing this restructuring of the operations of -- on the fiber side in Indonesia. So we don't see any immediate risk, but we will keep assessing as we go along on a quarterly basis. Now I mean we say that our balance sheet is stretched. But in reality, I mean, at 2.9x is not an unsustainable situation. And the reason why I say is that given the growth which we are delivering on EBITDA, this is something which should organically improve unless we have to borrow new money to invest. Having said that, we think in the current environment, we need to have a decent headroom available all the time to look at strategic investments and opportunities as we go along. So I think it's not an immediate concern. We're not going to sell our assets at cheap price just because we want to improve our balance sheet. I don't think balance sheet is a big issue per se. But we need to have flexibility to be able to maneuver through difficult times as well as look at strategic opportunities as and when they come. And that's why the balance sheet improvement, Prem, is important for us. In addition, obviously, as I said, we will be getting these funds coming in from CelcomDigi. Some of the assets in future is not necessarily to do with monetization in itself, but also to do with getting strategic investors, which we've done in the past as Axiata in our different operations. We do get strategic investors. We could get a dilution of our stake to allow a new investor put in money in the company as well as our ability to monetize through secondary sales. So that we will keep evaluating as we go along all the time. So it's not an immediate concern for us. And as I said, it's not that to deleverage, we are going to sell our assets at cheap price. It's more, as I said, opportunity for future investment that we will improve our balance sheet.

Thanks, Prem. Okay. Maybe we will circle back with Foong from CIMB. Foong? Okay, maybe we'll come back after Izzati then.

Can you hear me?

Yes.

Three questions from me. The first one, I guess, with Celcom's deconsolidation and XL Axiata. So I recall the emphasis for Axiata has always been, you want to be strong #1 or strong #2 in any market you have presence. But XL, I guess, has been pushed down to sort of distant #3 for mobile with the recent merger, right? So how do you plan to address this and strategy to also lower their leverage ratio I suspect the conversation about their fixed mobile convergence and everything might have CapEx implication as well to XL? That's the first one. Second one, Indonesia home broadband ambition of 8 million, the whole market for home broadband looks pretty competitive with many players. Do you expect there will be more consolidation for this segment in Indonesia? And lastly, since we have Supun in the call, it will be great to get some color on the cost escalation in Sri Lanka. I recall in the Investors' Day, I sense the risk for frontier markets sort of easing, Dialog talking about initiatives to keep costs tight. Can we expect margins to decline further or this is the bottom for first quarter for Sri Lanka? Yes.

So maybe I'll take the first one on Indonesia and XL in particular. You're right, in a third player position, there are challenges which need to be addressed from the point of view of scale and also the motivation imperative of moving towards an asset-light formulation. And this is exactly what XL and Axiata with the delayering strategy that we have announced, it's exactly one of the directional moves that we are taking by helping Excel to move in an asset-light direction with respect to its converged play and using the -- using Link Net as a wholesale fiber provider and Link Net would then drive high utilization of its infrastructure across multiple ISPs and thereby the delayering outcome of the delayering upside that we would get as a combination of assets would address -- part address the problem that you very correctly pointed out. But this is a journey. And you would see that going forward as well, we would look at all opportunities to have the larger scale in terms of operation as well as higher utilization of any capital investments that we put in.

Right. What about the mobile side at XL?

Yes. So XL -- you would have seen from its results that XL is performing very well in the market on the mobile side.

So I think the question is now XL is #3 with the recent merger in IOH, how do we address this? And the strategy to reduce...

So I think it's -- we want to be #1 or a strong #2 player. But we -- in Indonesia, we were relegated to #3 post the merger between Indosat and Hutch. And that's pretty much the reason we have to find a different spot to XL in that market. And that's where the fixed mobile convergence is our strategy to focus. Having said that, I think despite the fact that we are elevated to #3, XL continues to do well in that market and continues to gain share. I think that focus will continue. In addition to that, the driving cash flows and profitability of the business is also something which we are focusing on. Supun, would you chip in on the cost escalation question.

Yes. Can you can hear me?

Yes, yes, we can hear you. Go head.

Yes. The overall economy has seen fairly good stabilization of macro indices in Q1 going into Q2 as well. Exchange rate has improved, as mentioned by Dr. Hans. This, what we have reported in Q1, I probably believe is kind of the bottom in terms of EBITDA margins. We are looking at more turning it around and starting to pick it up going into Q2, Q3 largely due to inflation stabilizing now, point-to-point inflation now going down to 30% in the last month and exchange rate stabilizing. The price levels have started to come down. The main challenge in the market is because of the heightened inflation, consumer affordability is getting challenged, that's why some challenge in terms of growth that we are seeing in the market, but overall cost is under control, and we believe that we can start lifting the margins with multiple initiatives on cost reduction, simplification of the network shutting down 3G also rearranging some of the infrastructure in television platform would help in the coming quarters.

Thanks, Izzati. I hope that answers your questions. Okay. We'll try again, Foong, third time lucky perhaps.

Can you hear me?