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. Thank you for standing by, and welcome to Axiata's Third Quarter 2023 Results Briefing. Firstly, to apologize for a small technical issue here. I think the video camera is not yet on, but we are fixing it. So we hope to come back online via video as soon as possible. Nonetheless, today we have present with us Vivek Sood, Group CEO; Dr. Hans Wijayasuriya, CEO of Telecom; Lila Azmin, Acting CFO and Chief Development Officer; as well as representatives from our operating companies. There will be a short presentation followed by a Q&A session. Without further ado, I would like to hand the conference over to Vivek.

Thank you, Clare. A very good afternoon, good morning, depending on where you are. Welcome to the quarter 3 results call. Let me start on the first slide. I think quarter 3 was a good strong performance continued with the development on the revenue side and EBITDA for us with double-digit growth coming in revenue and EBITDA and a strong 9% growth coming on the EBIT line on an underlying basis. However, the impact on profitability coming because of the Ncell impairment, which we've taken in this quarter; and also the fact that the ringgit weakened against dollars, which had a mark-to-market impact for us on the loans which we have outstanding in the corporate center. And of course, you are aware, after the deconsolidation of CelcomDigi last year, our share of profits from Celcom, which used to be close to MYR 300 million every quarter is down to around [ MYR 200 million ], MYR 150 million every quarter. So that impact has been hitting us on the profitability. But the larger part of that impact is coming from the one-off on Ncell impairment. However, on an underlying basis, continues to [ give ] a strong performance. PATAMI impacted because of the high interest cost and depreciation. Just to touch upon Ncell impairment. The Board of Axiata decided -- made a decision to exit Nepal as we see a telecom outlook in Nepal and specifically challenges relating to foreign investments not very conducive. The uncertainty around regulatory and tax matters as well as uncertainty around the license beyond 2029 made the Board decide that we should find the right buyer for the enterprise and exit out of Nepal, and that has resulted in around MYR 1.2 billion net PATAMI impact coming for us in quarter 3. As I said here in this presentation, most of these items are noncash in nature. Having said that, the cash flows remain fairly strong, both on a reported basis as well as on an underlying basis with improved EBITDA as well as lower -- relatively lower CapEx as a result of better cash realization. If I go to the next slide. So this quarter, you would see results actually split into continuing business, discontinued business and discontinuing business. Ncell falls under the category of discontinuing business because it's been classified as held for sale and it's not something which the transaction has been completed. So that, I think, is something we will have to talk about. And discontinued is Celcom, which was discontinued last year. But what we report here to this time is on a combined basis, and this is to reflect how we've been performing against the KPI which we set in the beginning of the year. Just to quickly touch upon the reported numbers, the revenue grew by 9.4%; EBITDA at 11.5% coming from a couple of major assets, for example, XL and Robi, which have delivered very, very strong performance in the quarter and on a year-to-date basis, and Link Net, of course, I mean, because it was not there in the base -- or was only for 3 months in the base last year. EBITDA impacted, as I said, [indiscernible] impairment and further losses -- I mean, profits coming from CDB lower than what it was last year. However, on an underlying basis, I think revenue, EBITDA, strong growth, partly also helped because of the currencies, but mostly coming out of the operational performance being much stronger and continuing in that trend from quarter 2 onwards. However, profit is impacted by higher D&A, specifically in Link Net and EDOTCO, where we did invest for growth and coming years for us; and also the interest rates going up, which is impacting the finance cost. Our average interest rate has moved up from 4.4% to around 5.9%, partly because of the overall interest rate increasing also on the account of us derisking dollar exposure in some of our frontier markets and converting that into the local currency loan where the interest rates are higher than what the dollar interest rates were. As I said, cash flows remain strong. The debt-to-EBITDA moved up a little bit from 3.06x to 3.17x mainly because of deconsolidation of EBITDA on Ncell. Cash balance remains strong at MYR 5.7 billion and reduced partly due to the repayment of multicurrency loan of $100 million at the corporate center. XL, as I said earlier, strong, sustained environment with price stability. And in fact, sustained price environment is helping XL deliver strong performance of 10.5% growth and also translating that into an EBIT improvement of 19.8%. The development on the fixed broadband side also has been encouraging with more than 200,000 now fixed broadband connection in XL. Bangladesh has been a significant turnaround as we see over the last 1.5 years. And quarter-on-quarter, the operation has been delivering growth. Robi, delivering 17% -- 17.7% growth in revenue, 19% growth in EBITDA and around 27% growth in EBIT. And coming not just from the subscriber growth as well as the maintenance of cost but also hardening of prices in the market, we've seen the ARPU improving from BDT 125 last year to around BDT 143, BDT 18 improvement in ARPU over the last 1 year and resulting in a strong profitability. Dialog. Last year, as you know, was a real -- a tough year for Dialog with the economic crisis, and that economic crisis continued into 2023. And we've seen significant increases happening on the fuel prices and food, and that's impacting the overall affordability of the customers. Having said that, I think the business has done very well in improving revenue in those conditions, coming from hubbing but also from the monetization of data, both in the mobile and fixed broadband segment; improving EBIT by around 21.5% mainly coming from cost rescaling exercise, which has been a substantial impact of around LKR 12.5 billion over the last 9 months; and also moderating D&A because of lower CapEx spend and managing with the existing infrastructure to deliver the revenue growth. And also, we've seen some gain coming from ForEx where Lanka rupee improving in the last quarter. However, PATAMI getting impacted because as I said, they have been moving away from dollar debt to local debt and interest rates have been high. But given that the risk associated with dollar, we think that's a good strategy to follow. Smart, I think, continues to deliver strong performance, is the second largest profit contributor for us at this point in time with strong cash generation. However, on a year-to-year basis, there have been some adjustments which was one-off in 2022. Link Net, I think, has been a business which struggled. Having said that, I think we've seen some stability coming on the residential subscribers over the last quarter. And the business is getting impacted because of the fiber rollout, as you know. And we explained that back in May that we are looking [ at Link ] at a focus on fiber wholesale and fiber build at this point in time for XL, and that's basically advancing the CapEx spend to be able to roll out the fiber, which will eventually start giving revenues once it starts delivering on [ home connects ] on this fiber. And that resulting in lower profits as well as somewhat impact from the bad debts on the enterprise business and the lower profits coming because of higher D&A and net finance cost from these accelerated fiber rollout. Boost. I think we do see start-up costs impacting the Boost performance, while the revenue, we have seen an improvement. But overall, given that we are investing on start-up of a digibank, there's been upfront investments coming in. And also, the attempt to build the credit book, which is currently looking at around MYR 244 million, and there's been disbursement of more than MYR 1 billion loan in the last 9 months. And that, in a way, is already -- while the costs and the impact is built into the existing business, would be something which will be accretive as and when that [ whole ] book moves on to the bank. ADA, I think, is more impacted because of the industry challenge on the A2P SMS business, which has been kind of coming down and also putting some pressure on the revenue share of this business with our partners, and that's impacted the profitability. Having said that, the business has actually started to giving good growth momentum on data and analytics business, and their recent entry into Korea and Japan on this business is something which we are looking forward with successful outcome. EDOTCO. As you know, we acquired towers in Indonesia and Philippines. Philippines transaction got completed in the last quarter. And now we are looking at both inorganic as well as continued improvement on the colos in both Malaysia and Bangladesh as well as new build to suit coming in our existing footprint, giving strong top line growth. However, the impact of the dollar debt borrowings for EDOTCO as well as the CapEx spend resulting in D&A impacting the overall profitability. CDB. As you would have already learned from the results announcement by CDB, I think their integration continues to be on track. They are continuing to deliver on the synergies, which is part of the business plan. Deconsolidation of towers, around 4,400 towers have already been deconsolidated. And as far as we are concerned, they continue to deliver a dividend to us as per the plan. On the overall headline KPIs, we do expect ourselves to deliver what was stated at the beginning of the year on revenue and EBIT number. We do see CapEx lower than MYR 7.1 billion, which was the projection made in the beginning of the year, and main contributors to lower CapEx would be XL, Link Net and EDOTCO. So that's my executive summary on the quarter 3 performance. Now I'll hand over to Lila and come back in the end to address Q&A. Thank you. Lila, over to you.

Thanks, Vivek. So as Vivek mentioned, in quarter 3, the unaudited financial results in the [ face ] of the P&L will show the continuing and discontinued -- discontinuing operations separately. I know it's going to get a bit complicated, the financial statements. So this is because we have classified Celcom as discontinued and Ncell as asset held for sale. For clarity, discussions on the Q3 performance is based on the combined reported results, which continues to include Ncell as 80% subsidiary of Axiata Group, CelcomDigi as 33% associate and Link Net of 92.83% from quarter 3. You can see on the chart, on a combined basis, there is a year-to-date loss of MYR 1.3 billion; and on continuing operations basis, year-to-date loss of MYR 141 million. So I'll go to the next slide for more details. So on reported basis, year-to-date revenue stands at MYR 17.4 billion, an increase of 9.4% due to the strong contribution from XL, Robi and consolidation of Link Net. EBITDA grew in line with revenue at 11.5% year-to-date to MYR 7.8 billion. Main contributors are from XL, Smart and EDOTCO and of course, Link Net 3 months comparatives in y-to-date 2022 due to the first time concentration in Q3 compared to the 9 months in year-to-date September 2023. EBIT, you can see, was hit by impairment of asset for Ncell, while PATAMI was further impacted by lower share of CelcomDigi Berhad result of about MYR 366 million relative to PATAMI contribution as a subsidiary earlier of MYR 856 million. This was somewhat cushioned by a gain on disposal of Celcom from the final closing adjustment from quarter 2 in '23 and also, as Vivek mentioned, lower ForEx losses and taxes. Next, on underlying performance. On constant currency basis, year-to-date revenue ex device grew by 13%, and this is supported by the continued growth from all OpCos except for ADA and Ncell. ADA was impacted by renegotiation of contract with XL, and Ncell's top line was mainly impacted by a revision in the call rate hitting the voice segment. Underlying EBIT continued to grow year-on-year supported by EBITDA growth of 15.2%, which was offset by higher depreciation and amortization charge largely from XL, EDOTCO and Link Net. UPATAMI, however, saw a decline of minus 76.6% mainly due to increase in net finance costs of about MYR 550 million largely from EDOTCO, Dialog and XL; secondly, a smaller contribution from CelcomDigi's share results, which I mentioned earlier. On the left below, the y-to-date adjusted OFCF has increased more than 100% mainly contributed by EDOTCO, XL and Dialog. Next, on the adjusted OFCF, that has increased by more than 100% to MYR 958 million largely due to higher EBITDA from the OpCos, lower CapEx and lower taxation. However, this is offset by the increase in net finance cost and ROU depreciation. On OpCo-by-OpCo basis, both EDOTCO and XL saw increases of more than 100% on the back of higher EBITDA and lower CapEx; Dialog, more than [ 100% ] on higher EBITDA also and lower CapEx and taxes. Next, the balance sheet is based on continuing operations. As you can see, the net debt to EBITDA increased to 3.17x versus what we had in quarter 2 of 3.06x due to the reduction in EBITDA as a result of the exclusion of Ncell and Celcom. Cash balance stood at healthy MYR 5.7 billion. Quarter-on-quarter, there was a reduction due to the repayment of multicurrency loan of USD 100 million and also, of course, the payment of dividends in the last quarter. Capital structure managed amidst uncertain macroeconomic backdrop. As you can see from the charts there, 34% of our foreign currency loans are hedged, and 64% of the group borrowings are on fixed rates. Unhedged portion of the borrowings, you can see that it's from our 30-year bond EMTN of USD 1 billion. That's a 2050 expiration; EDOTCO debt of USD 527 million; and some debt in the frontier markets, such as Sri Lanka and Bangladesh. Now I will hand over to Dr. Hans to go through the performance of the OpCos, starting with XL.

Thanks, Lila. I think Vivek covered all the headlines pretty comprehensively. So in the interest of time and leaving time for Q&A, just a recap on a few highlights. So with respect to XL, fantastic performance driven by organic growth in the market as well as a very sustained rationality in the pricing environment post Lebaran as well. Revenues grew 10.5% year-to-date driven by data as well as digital services. Notably, ARPU increased by 7.9% from IDR 38,000 to IDR 41,000, and this bears testimony to the very rational -- or increasingly rational pricing environment as well as the acquisition of higher-quality subscribers. EBIT grew by close 20% year-to-date, and the EBIT margin expanded as well to 13.5% driven by higher [ EBITDA growth ]. In the case of PATAMI, growth has moderated relative to EBIT due to higher net finance costs, taxes and the recognition of share of associate losses. Cash improved by more than 100% year-to-date driven by the higher EBITDA and lower CapEx based on XL's calibrated approach to CapEx, [ who joined ] this year, resulting in negative 12.3% in terms of CapEx [ in the business ]. Moving on to Robi. A very strong performance again backed by both subscriber growth as well as ARPU growth. So if you look at ARPU, that is a 14.4% increase from BDT 125 to BDT 143. So this is very good news given the combination of subscriber growth and ARPU, meaning that Robi is increasing its share of high-quality subscribers as well as evidence of a rational pricing environment in the market. EBIT, a very impressive 27% growth year-to-date, and EBIT margin expansion by 1.2 points to 15.6%. Interestingly, revenue growth outpaced the increase in D&A cost, resulting in this increase in EBIT. At cash level, however, there is an acceleration of CapEx by around 18% to capture growth. And we see a 4.6% reduction in AOFCF year-on-year, but this is a strategic application of CapEx and acceleration of expansion to capture both subscriber growth as well as profitability as evidenced by PATAMI growth of over 100% year-on-year, reaching BDT 1.7 billion for year-to-date [indiscernible]. Moving on to Dialog. A very promising picture at Dialog with EBITDA increasing by 22.7% quarter-on-quarter basis and 7.3% year-to-date basis. Margin, however, reduced by 1.8 percentage points to 30.8%. Overall, a very solid performance and EBITDA level with the cost rescaling initiatives going through. If you look at year-to-date picture, LKR 12.6 billion of savings recorded, and this has also driven an EBIT growth of 21.5% and margin expansion of [ 0.6 percentage ] points [indiscernible]. PATAMI, likewise, more than 100% increase, recorded at LKR 14.8 billion as of date, returned to positive territory, which is very good news for Dialog and the market overall. Of this LKR 14.8 billion, LKR 10.7 billion comes from ForEx gain. But that leaves over LKR 4 billion of organic profit increase, demonstrating Dialog's return to a strong positive performance territory. Cash, likewise, grew by over 100% driven by the EBITDA improvements as well as calibrated CapEx, with CapEx [ being constrained ] to 47% based on the calibrated approach [ to Dialog ]. Smart continues to deliver steady profit and cash flow. Revenues as reported declined by approximately 1%. But excluding one-offs, the underlying revenue performance demonstrates a growth of 5.6% supported by growth in prepaid, international business as well as enterprise. EBIT grew by 16.4% due to some one-offs as well as organic improvement and EBITDA level of 8.8%. PATAMI grew by over 100%. But excluding the one-off regulatory fees and ForEx losses in the previous year, PATAMI grew by 2%. Overall, a very healthy performance and consistent performance from Smart. Link Net, as Vivek explained as well, dual businesses here: the consumer business, the residential broadband; as well as the going-forward business of the FibreCo for XL -- FibreCo either to XL and other ISPs. The costs related to the FibreCo transition kicked in with the rollout of [ 1 million ] home passed for XL. But in this transition period, we also record the revenues from the consumer business, which are under pressure due to the market dynamics in terms of very stiff competition and pressure on ARPUs as well as collections in the market on the consumer side of the business. Notably, however, the recovery initiatives of the company with respect to capturing back our subscriber share have been successful. And at the end of the third quarter, we had the highest level of residential subscribers this year, getting close to the 2022 [ point or pre-crisis point ] of residential subscribers. Also, interestingly, the ARPU grew to IDR 349,000 from IDR 334,000 previous year. Again, [ maybe that's ] acquisition of quality subscribers and return to strong residential performance. I'll pass on to Vivek to...

Thanks, Hans. Yes. So let me cover Boost first. I think as I said earlier, Boost profitability impacted by start-up costs from digibank. Just to give you an update on status of digibank, I think we've submitted all the requirements to the Central Bank. They are going through the operational readiness review. So [ if we get early, before ] the end of the year, we should be [ optimal ] launching the alpha version of the digibank. Having said that, I think we've seen some growth in revenue coming in quarter-on-quarter, 8.2%; and year-on-year, around 60% growth. And that's mainly coming from the ability to [ drop charge ] MDR for merchants and also the increased revenue coming from disbursement of loans. As I said earlier, the teams disbursed more than MYR 1 billion. And as we speak, [ between both ] Indonesia and Malaysia put together, the loan book stands at around MYR 244 million. And the intention is for this loan book to move to digibank as and when the [ credit ] product is available into digibank for us to roll out there. Impacting the profitability. Impacted, as I said, mainly because of start-up cost. However, the ecosystem continues to grow, though we are careful in terms of being very aggressive on delivering customers or merchants, keeping in mind concerns around cash flow. Boost Life users increased by 6.4%, and the merchants grew by 15.3% to 620,000 merchants. EBITDA profit looks pretty much flat at this, but the profit does include around MYR 30 million to MYR 40 million on account of the start-up cost for digibank. If I go to the next one. ADA, which is the analytics, data and advertising business, has seen a substantial impact coming from the A2P SMS business where we've seen overall challenge around the growth -- organic growth as well as the revenue share model with the telcos, which has resulted in somewhat drop in revenue flowing down because this has been a high EBITDA margin business flowing down into the profitability and also flowing down into the EBIT, which has been negative in the first 9 months of the year. However, as I said earlier, that we would see traction coming in some of the new businesses under the ADA, specifically, the data and analytics business. But early stage of that, and there are still marketing spend to build that business [ hitting ] the profitability of the group. On EDOTCO, the next slide. I think it's a combination of inorganic as well as improvement in build to suit and colo in our existing markets. As I said earlier, the colo continues to show improvement in our key markets: Malaysia, 2.31x; Bangladesh, reaching to 1.62x. Overall, around 1.65 [ in colo ], which has been a strong growth coming. If you look at 1.65 in the context of some of the new acquisition of towers which are just [ won ], the overall organic improvement on the older towers has been substantial. However, profitability getting impacted by higher D&A and also the higher net finance cost. So the EBITDA growth is partly moderated because of the increase in maintenance and manpower cost in Philippines and Cambodia and also in Malaysia on account of project in Jendela. On the next slide. So moving forward, I think as I said earlier, at least 2023 on our KPIs, we will be -- we are expected to stay in line with our KPIs of mid-single-digit growth in revenue and high single-digit growth in EBIT. In fact, revenue should be better than mid-single digit. CapEx will be [indiscernible] down. At this point in time, we're running MYR 1 billion behind. But there's still some rollouts to be completed, and some of that will be carried over to the next year. And we will come with the guidance on next year CapEx by February 2024. KPI, the risks and opportunities. I think this is pretty much known, nothing new to talk about. But our view is that the risk has, in a way on the macro situation, has peaked where the interest rates have peaked, We should start seeing moderating down next year. And also from an exchange standpoint, the impact of dollar strengthening should not continue into next year, and that should ease up a lot on the balance sheet of Axiata because on the mark-to-market itself, we see [ stress ] coming on the balance sheet. Geopolitical challenges, I think less impacted in our market footprint as we see. I think it's more the macro situation, the inflation, foreign exchange, which has been the impact. The supply chain disruption so far has been less impactful for us on geopolitical reasons, and that puts us relatively in a better position. Opportunities. I think we have seen, as I said earlier, 2 of our largest markets, Bangladesh and Indonesia, continues to have competitive rationality. In fact, in addition to that, some price discovery, which we are seeing with ARPU improving. So that's a positive sign. We do expect that situation to continue. I think once we are able to complete the [ carve out ] of customers as well as implement rollout of fiber by Link Net, we should start seeing synergistic benefits. That's still to be captured. Delayering exercise, I think, which we are doing and which we will talk about more on our Investor Day, will also help us get better results not only on synergies but also on the valuations of our assets. And Dialog and Airtel merger, still currently being delayed because of the legal process. But we expect that to be behind us by the end of this year, and we should be able to close the transaction in the first quarter of 2024. And as I said, opportunities, while it looks a risk with strengthening USD and high -- but I think that should start moderating down, in our view, going into next year, and that should have a substantial relief both on the balance sheet as well as the finance cost for us. So I'll just go quickly -- maybe touch upon the Analyst and Investor Day, which is scheduled on 6th of December. We will have a full day with our invitees there. And I'm happy to inform that the participation will just not be at the group management, but we will have our OpCo leadership also talking about what they're doing in their specific markets. And the focus of the Analyst Day is really around what is our portfolio strategy, which I've talked about, the 5 buckets, and how do we take each of those vectors or buckets forward in terms of the portfolio mix as well as looking at some of these elements which Hans and Thomas, our CTO, will talk about the journey from telco to techco, where we're trying to do that. We will also cover the portfolio optimization, which is, I think, a little bit touching upon what are we doing on the delayering of assets, specifically to start with in Indonesia; and how we're trying to look at some of these market repair in Indonesia, Bangladesh as well as optimizing capital structure for us. And also, how do we look at growth coming from our assets, not by our own capital, by getting strategic investors coming into some of our [ investor ] assets to help us grow those assets because we do see still growth opportunities on some of the markets. But having a constraint on the balance sheet, we are looking at strategic investors to participate with us in that growth. The capital allocation. We can talk about the principles around capital allocation and guardrails, which are there across all the 5 buckets that we talked about. And we'll touch upon what Axiata is doing around sustainability. I think that's an important topic. Our Board is quite focused on driving sustainability through our Board Sustainability Committee as well as Board's direct involvement. So we'll touch upon that. Maybe -- we've set 15 minutes there. This could be a little longer than 15 minutes. So we'll adjust the final agenda. And then, of course, the discussion and Q&A. So we invite all of you to come in and at least listen to what we are trying to do and the investors -- and this is really, as I said earlier, will be focused on our portfolio strategy. That's it. I hand over back to Clare.

Okay. Thank you, Vivek. I think we will move on to the Q&A session.

[Operator Instructions] So we can proceed to start with the Q&A session. Maybe we can start with Foong.

Three questions from me. Firstly, on Ncell. Just wanted to understand whether Axiata will be running a tender for it. And if so, by when? And in terms of what we're looking to sell it for, right, will we be selling it at any price -- I mean, the highest price in the tender? Or do we have a reserve price? And if we don't meet that, then we don't sell. And also on Ncell, have we written it off completely from our books by now? And if there is a sale, am I right to understand that we would then book in the net selling price as a gain later on? So that's the first question. Second question for the Myanmar towers, right? Do you see any potential impairment given the civil war there at this point? And have we been able to repatriate cash back from Myanmar so far? And then thirdly, for Link Net, losses have widened Q-on-Q due to the higher D&A. Do you see this widening further in the coming quarters? And 41 million homes passed that has been committed for rollout for XL, how much of it have we rolled out year-to-date? Yes, those are my 3 questions.

Maybe I can take the first one on Ncell, then I'll hand over to Adlan. Adlan will be there to talk about Myanmar. I think -- on impairment, I think [ we've seen ] surplus. So that's not a concern for us. But I think we can talk about the repatriation of dollars, and then maybe Hans can talk about the Link Net [ and conditions ] also. So Ncell, I think we have taken -- at this point in time, the Board has decided, for reasons which I mentioned, that we would like to exit. And we've also been in talk with potential buyers. Nothing very concrete at this point in time. But my intention is given that this -- the market in Nepal would be very, very selective interest from buyers. So we will be not running a formal tender process to invite prospective balance. But we will look at those who would be interested and would be able to manage the environment, which they -- where we struggle not something, which we look at. As far as the estimates on profit and loss is concerned, I think we basically looked at based on what we think will be the fair value of the assets. On that basis, we impaired. What we've not impaired yet is any ForEx reserve, which will actually flow into the P&L at the point in time the transaction gets completed. But I think when we complete the transaction, we would get full details in the announcement on what's the overall financial impact, what's the pro forma impact and what's the actual realization [indiscernible]. Adlan?

Okay, on the...

I think also for us, given that one of the key conditions for us is a clean exit from the market because once we exit, we do not want any further liabilities or indemnities, et cetera, staying because we will not have direct influence there. So I think on consideration, obviously, on the realization would also be on a clean exit from the market. Adlan, Adlan, I hand over to you on Myanmar.

Yes. Okay, yes. Okay. So if you look at the [indiscernible], I think you would see that in terms of their right number of sites that is probably not accessible at the moment, right? So however, I think if you look at one of the customers sets to date, they have actually declared on a fourth model on all the sites. So we are still collecting money, and customers are still paying their lease fee, right? Essentially, some of these sites, we have outsourced the maintenance of days to locals. And I think not entirely that they are not accessible at all. It's just that I think the period that we can access some of these sites are probably pretty limited. So as and when we can do the maintenance when we save, we do, right? So there is no question about impairment of towers as today because customers are still bringing their lease fee even in a zone that probably -- it's probably a [indiscernible] and I think we're just collecting the money from our customers. Second, on repatriation of funds, I think to date I think we have actually managed to repatriate in terms of our holding company charges that we charge through our subsidiaries, as well as we just recently got approval for dividend payment, right? I think the key challenges in terms of repatriation in terms of getting the approval of the regulatory, right, whether it's GBM or FESC, the foreign exchange outlook. And to date, we have managed to repatriate close to about USD 1.7 million, right? However, recently, we have managed to get approval on [indiscernible] on our intercompany chart on our holding company charges as well as dividend. So a small amount, I think you would probably be able to get the approval. However, a bigger amount, I think it's where the restriction is, right, it's difficult to get the regulatory approval. We can see all that as well, given for our intercompany -- the holding company charges and dividend approval, it also came quite -- it took some time before it was actually approved.

Thank you, Adlan.

So Ganesh, can you take up the Link Net question?

Yes. So I think the question was related to the financing cost and the current status of the rollout of the home passes here. So the financing cost is expected to go up as the 1 million home passes are funded from the external debt. And in terms of the rollout, we -- by end of November, we will be delivering close to 85,000 home passes on an active basis. And given that the Board is mainly under construction at this point in time, the ramp-up will happen from the months, December, January onwards to complete the 1 million home passes by somewhere in June 2024.

Okay. If I can just throw in some follow-up question, Vivek, on Ncell, right? So after the impairment, what is the book value left for Ncell? And for Link Net, so basically, what you're saying is that we have only delivered 85,000 of the 1 million is it in terms of homes pass? And therefore, as we go towards the completion of the 1 million homes pass, the financing costs will continue to go up and the losses would widen further for Link Net. Those are my 2 follow-up questions.

Okay. The first one was on the -- what is the book value of -- how much is it?

MYR 378 million.

MYR 378 million, right? MYR 378 million would be the book value of ringgit -- of -- and this is just based on fair value of after-sale. But as I said earlier, there will be another ForEx reserves, which is consequent to the Nepali rupee depreciating faster than ringgit, which we've also -- we flushed out as and when the sale happens. Now this is based on obviously our estimate of the fair value of realization, but the actuals could be different -- and that difference would also come at the point in time the sale gets completed here.

Foong, could you please repeat your second question on Link Net?

Yes. Just now it was mentioned that we have delivered 85,000 homes pass, right, on an active basis at the end of November. So I'm just trying to clarify here whether that's 85,000 of the 1 million that's been promised to or committed for XL, and therefore, only just a very small rollout has been completed so far? And therefore, as we go into completion mid of next year, there's a lot more to do, and therefore, financing costs could go up a lot more from where it is in the third quarter.

Sorry, go ahead.

No. So I think, yes, you're right. There would be increase in financing costs. And I mean, I think on the 6th of December, we will talk about the source of financing. But I think also simultaneously, the XL should start delivering on home connects on those home passes are based on delivering, we will start Link Net would also start getting revenues coming from XL.

Okay. Thanks, Foong. So let's move on. Next in line is Luis Hilado.

I have 3 questions as well. Just wondering, do you foresee any more kitchen sinking exercises in the fourth quarter? Or is this impairment that you've done with the -- aside from the ForEx reserve over and done with and you should see a clean set of numbers in the coming quarters? Second question is related to edotco. Could you give us an update on the tenancy prospects for Philippines and Indonesia now that those assets are fully acquired? Do you see it improving going to next quarter and onwards? And related -- last question is related to edotco as well. There is a Bloomberg article mentioning some progress and active interest in the sale. Is there any timetable for a transaction to take place?

So as I said, there could be 2 elements coming in on edotco further impairment. What would be the ForEx reserve, which we talked about, and there could be -- if the sale gets completed in Quarter 4, then we might have a difference between what we as in the fair value versus what will be the realized value. So that would come. We don't think there would be any further impairments or kitchen sink, as you call it, coming in, in Quarter 4. However, at the end of every quarter, we do look at our -- all our assets as well as the carrying value and what the value can see. Tenancy, Adlan, can I hand over to you?

Yes. [indiscernible] talk about Philippines further I think if you see in 2023, I think the market is a little bit slow right for whatever event that's happening in PLDT, I think, you see that Smart has not been rolling out much this year. In fact, they have taken a fee in terms of the whether it's new rollout or in terms of co-location. I think similar approach has been taken by the Globe as well, but we did see some co-location coming from Globe, right? And as far as [indiscernible] is concerned, this year, they had some shareholding issues. However, the good news is what we're seeing is towards the end of the year, a big debt shareholding issue has come to the final end. So hopefully, we are starting to see now that -- we are starting to see orders coming from [indiscernible]. And I think we're also starting to see that Globe have also started to farm up new orders, right? And this is more for planning going into 2024. So it was a little bit of a slow yield in 2023 for all 3 operators given the various issues that each of them have. Never -- having said that, I think we believe that there will be some catching up -- catch-up that will happen in 2024. Hopefully, I think with that acceleration in terms of the rollout. And we hope to see some tenancy increase going into 2024. As far as Bindu is concerned, I think for us at the moment is still very slow progress because I think the focus on a lot of the tower -- the MNOs in Indonesia have been really focusing on co-location and essentially our portfolio in Indonesia is relatively small. So we still have not gotten much order yet in 2023. Having said that, I think as you know that we do have commitments from XL, which we think that this will probably come sometime in 2024. While working on these commitments, we are also working on some strict for nature deals with local councils and all that, but these are currently work in progress. We should be seeing some results coming in 2024. On the capital raising process, I think you see so many news in the press, right, in the papers and all that. Yes, I think the process is still ongoing for ForEx. There are still a few interested parties business I will say that actually looking at this, we are still probably in a due diligence process. So once that is completed that we have to resolve and all that, something that will probably make the announcement. So we'll make the necessary announcement if we have something concrete and conclude with any one of the bidders. But essentially, there are a few parties that are still involved in the process.

Thanks. Okay. Let's move on. I think the next starting to question is, Ben chain Lim.

My first question is around Ncell. I mean it looks like the carrying book value, you've written it down. So you've written off about 80% of the value. And what you turn it down to, it looks like it's not even 1x EBITDA -- is it fair to look at this as a more sort of a fire sale, get rid of it at any price and look at it quite negatively actually. Do you think that's a fair way to think about it?

Is that the only question then?

I've got a few more. Maybe -- okay, my second question is on your Digital Bank. I just wanted to get an estimate for the cash burn you expect for next year once it goes live. And I think there's some useful context because one of your competitors has launched -- soft launch already, some of their headline products, right? They want to do 3% daily reservoirs savings accounts. They want to do 1% cash back on a debit card. So you actually have some baseline to think about where the competition is pricing, at least in the short term, how they're bringing in new users? And if you sort of think around matching that, right? Do you have an idea of what kind of cash burn you need to match the competition?

Sure. So the first one, let me address on the Ncell. I think, as I said earlier, one of the key conditions for us is clean exit as we don't want any indemnities, volunteers to be given to the buyers. So I think that's 1 of the key element of our decision would be. And to get a clean exit, I think they would be obviously compromised on the valuation, right? So I won't call it as a fire sale, but I would just say that this is -- this might have a compromise on the valuation. So in our view, the carrying value which we said is reflective of the fair value of what we would probably be open to sell. It could be a plus/minus on that also. But I think more important for us is clean exit from. On the second question, which was on the Digi Bank, I think our 5-year estimate before it starts breakeven, I think we're expecting breakeven of the bank in 3 years' time is around MYR 500 million as a total spend. And as we are the 60% owner of the Digi Bank, so effectively MYR 300 million and even good news, as I said earlier, is that one of our first products, which we will start moving on is really the lending product. And the lending product, most of the cost actually comes on account of the acquisition of those customers. So around -- currently around MYR 250 million by the time, we would have the bank launch, probably will be around MYR 300 million, MYR 350 million as the book to be moved directly into the Digi Bank. So that would be accretive from day 1. So we will not have a cash on that. So if you look at 3 years, I mean, we'll be looking at something like spread over MYR 120 million, MYR 130 million over 3 years period, but not as high given that we already have an existing business, which will get transferred. And that will be our contribution as shareholders to the Digi Bank. Having said that, I think we do expect our cash on the wallet side to keep coming down. And there have been some actions taken during this particular year which, at least on the EBITDA level, you should be getting to neutral in 2024. So overall, I won't see much of a shift on the overall cash on, if any, will come down from where we are. But the shift would happen from our wallet business into the Digi Bank.