Axiata Group Berhad (AXIATA) Earnings Call Transcript & Summary

Okay. Good afternoon, ladies and gentlemen. My name is Clare Chin, Head of Investor Relations at Axiata Group Berhad. Thank you for standing by, and apologies for the slight delay in our call. So welcome to Axiata's fourth quarter results briefing. Today, we have present with us Vivek Sood, Group CEO of Axiata Group; Nik Rizal Kamil, Group CFO of Axiata Group; as well as representatives from our operating companies. There will be a short presentation followed by a Q&A session. One last housekeeping matter to note, please, since it is Ramadan month. We would be keeping this call to only 45 minutes today. So without further ado, I would like to hand the conference over to Vivek, please.

Thank you, Clare. Very good afternoon. It's my pleasure to present the quarter 4 2025 results. Let me start with a quick slide, and then I'll hand over to Nik to go through the details. So 2025, we ended up the year with MYR 365 million profit, but very strong cash flow generation of MYR 1.6 billion. And we are very happy to declare MYR 0.05 dividend that translates into full year dividend of MYR 0.10, and this is in line with what was the market message we made earlier in the year. We also feel a strong balance sheet of 2.46 net debt to EBITDA. However, performance does get impacted because of the strengthening of ringgit versus our operating currencies. I think against our operating currencies somewhere between 7% to 12% was the strengthening of ringgit and that does impact our translation number into ringgit. Let me quickly cover the three buckets of our assets. And you will notice that I'm not really talking about infra here. So let me start with digital telcos. Our underlying performance of all our footprint markets, including the two joint venture companies was strong. We are seeing very strong synergies coming from the merger in Sri Lanka, Indonesia as well as Cambodia, and they are pretty much on track. We are also seeing visible market repair subsequent to the consolidation, which has happened, and we've been a significant part of that consolidation exercise in these markets. So we are seeing market repair in Indonesia, Sri Lanka and Cambodia. We also -- as you know, the impact to us has been because of the profits from XLS, which has been impacted because of the integration cost as well as accelerated depreciation consequent to the network integration. Having said that, I'm happy that the XLS, the progress on integration is ahead of the plan and synergy so far has been ahead of the plan, and we do expect ourselves to deliver the committed USD 300 million to USD 400 million synergies from 2027 onwards. Digital business, ADA, I think, has been scaling on its AI capabilities with a strong EBITDA growth, I think it's been profitable and also fairly cash liquid, looking for opportunities to further expand as well as create bigger value. Boost, strong loan growth coming from the Boost Bank and the non-Boost Bank losses are narrowing. I think the good news is our ability to generate strong cash flows in operating companies translating into upstream of dividend of around MYR 1.7 billion during the year as well as significant reduction both at the group and overall group as well as the holding company of debt. Some of the markets -- in fact, most of the frontier markets are -- have eliminated their dollar exposure over the last year. Monetization of infra businesses is progressing, and we expect to close this year, our exercise. With that, I hand over to Nik, to take you all through the financial numbers.

Okay. Thank you, Vivek. Good afternoon, everyone. So for the Q4 '25 and full year '25 results, this time around, we will -- I will take you through the results of OpCo by OpCo before we summarize it and roll it up to the group numbers. We'll start off with our telecommunications portfolio. Firstly, on CelcomDigi Berhad. Steady revenue growth and cost discipline supporting PAT resilience. I will not go into a lot of detail because you would have also seen they've already announced their results and had their analyst call. But some key highlights is that on a year-on-year basis, full year revenue grew 2.2%, mainly driven by postpaid, home & fiber and TechCo segments, offset by softer prepaid and enterprise mobile. EBIT growth was 15.7% year-on-year due to lower depreciation, amortization and impairment costs, which resulted in overall PAT growth of 10.1%, which was lifted not only by the lower depreciation, but also by tax benefit. The full year '25 -- the financial year '25 merger synergy targets are on track, and CDB declared MYR 0.148 dividend per share for FY '25. Moving on to XLSMART in Indonesia. The merger was successfully executed in quarter 2 of last year with financial year '25 synergy targets being achieved and in fact, exceeded. On a quarter-on-quarter basis, comparing to quarter 3, there was a strong revenue growth of 3.9%, driven by mobile ARPU growth of 15%. The business fundamentals remain strong despite one-off adjustments and ongoing integration. At the PAT level for full year '25, it was IDR 4.4 trillion loss. And this is mainly due to the accelerated depreciation and also the -- which was about IDR 4.5 trillion and also integration costs of IDR 1.8 trillion. Added to that, there's also Link Net impairment as XLSMART still owns 20% of Link Net. And if you were to exclude these items, PAT would actually be a profit of IDR 3 trillion. As I alluded to earlier, FY '25 synergy targets of between IDR 150 million to IDR 200 million was achieved. In fact, they achieved slightly more than that. And XLSMART declared a dividend of IDR 244.7 per share for the financial year 2025. Next, we have Dialog in Sri Lanka. So despite the impact of Cyclone Ditwah in Sri Lanka in quarter 4, the quarter 4 performance remained resilient with a 1.8% higher revenue quarter-on-quarter. In fact, on all metrics, they had positive momentum for the quarter. For the full year, revenue growth was very strong with a 4.9% uplift, mainly due to the strong 23% uplift in mobile, mainly in prepaid segment, underpinned by organic growth of 17% and also Airtel consolidation of 7%. There were further cost optimization in the year from the Airtel and Airtel merger synergies, which translated to a significant uplift across all parameters. For the year, Dialog declared an LKR 1.5 dividend per share. Next, on Robi. Robi remained resilient in FY '25 and sustained their profitability, whereby the PATAMI grew by 33.3% year-on-year. And notwithstanding that revenue was relatively flat, slightly higher at 0.4% on a local currency basis or constant currency. And this, together with the cost efficiency and optimization have meant that they were able to keep EBITDA flat and -- however, grow profitability to about Tk 9.4 billion for the financial year. The balance sheet continued to strengthen with borrowings basically reduced to near 0 at the end of FY '25. The borrowings that you see in their books are mainly due to leases. And for the financial year, Robi declared Tk 1.75 Bangladesh per share for the year. Next, on Smart. Prepaid ARPU growth and cost efficiency drove the PATAMI growth. Revenue grew by about 6.2% quarter-on-quarter and 4.8% year-on-year. For FY 2025, the growth was mainly due to the sustained growth in prepaid segment from high ARPU and subscribers. Cost efficiencies continue to deliver strong EBIT and PATAMI growth of 11% and 5.9%, respectively. And for the year, dividend upstreaming from Smart was approximately USD 70 million. So with the exception of XLS, just to summarize all our telecoms portfolio showed a year-on-year PATAMI increase. And the only reason for XLS, the PATAMI loss was due to the accelerated depreciation, integration costs and the Link Net impairment. If you were to take those one-offs out, even XLSMART would have shown a profit. So if you were to look at our telecoms portfolio in its entirety, it was a year-on-year portfolio growth with all telecom portfolio or OpCos upstreaming dividends to the group. Moving on, next is on our technology -- used to be digital business, what we're calling now the technology portfolio. We start with ADA was growth was led by the Solutions business with underlying profit improving based on disciplined cost management. Revenue was relatively flat. EBITDA and EBIT was slightly higher, but PATAMI was slightly lower at 7.5%, but still at MYR 49 million, which basically marked the seventh consecutive year of profitability for EDOTCO -- sorry, for ADA, my apologies. For Boost, loan book growth in the year resulted in higher interest income at both bank and nonbank with overall losses narrowing. So as you can see, there's revenue growth of 43% in both bank and non-bank. And for PATAMI, for the nonbank, PATAMI losses narrowed in the year. And for the bank, it was slightly lower at MYR 41 million. Now to EDOTCO. EDOTCO on a revenue basis quarter-on-quarter showed a 4% increase from quarter 3 to quarter 4. However, on a full year basis, it was 5.9% lower. EDOTCO, like Axiata Group, also were impacted by the strengthening of the ringgit against our -- the OpCos that they have operating. And for EDOTCO, it was mainly in Bangladesh, which account for a significant chunk of their business. On a constant currency basis, they showed basically flattish revenue, and that was mainly because in FY 2024, they had the benefit of a price benchmarking that happened in the middle part of the year, which accounted to about MYR 121 million. So on a like-for-like basis, they would have shown growth to normalize it in FY 2024. Although the decline in revenue due to forex is what I was alluded to earlier. PATAMI actually more than doubled from MYR 171 million to MYR 379 million, where there was forex gains because some of their borrowings is actually denominated in U.S. dollars. So they gain from the balance sheet side of it. There was also lower finance costs from the ability of EDOTCO to pay down their debt in the year, mainly from the utilization of the proceeds they got from EDOTCO Myanmar, indicating discipline in terms of capital management and recycling. With regards to the TowerCos, all were profitable with the exception of Philippines, where losses are narrowing. And the expectation for Philippines for 2026 is that from quarter 4 2026 onwards, they will start going to PAT positive territory. Dividend upstreaming in EDOTCO, this was actually the second year of dividend, right? First year of dividends from EDOTCO and the second payment is MYR 54 million for FY '25. And I believe they'll also be declaring the second interim to Axiata and to the other shareholders. Finally, on Link Net. Unfortunately, Link Net is OpCo that faced a very challenging FY '25. Again, a comparison on the year-on-year or like-for-like is a little bit distorted due to the fact that in FY '24 -- late in FY '24, we had transferred or basically sold -- Link Net had sold the ServCo business or the customers to XLSMART. You can see in the FY '24 bar in '24 alone, that accounted roughly for three-quarters of performance. That was already about IDR 1.1 trillion. So obviously, due to the transfer in 2024, this was no longer there for '25. But on a like-for-like basis, comparing the FiberCo business, you can see that FiberCo business has done well compared to FY '24. And this is the ability to essentially transform Link Net into a FiberCo going forward. Obviously, they made some progress on ISP expansion and open access. However, as the exclusivity with XLSMART only expired towards -- in Q4 of last year, it's only towards the tail end of 2025 and beginning in January that they have already started to sign up some of the home connects. So going forward, the improvement should come forth from there. Again, from a profitability point of view, you can see that the transfer of the ServCo is the main -- one of the main reasons to -- that impacted the PATAMI that grew from positive to negative in FY 2025. With that now, I will transition to the overall or the rollout of the consolidated group numbers for FY 2025. So as I had alluded to earlier, our overall performance was impacted by forex translation with the ringgit strengthening by about 7% to 13% versus our operating currencies. On the revenue side, we closed the year at MYR 11.8 billion in revenue, 6.3% down year-on-year, mainly due to forex, but on a constant currency basis, 2.2% higher. Quarter-on-quarter showed a strong performance in quarter 4 compared to quarter 3 with both on a year -- basically on a constant currency quarter-on-quarter basis, it grew by about 4.1%. And again, the main reason for the improvement in revenue was basically higher ARPUs in Dialog and Smart. However, it was offset by the weaker performance in Link Net. EBITDA for the year, we registered MYR 5.46 billion, 4% down year-on-year, mainly due to forex. At constant currency, 5.7% higher, mainly due to the merger synergies from Dialog and Airtel in Sri Lanka. Quarter-on-quarter, there was good underlying performance, and EBITDA grew by about 7.9%. EBIT level, we recorded MYR 1.57 billion for the year, down 19.1% year-on-year, mainly due to forex translation and Link Net impairment. So even on a constant currency, it was down 7.8%, mainly due to the Link Net impairment. If we were to normalize for the Link Net impairment and the impact of forex, the underlying EBIT growth would have been 20.2%, which beats our headline KPI of high single-digit growth. On joint control entities or JCEs, share of results for the year was MYR 79 million, 79.4% lower year-on-year, mainly driven by the share of results from XL Smart, where due to the merger integration costs and also the accelerated depreciation and Link Net impairment for full year 2025, our share of loss was about MYR 389 million. For CDB results, though, contribution to AGB was 21.2% higher at MYR 468 million compared to the previous year. PATAMI, we recorded PATAMI of MYR 365 million. This was impacted mainly due to the Link Net impairment, which if we were to normalize that, PATAMI would be at roughly around MYR 762 million. The MYR 365 million PATAMI reported here is on a combined reporting basis. So it includes continuing -- besides continuing operations, also the discontinued operations of XL Axiata and EDOTCO Myanmar. On an underlying PATAMI basis, this we recorded at MYR 537 million, 36.3% higher year-on-year, again, reflecting the underlying performance of our OpCos, mainly our telcos, which based on a constant currency basis and also adjusted for one-off items. So again, the outperformance is mainly driven by Dialog, EDOTCO and also the -- as I mentioned, the other telcos as well. On a quarter-on-quarter, performance was flattish at roughly about MYR 160 million in fourth quarter '25, which is driven by top line improvement. Next, just quickly on balance sheet. As at the end of December 2025, group cash stood at MYR 3.7 billion, lower year-on-year, mainly due to the deconsolidation of XL Axiata, which completed in quarter 2, 2025. So FY '24 in our balance sheet, we did not restate our balance sheet. So the balance for XL Axiata was still consolidated in FY '24 numbers. At HoldCo level, our HoldCo cash was MYR 826 million, higher year-on-year by 70.8%. On borrowings, group borrowings, we closed the year at just slightly over MYR 15 billion. This is 35.1% lower year-on-year basis, mainly due to debt repayment at HoldCo level, EDOTCO, Robi and Dialog and also the deconsolidation of XL, which was in 2025. HoldCo borrowings was just slightly below MYR 7 billion, 26.6% lower year-on-year, mainly due to the disciplined reduction in HoldCo debt, including the EMTN buyback that happened in third quarter of 2025. [indiscernible] at the end of 31st December 2024, our HoldCo borrowings stood at about MYR 9.5 billion. So approximately, we've managed to bring down the HoldCo borrowings by about MYR 2.5 billion in the calendar year. This has resulted in our net debt to EBITDA at the end of 2025 at 2.46x, which is an improvement from 2.61x that we recorded in quarter 3 2025. And comparing to quarter 4 of 2024 or where we ended in 2024, it was 2.74x. With that, I will pass it back to Vivek.

Let me start with our headline KPI 2025 achievement. So we did set a KPI of high single digits. We end up with 20.2% on EBIT. This is after adjustment for Link Net goodwill impairment. Going forward, given that we're still in the process of monetization of our infra-assets, there may be short-term deviations against what we set headline KPI. In this context, the group's prospects will provide more appropriate guidance. In 2026, the group is progressing into the next phase of its strategic journey, which as we explained in our Analyst Day, split between telecoms and technology portfolio to focus on profitability and valuation growth. Telecom portfolio, I think we've completed the market consolidation. And with the improved market structure, operating companies will continue to -- with market reparation efforts to obtain market position #1 for strong #2. Our OpCos, Smart, Robi, Dialog and key associates have an aspiration to realize full potential of top line convergence on operational excellence and to deliver full equity potential in high ROIC cash flows and profitability. So our portfolio on technology will focus on value elimination and the funding for that would be essentially external. ADA and BHS, we have an aspiration to achieve sustainable growth, execute on bolt-on acquisition, again, internally funded or funded through external capital and move along to the path of monetization and value elimination. So this basically, in a way, spells out what our prospects for 2026 are. We expect once all this monetization, et cetera, is done and where we are more in a static state of business, we should be able to come back to the guidance with some financial KPIs. We will let the market know what would be those KPIs would be. But for 2026, we will stick to the statement. Okay. The last slide, as always, opportunities and risks. I think we still see benefits of merger synergies and market repair flowing down to the cash flows and profit generation of these OpCos. I think the 2, specifically the biggest one would be Indonesia, so far moving on track. I think 5G market leadership, we've been ahead than our peers in these 3 markets, Indonesia, Sri Lanka and Cambodia in terms of our 5G rollout. I think that's an opportunity. Monetization of infra-assets. I think this also came out in our Analyst Day as something important from the investors as a key trigger for any kind of re-rating of Axiata. So I think that's something where we should attempt to get successfully completed, and that should also result in reduction in holding company debt as well as our continuing efforts in reducing the operating expenses at the holding company. Risks, I think we're still not there when it comes to the final state of DNB and the ownership structure of DNB. I think that will still remain for some time as an overhang. Monetization of 5G investments, I think so far, so good, but we need to be conscious that this is not something which is easy to be achieved. And then our markets, specifically the frontier markets will remain vulnerable to the geopolitical and macroeconomic risks. With that, I will stop, hand over back to Clare.

Okay. Thank you, Vivek. Thank you, Nik. So we move on quickly to the Q&A session, and I would like to highlight that we also have representatives from XLS, Robi, Dialog, Smart and EDOTCO on the line. So feel free to engage with the respective CEOs of our operating companies. [Operator Instructions] Perhaps we have done a very good job in the presentation. There are no further questions. It doesn't seem like we have any...

We just did an Investor Day 2 weeks back, right?

Yes, 10 days -- almost 2 weeks back.

Okay. So Prem couldn't resist unfortunately.

Thanks for flying the flag.

Okay, Prem, your hand is raised. Mic over to you then.

Thanks. Yes, maybe because it's just very close to the Investor Day. But let me try my luck here. Any progress with regards to the asset monetization's since last month?

Well, I think we are in discussions. We are progressing, but I don't think we can share at this stage, it's all in cooking. So it's all work in progress, yes.

I suppose the one thing which stands out is compared to 1 month ago, this time around, you did come out to say specifically that you plan to complete the asset monetization in 2026.

Yes. I think that's still holding.

Yes.