Axiata upbeat on Cambodia venture [New Straits Time (Malaysia)]
(New Straits Time (Malaysia) Via Acquire Media NewsEdge) KUALA LUMPUR: Axiata Group Bhd, the most valuable telecommunications company in the country, expects its US$155 million (RM472.7 million) merger in Cambodia to be earnings accretive by end of this year, mainly driven by cost efficiencies.
The merger, which involves Hello Axiata Co Ltd and Latelz Co Ltd, will see Axiata holding a 90 per cent stake in the merged entity.
By itself, without the merger, Hello Axiata and Latelz Co were operating at a loss.
"I believe there's a good chance that the merger will be earnings accretive during the first year itself. This means, the merged entity will be able to register a net profit by year end.
"This is possible, because by merging, we will be able to operate more efficiently with a better cost structure, as we will be able reduce substantial amounts of duplicate costs," Axiata president and group chief executive officer Datuk Seri Jamaludin Ibrahim said in a Business Times interview.
The merger, to be funded by Axiata via internal funds, is expected to be completed by end of the first quarter this year.
The merger reflects Axiata's confidence in the Cambodian economy, which has grown by at least six per cent over the past two years.
Nevertheless, questions remained if the merger was a right move, after all, Cambodia, a country with population of just over 14 million, currently has a high mobile penetration rate of over 80 per cent.
A high mobile penetration rate means it will be tougher for a mobile operator to acquire new customers.
Jamaludin said the growth potential remains strong in Cambodia, as most of the mobile phone users in the country have more than one SIM card.
"The unique mobile penetration is below 40 per cent and the industry is expected to grow at a rate of high single-digits to low teens over the next few years. So, there're still opportunities," said Jamaludin.
Meanwhile, the company said that it is expecting slightly lower capital expenditure (capex) in 2013, mainly due to lower capex needs for its Indonesia operations.
The company, with a market cap of over RM54 billion, the highest among its rivals in the country, spent over RM4 billion in capex in 2011. The amount increased to over RM5 billion last year, mainly due to the group's plan to accelerate its investments to boost data coverage in Indonesia.
This year the company is expecting its capex to be slightly lower than last year's.
"For Indonesia, we are expecting lower capex in 2013. For other countries, including Malaysia, we are expecting similar amount of capital expenditure," said Jamaludin.
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