Axiata rating unaffected by purchase

Standard & Poor’s said that its rating and outlook on Malaysia’s Axiata Group was not affected by its acquisition of Latelz Co.

“We don’t expect the acquisition to significantly affect Axiata’s operating and financial performances,” the international rating agency said in a statement. 

It noted that Latelz, which operates the Smart mobile network, was Cambodia’s second-largest wireless company in terms of subscribers.

“We anticipate that the acquisition will strengthen Axiata’s competitive position in the Cambodian telecom market by making the company the second-largest player with a market share of about 35 per cent,” it said.

Axiata’s mobile network Hello is currently the fourth biggest in Cambodia.

“We also believe the acquisition will bring in significant cost synergies. Nevertheless, its overall impact on Axiata’s operating performance will be limited because the combined entity will contribute less than 2 per cent of the company’s consolidated earnings before interest, taxes, depreciation, and amortisation (EBITDA).

“In our opinion, the acquisition will not materially impact Axiata’s financial metrics. We expect the company’s debt-to-EBITDA ratio to remain strong for the rating at less than 1.3 times after factoring in a purchase price of US$155 million [Bt4.7 billion] and marginal debt at Latelz. 

“Upon completion, Axiata will hold a 90 per cent stake in the combined entity and emerge as one of the largest operators in Cambodia in terms of subscribers and revenue,” the statement said.

“The Cambodian market is primed for consolidation,” Axiata said, noting the “intense competition” with nine mobile players in a country of only 15 million.

The statement predicted the local mobile market would end up with three to five players.

Axiata said the merger would provide improved economies of scale, remove duplicative costs and enhance revenue potential. “The merged entity will also facilitate synergies and the sharing of best practices between the two companies. This will include increased spectrum and significant synergies across network coverage and infrastructure,” it said.

The company said that both Smart and Hello had more than doubled their market shares over the past year with average quarterly income more than quadrupling.

Group chief executive Jamaludin Ibrahim said the merger was “an excellent opportunity to strengthen our presence in Cambodia. The time is right for Axiata to consolidate with Cambodia now offering more visibility on market structure. 

“Smart has clearly emerged as a strong and resilient operator through a tough period of industry competition and realignment. This consolidation also achieves the twin benefits of improving overall market fundamentals and achieving tangible synergy benefits,” he said. 

With $5.4 billion in group revenue last year, Axiata is one of Asia’s largest telecommunication companies. It controls mobile operators in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia and also has significant strategic stakes in India and Singapore as well as a stake in mobile operations in Thailand. The statement noted that Latelz is owned by Cyprus-based Timeturns Holdings, which owns several operators and licences in Asia and Africa. The company currently employs more than 450 people in Cambodia, it said.