KUALA LUMPUR – Axiata Group Bhd’s diverse emerging and frontier market investments will drive growth and keep credit quality stable over the next one to two years, said Moody’s Investors Service.
In its “Inside ASEAN 21st Edition” report, Moody’s said the group’s (Baa2 stable) revenue will grow between 2% and 2.5% in 2020 and 2021, despite a low-single-digit revenue decline at its domestic mobile unit, Celcom Axiata Bhd, in Malaysia (A3 stable).
Growth in its emerging and frontier market operations, including stable earnings from tower company edotco Group Sdn Bhd, will mitigate revenue contraction at Celcom.
“We expect Celcom’s revenue contribution to Axiata to remain around 25% through 2020 and 2021, after declining to 26% for the first half of this year from 30% in 2018.
“Stiff mobile-sector competition in Malaysia will keep Celcom’s profitability low,” Moody’s said.
Meanwhile, it said increasing revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) contribution from Axiata’s 63%-owned regional tower subsidiary, edotco Group, provides the group with a steady stream of contractual revenue and earnings.
Edotco will contribute about 10% of consolidated EBITDA through 2020 and 2021, which will lend a higher degree of certainty to Axiata’s revenue than its faster growing but potentially more volatile emerging market earnings base.
“We believe the breadth of Axiata’s holdings and financial discipline at the subsidiary level help mitigate volatility, as well as regulatory and operational uncertainties in any country. None of the frontier markets individually contributes more than 15% of consolidated EBITDA,” Moody’s said.
Despite higher capital spending and dividend payouts, Moody’s is expecting Axiata to balance its growth plans and shareholder initiatives with debt holder protection measures. – Bernama, December 8, 2020
