Axiata makes a foray into the digital space

Reading Time: 4 minutes

Malaysia-based Axiata Group, one of the largest telecom operators in Asia, recently revealed a record-high 2016 revenue of 21.6 billion ringgit, an 8.5-per cent increase over 2015. However, despite the growth in revenue, profit after tax in 2016 was significantly lower at 657 million as ringgit, compared to 2.6 billion ringgit in 2015.

Jamaludin Ibrahim, President & Group CEO of Axiata, said that – despite the disappointment over the drop of group profitability – there was reason for optimism.

“2016 was an extremely tough year for the group with a combination of external and some internal challenges. Despite our top line revenue and EBITDA showing stronger performance, profitability was below our expectations. We are naturally dissatisfied with the performance of some of our companies, but are pleased that most others have done very well,“ he said.

Investvine discussed with Jamaludin Ibrahim what’s next for Axiata.

In what global markets you operate do you see highest growth? Are you considering further expansion in existing markets or forays into new markets?

Within the Axiata market, highest growth comes from Sri Lanka, Cambodia and Nepal. As for expansion, Axiata is always keen to look into organic and inorganic opportunities within its target markets in ASEAN [Association of Southeast Asian Nations] and SAARC [South Asian Association for Regional Cooperation]. Our focus for inorganic activities has always been towards in-country consolidation within our existing footprint.

What can we expect next in the Robi-Airtel deal, the merger with the Bangladesh unit of Airtel and your local subsidiary Robi Axiata?

We completed Bangladesh’s first telecom merger in a share swap transaction between our Robi Axiata Limited and Bharti Airtel Bangladesh Limited in November 2016. The merged entity now serves approximately 32.2 million subscribers over the widest mobile network coverage across Bangladesh. The merger has enhanced Robi’s stronghold in the mobile Internet segment and consolidates its position as the strong second largest operator in the country. Strengthening our position in the Bangladesh market, we expect to be a lot more competitive in 2017 and gain market share.

What have been the major challenges in upgrading network infrastructure in Malaysia? And what solutions are in place to minimise disruption?

In general, rising costs especially in network modernisation and stagnating or declining revenues pose the biggest challenge to the telecom industry in Malaysia, as it is the case in most markets in the Asian region. Within Malaysia, the recent spectrum realignment and reallocation sets a challenge to mobile network operators. Network optimisation will have to be conducted continuously over the next twelve months to achieve the desired outcome. Malaysian telecoms may also need to implement new cell sites in dense urban areas to align with new spectrum allocations. Further to this, operators will also need to constantly explore new collaborative ways to make sure that availability of fiber reach is improved while keeping costs under control given the rising data demand.

What are you doing in the digital space?

In the digital space, Axiata established its digital services arm, Axiata Digital, in late 2012 to place the group in the same space as over-the-top service providers. Axiata Digital as a business unit of the group expands our services to cater to online customers on smartphones, tablets and fixed Internet. Its portfolio of digital services is built through acquisition or developed in-house and covers digital advertising and activation, digital commerce/marketplace, mobile money, digital entertainment and education, disruptor models and digital platforms. In three and a half years, we have a range of over 26 digital services brands and businesses. Axiata Digital has also gained significant traction and has now become a fast growing business segment for the group.

With the rise of services such as Whatsapp, Viber or Line that are disrupting conventional mobile telephony and SMS services, telecom companies around the world are now active engaging tech startups and IT entrepreneurs to develop innovative solutions. Tell us some success stories from Axiata Digital and how you support the startup ecosystem?

Group CEO Tan Sri Jamaludin Ibrahim

Some of the early successes include “Yonder Music” which now supports our mobile broadband business through the need for data plans and the increase data usage of these customers. It also improves the overall “stickiness” of these customers and helps us manage churn our rate. Yonder in now in three markets and has over 350,000 users since its launch in December 2015. Axiata Digital also entered online marketplaces with “Elevenia” in Indonesia, “11Street” in Malaysia and “Wow.lk” in Sri Lanka where we have a ready customer base for our operating companies. These digital marketplaces have now become market leaders in their own countries. We also made significant inroads in mobile money with five mobile payment applications in five of our operating countries. These mobile money services have been developed and rolled out within our footprint markets. “EzCash” in Sri Lanka is a success story which won a GSMA Global Mobile Award for the Best Mobile Money Service in 2015.

How do you groom such startups and solutions for your own use?

Under the Axiata Digital umbrella, each of our operating companies has a digital services arm that identifies, develops and incubates new and over-the-top products and services for their markets. Based on success, usefulness and demand, these services are then rolled out in our other markets. To enable faster roll out of digital services and products, Axiata Digital has also developed its own API platform called MIFE (Mobile Internet Fulfillment Exchange).

Having this ecosystem in place, in 2014, Axiata established a 100-million-ringgit venture capital fund called Axiata Digital Innovation Fund (ADIF) to encourage and spur innovation and growth of the Malaysian digital ecosystem. As the largest venture capital fund in the country, ADIF has made a 23-million-ringgit investment in twelve digital companies. These companies, which are managed on their own, have collectively grown over 200 per cent year-on-year and generated revenue of 46 million ringgit.

What is Axiata doing to innovate and how will you capitalise on the growth opportunities created by the Internet of Things?

The Internet of Things is one of the key pillars of our long-term strategy as it is an emerging digital services sector estimated to be worth potentially $30 billion by 2020 in Axiata’s current footprint alone based on our own forecasts. Over the next two to five years, we see the greatest economic potential in the B2B and B2B2C segments for enterprises and governments. To date, within these business solutions segments, Axiata has entered into pilot testing collaborations and partnerships in Malaysia, Indonesia, Sri Lanka and Thailand. We are actively working towards more collaborations in this area and expect to see a stronger portfolio built in the next few years. 

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Malaysia-based Axiata Group, one of the largest telecom operators in Asia, recently revealed a record-high 2016 revenue of 21.6 billion ringgit, an 8.5-per cent increase over 2015. However, despite the growth in revenue, profit after tax in 2016 was significantly lower at 657 million as ringgit, compared to 2.6 billion ringgit in 2015. Jamaludin Ibrahim, President & Group CEO of Axiata, said that - despite the disappointment over the drop of group profitability - there was reason for optimism. “2016 was an extremely tough year for the group with a combination of external and some internal challenges. Despite our top...

Reading Time: 4 minutes

Malaysia-based Axiata Group, one of the largest telecom operators in Asia, recently revealed a record-high 2016 revenue of 21.6 billion ringgit, an 8.5-per cent increase over 2015. However, despite the growth in revenue, profit after tax in 2016 was significantly lower at 657 million as ringgit, compared to 2.6 billion ringgit in 2015.

Jamaludin Ibrahim, President & Group CEO of Axiata, said that – despite the disappointment over the drop of group profitability – there was reason for optimism.

“2016 was an extremely tough year for the group with a combination of external and some internal challenges. Despite our top line revenue and EBITDA showing stronger performance, profitability was below our expectations. We are naturally dissatisfied with the performance of some of our companies, but are pleased that most others have done very well,“ he said.

Investvine discussed with Jamaludin Ibrahim what’s next for Axiata.

In what global markets you operate do you see highest growth? Are you considering further expansion in existing markets or forays into new markets?

Within the Axiata market, highest growth comes from Sri Lanka, Cambodia and Nepal. As for expansion, Axiata is always keen to look into organic and inorganic opportunities within its target markets in ASEAN [Association of Southeast Asian Nations] and SAARC [South Asian Association for Regional Cooperation]. Our focus for inorganic activities has always been towards in-country consolidation within our existing footprint.

What can we expect next in the Robi-Airtel deal, the merger with the Bangladesh unit of Airtel and your local subsidiary Robi Axiata?

We completed Bangladesh’s first telecom merger in a share swap transaction between our Robi Axiata Limited and Bharti Airtel Bangladesh Limited in November 2016. The merged entity now serves approximately 32.2 million subscribers over the widest mobile network coverage across Bangladesh. The merger has enhanced Robi’s stronghold in the mobile Internet segment and consolidates its position as the strong second largest operator in the country. Strengthening our position in the Bangladesh market, we expect to be a lot more competitive in 2017 and gain market share.

What have been the major challenges in upgrading network infrastructure in Malaysia? And what solutions are in place to minimise disruption?

In general, rising costs especially in network modernisation and stagnating or declining revenues pose the biggest challenge to the telecom industry in Malaysia, as it is the case in most markets in the Asian region. Within Malaysia, the recent spectrum realignment and reallocation sets a challenge to mobile network operators. Network optimisation will have to be conducted continuously over the next twelve months to achieve the desired outcome. Malaysian telecoms may also need to implement new cell sites in dense urban areas to align with new spectrum allocations. Further to this, operators will also need to constantly explore new collaborative ways to make sure that availability of fiber reach is improved while keeping costs under control given the rising data demand.

What are you doing in the digital space?

In the digital space, Axiata established its digital services arm, Axiata Digital, in late 2012 to place the group in the same space as over-the-top service providers. Axiata Digital as a business unit of the group expands our services to cater to online customers on smartphones, tablets and fixed Internet. Its portfolio of digital services is built through acquisition or developed in-house and covers digital advertising and activation, digital commerce/marketplace, mobile money, digital entertainment and education, disruptor models and digital platforms. In three and a half years, we have a range of over 26 digital services brands and businesses. Axiata Digital has also gained significant traction and has now become a fast growing business segment for the group.

With the rise of services such as Whatsapp, Viber or Line that are disrupting conventional mobile telephony and SMS services, telecom companies around the world are now active engaging tech startups and IT entrepreneurs to develop innovative solutions. Tell us some success stories from Axiata Digital and how you support the startup ecosystem?

Group CEO Tan Sri Jamaludin Ibrahim

Some of the early successes include “Yonder Music” which now supports our mobile broadband business through the need for data plans and the increase data usage of these customers. It also improves the overall “stickiness” of these customers and helps us manage churn our rate. Yonder in now in three markets and has over 350,000 users since its launch in December 2015. Axiata Digital also entered online marketplaces with “Elevenia” in Indonesia, “11Street” in Malaysia and “Wow.lk” in Sri Lanka where we have a ready customer base for our operating companies. These digital marketplaces have now become market leaders in their own countries. We also made significant inroads in mobile money with five mobile payment applications in five of our operating countries. These mobile money services have been developed and rolled out within our footprint markets. “EzCash” in Sri Lanka is a success story which won a GSMA Global Mobile Award for the Best Mobile Money Service in 2015.

How do you groom such startups and solutions for your own use?

Under the Axiata Digital umbrella, each of our operating companies has a digital services arm that identifies, develops and incubates new and over-the-top products and services for their markets. Based on success, usefulness and demand, these services are then rolled out in our other markets. To enable faster roll out of digital services and products, Axiata Digital has also developed its own API platform called MIFE (Mobile Internet Fulfillment Exchange).

Having this ecosystem in place, in 2014, Axiata established a 100-million-ringgit venture capital fund called Axiata Digital Innovation Fund (ADIF) to encourage and spur innovation and growth of the Malaysian digital ecosystem. As the largest venture capital fund in the country, ADIF has made a 23-million-ringgit investment in twelve digital companies. These companies, which are managed on their own, have collectively grown over 200 per cent year-on-year and generated revenue of 46 million ringgit.

What is Axiata doing to innovate and how will you capitalise on the growth opportunities created by the Internet of Things?

The Internet of Things is one of the key pillars of our long-term strategy as it is an emerging digital services sector estimated to be worth potentially $30 billion by 2020 in Axiata’s current footprint alone based on our own forecasts. Over the next two to five years, we see the greatest economic potential in the B2B and B2B2C segments for enterprises and governments. To date, within these business solutions segments, Axiata has entered into pilot testing collaborations and partnerships in Malaysia, Indonesia, Sri Lanka and Thailand. We are actively working towards more collaborations in this area and expect to see a stronger portfolio built in the next few years. 

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