Tab-up : Axiata Sees Data as Key Growth

Axiata Sees Data as Key Growth Driver, Various Developments Underway To Improve Network

KUCHING: Axiata Group Bhd (Axiata) sees its data business segment as a key growth driver for the group as its core business in voice and SMS have been declining.

In its annual report, it said that data growth has been strong across all its markets and is currently a material part of its revenue, particularly in more mature markets. Celcom, XL, and Dialog in particular, have seen continuous growth in data contribution to revenue now at 17, 23 and nine per cent respectively, it said, and noted that Celcom’s data revenue for smartphones and tablets saw a 35 per cent growth in 2013.

“We have been proactively making significant investments and enhancements to our networks, support systems, organization structure and business models to strengthen our data capabilities.

“We have modernized our networks in Celcom, XL and Dialog to be optimized for data via the conversion of our core networks from all ‘switchbased’ network to ‘IP-based’ network, including transmission backhaul.

“The new networks are not only more efficient for data, but also for voice, and will require significantly lower operating costs,” said Axiata’s managing director and chief executive officer (CEO) Datuk Seri Jamaludin Ibrahim.

He added that as such, the group is constantly investing in new technologies, and technology migration from 2G to 3G, and 3G to 4G LTE will provide better user experience with a much improved cost efficiency.

“Celcom and Dialog are already expanding their 4G LTE networks to enhance ultra-high speed broadband network reach. XL is preparing to merge with the recently acquired Axis network and at the same time upgrade their network to capitalize on the newly acquired spectrum.”

On a regional basis, in 2013, the group has invested more than US$2 billion to acquire new spectrums in Bangladesh, Sri Lanka and India for 2G, 3G and 4G services.

Robi in Bangladesh acquired five megahertz (MHz) of paired 2,100MHz spectrum, Dialog acquired 10MHz of paired 1,800MHz spectrum while in India, its associate Idea acquired five MHz (on average) of paired 1,800MHz spectrum in 11 circles (out of 22) and five MHz of 900MHz paired spectrum in the Delhi metropolitan circle.

In Indonesia, XL’s acquisition of Axis provided XL with an additional 15MHz of paired 1800MHz spectrum and the new spectrum will facilitate further growth at a lower incremental cost.

The group CEO further highlighted that the company have also set up two new business units to spearhead its ventures in to new revenue streams, one of which was the company; edotco group, to own and manage Axiata’s group-wide passive network infrastructure. The edotco group would unlock the value of its assets by driving new levels of operational efficiency in passive infrastructure management while diversifying its revenue streams with the construction of 13,000 towers in Malaysia, his outlined.edotco Group is also one of the largest tower companies in Southeast Asia and internationally, with towers built in Bangladesh, Sri Lanka and Cambodia.

Axiata has also developed the Axiata Digital Services unit to focus on digital entertainment, digital commerce, digital payment, and digital advertising services. Aside from that, Jamaludin have also expanded its digital platform with the launch of various digital services.

He said, “We have launched ‘Escape’, the digital OTT entertainment service in Malaysia via Celcom; acquired a stake in ‘Anything.lk’, the biggest digital commerce company in Sri Lanka; and launched ‘Elevenia’ in Indonesia (in March 2014), a digital commerce business in partnership with SK Planet, a subsidiary of SK Telecom.

“Our investments in these digital service businesses are important to strategically position the group in the ‘digital world’, in providing synergies and complementing our core business, whilst building Internet and digital skills within the group. “The group has also reorganized its procurement and treasury operations into centralised business operations for the group.

“The Axiata Procurement Centre (APC) focuses on optimizing our network and IT expenditure, which is the majority of group spend. By standardizing and aggregating our demand across our OpCos, and implementing common systems and processes, we will increase value from our suppliers such that all OpCos will be in a position to benefit from Axiata’s scale,” he explained.

Meanwhile, the newly setup Axiata Treasury Centre (ATC), expected to be group wide by 2014, are expected to improve the group’s managing cash, strengthen operation balance sheet, ensure efficient capital management and strengthen financial risk mitigation, which includes interest rates and foreign exchange (forex).

In a note, Axiata added that the group spends about RM4 billion in network capital expenditure (capex) and more than RM1.5 billion in network operational expenditure (opex) yearly, it has reviewed the cost structure of our operations to reduce its cost further.

“In-country network sharing with other local players, from cell sites to fiber and microwaves, and in the future active network elements, will also substantially alter the cost structure of our networks.

“Our operating entities are already collaborating with other operators in their respective markets to share and reduce spend in passive infrastructure and transmission,” Jamaludin commented.