KUALA LUMPUR: Regional telecommunications provider Axiata Group Bhd yesterday reported a sharp 84% year-on-year (y-o-y) drop in its first quarter net profit, as foreign exchange (forex) losses and finance costs wiped out revenue growth of 5.3% attributed to Celcom and its Bangladesh unit.

Net profit for the three months to March 31, 2009 (1Q09) at RM63.9 million was a strong rebound from a RM515.25 million net loss in 4Q08, but was only 16% of the RM402.7 million booked in 1Q08.

Forex losses — mainly due to the strengthening of the US dollar against the rupiah and the ringgit that necessitated the revaluation of its debt — halved to RM216.2 million in 1Q09 from RM472.3 million in 4Q08, while net finance cost fell RM16.4 million or 3.3% over the period. As at March 31, 60.2% or RM6.86 billion of the group’s total foreign currency borrowings of RM11.4 billion were in US dollars, while 26.2% or RM2.99 billion were in rupiah.

In 1Q08, Axiata had posted forex gains in operations and finance costs of over RM42 million.

Axiata said its group revenue would have declined 0.3% quarter-on-quarter (q-o-q) at constant currency, but the ringgit’s performance against the currencies of most countries it operates in had “favourably affected” its translated revenue. Nonetheless, its group revenue would have grown 8% y-o-y if currency rates did not fluctuate.

It also attributed the group’s 5.3% y-o-y revenue growth to RM2.87 billion to higher contribution from Celcom (M) Bhd and improvements at TM International Bangladesh Ltd (TMIB). Celcom recorded its 12th consecutive quarterly growth while TMIB posted its first quarterly profit since 1Q08. Group revenue was up 18.6% q-o-q.

Celcom’s contribution to group revenue fell to 51% in 1Q09 from 60.5% in 4Q08. Celcom’s profit after tax and minority interest (Patami) for 1Q09 of RM357 million was 15.2% higher on-year and 6.25% higher on-quarter. Celcom’s revenue was up 10% on-year and 0.3% on-quarter.

In a statement yesterday, Axiata said Celcom enjoyed its higher net addition of postpaid users during the quarter of 183,000, pushing the total customer base to 9.18 million from 8.8 million at end-2008. Celcom also saw “continued success” on its push to woo mobile broadband users, with over 300,000 customers currently from 228,261 users at end-2008 and 66,497 users in January last year.

Celcom’s Ebitda (earnings before interest, tax, depreciation and amortisation) margins were flat at 45% on-quarter and on-year. One analyst had earlier pointed out that a smaller advertising spending during the quarter could have propped up margins.

Axiata said contributions from its Indonesian unit, PT Excelcomindo Pratama tbk (XL), fell y-o-y due to an 11.2% depreciation of the rupiah against the ringgit from 1Q08 to 1Q09, despite a 6% q-o-q revenue growth in local currency terms.

The 643 billion rupiah forex loss and 383 billion rupiah in finance cost during the quarter did not help, but q-o-q Ebitda did improve 9% while Patami jumped 66% despite a 2% revenue contraction. But a RM103.3 million one-off gain, from the derecognition of its dark fibre optic lines due to a finance lease arrangement, boosted operating income.

Its Indonesian unit, which reportedly lost 1.1 million subscribers in 1Q09 as it weeded out non-performing customers, would continue to focus on improving yield from existing customer base, Axiata said.

Tougher competition also caused revenue from its Sri Lankan unit Dialog Telekom Ltd and TMI Cambodia Ltd to fall 5.4% and 9.7% q-o-q respectively, Axiata said. Dialog, which was Axiata’s third-largest revenue contributor in FY08, registered an operating loss of RM28.86 million in 1Q09. This was an improvement from some RM108 million in 4Q08 operating loss.

In a statement yesterday, Axiata group CEO Datuk Seri Jamaludin Ibrahim said the group was “generally pleased” with Celcom’s strength as well as improvement seen at other operations, but acknowledged that it needed to “show more improvements”.

“We do however, remain cautious of the effects of a potentially weak economy and currency fluctuations on our companies. In this regard, we will remain agile, focusing on the key areas to mitigate the impact, such as forex risk management and cost management,” Jamaludin said.

Some 17 short- and medium-term initiatives have been identified to manage cost such as power savings, tower sharing, network redesign as well as the reduction of capital expenditure to RM4.2 billion from RM5.4 billion, Axiata said.

Axiata’s board expects the group’s performance for FY09 to be “in line” with its recently announced headline key performance indicators (KPIs) where it expects revenue to grow between 6% and 11% and Ebitda between 4% and 6% y-o-y.

It is also “looking forward” to equity accounting earnings from India’s Idea Cellular Ltd in the second half of 2009, instead of its previous expectation of 2Q09. Axiata will own 19% in Idea once the latter’s merger with Spice Communications Ltd gains regulatory approval. Axiata would have been able to add about RM30 million to 1Q09 profits if Idea’s contribution could be booked. Axiata added 11 sen to RM2.32 yesterday.