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SHAPING THE FUTURE
Axiata Group Berhad | Annual Report 2016
011
CHAIRMAN’S
STATEMENT
Dear Shareholders,
2016 was a challenging year as advanced economies grappled with escalating national debt, stagnating global trade,
protectionist and a low investment environment. The global business and market environment saw an increase in
volatility and ambiguity as a result of unexpected key geopolitical outcomes to emerge out of the UK and US.
1
Source : “Global Economic Prospects : Weak Investment in Uncertain Times” published by the World Bank Group in January 2017
2
Based on 2016 unaudited proforma full year financials
According to the World Bank
1
, global growth for 2016 was an estimated
2.3%, its lowest since the 2008 global financial crisis. The regional
economies of our footprint in Southeast Asia and South Asia regions
mirrored the global economic struggle. Within the East Asia and Pacific
region, growth reduced by an average of 2.0% to 6.3%. Heightened global
unpredictability coupled with concerns of capital flight further prompted
currency depreciation and higher interest rates. As a result, regional
currencies, especially the Ringgit Malaysia, remained under pressure
against the US Dollar.
Within our industry, the regional telecoms sector is facing less predictable
regulatory and policy shifts, rapidly changing market dynamics, and
cross-integration of industries and Over-The-Top (OTT) services. The
disruptions brought on by the latter, coupled with hypercompetition
in many markets, have resulted in the telecoms industry losing market
capitalisation and value over the last few years.
Despite these compounding external and internal challenges, Axiata
maintains its standing as one of the largest Asian telecommunications
groups, with presence in ten countries in ASEAN and South Asia, servicing
approximately 320 million customers. The Group is ranked number two
in customer base, number four in revenue and number seven in market
capitalisation against other regional telecoms operators.
We are now in the third phase of our journey, one that will transition the
Group into a truly digital company by 2020. In building strong foundations
for our
New Generation Digital Champion
ambition, we remain keenly
focused on redefining and digitising our operating model at both Group
and Operating Company (OpCo) levels to capture value from new
opportunities on the horizon. Tan Sri Jamaludin Ibrahim outlines these
clear strategies in his message to you on page 13.
KEY CORPORATE DEVELOPMENTS DRIVING GROWTH
Over the course of 2016, a number of key developments helped shape our
Axiata 3.0 journey. We completed the acquisition of Ncell and welcomed
the company into the Group, marking our entry into the fast-growing
market of Nepal. As the market leader, Ncell has proven to be earnings
accretive to Axiata.
Axiata led the first market consolidation of the highly competitive
telecommunications sector in Bangladesh with Bharti Airtel Limited.
Serving approximately 33.8 million subscribers, Robi has cemented its
position as a stronger number two player post-merger.
edotco, our integrated telecommunications infrastructure services
company, set a new record in the global tower industry with the sector’s
largest private placement deal of USD600 million announced in 2016. At
the close of the placement exercise, edotco’s final portfolio equity value
was USD1.5 billion with an Enterprise Value (EV) to 2016 Earnings Before
Interest, Tax, Depreciation and Amortisation (EBITDA) multiple of 12.5x
2
.
In advancing our
New Generation Digital Champion
ambitions, our digital
services arm, Axiata Digital, has astutely invested over USD160 million to
build a portfolio of 29 digital assets with three subsidiaries and seven joint
ventures. Key milestones in 2016 for Axiata Digital include the successful
monetisation of two of these companies through private placements and
the expansion of its footprint into the burgeoning Indian digital market.
COMMITMENT TO LONG-TERM VALUE CREATION
Since 2010, the Group has maintained a progressively increasing Dividend
Payout Ratio (DPR). As outlined in our dividend policy, this is subject to
a number of factors including business prospects, capital requirements
and surplus, growth/expansion strategy, considerations for non-recurring
items and other factors considered relevant by the Board.
Having taken the uncertain investment and business climate into account,
we have adopted a temporarily more prudent dividend payout to ensure
the Group is sufficiently resilient while continuing to invest for the future.
Our decision on a 50% DPR for 2016 was two-fold; as a precautionary
measure against unpredictable forex and market volatility as well
as further spectrum costs expected within the next two years; and
investments for strategic long-term benefits such as 4G networks for
data leadership as well as for possible mergers and acquisitions (M&A)
exercises in the areas of market consolidation.
We remain committed to delivering the value proposition of moderate
growth and moderate yield to our shareholders over the longer term.
Strong internally generated funds and a healthy balance sheet will
support our commitment to reward shareholders.
SUSTAINABILITY AND SOCIAL IMPACT
Axiata remains dedicated to our nation building efforts, through our
sustained long-term investments and contributions to communities in
countries where we operate.
As a regional operator, we are a diverse Group with over 40 nationalities
within our workforce. We are committed to advancing gender equality
with women comprising 30% of our total workforce, of whom 16% are in
senior management positions.
On the global stage, Axiata is committed to global mobile development
through our role in the GSMA Foundation. We help steer mobile
development towards key areas that are relevant to our stakeholders
such as the Connected Women Initiative (CWI) launched in 2016. I am