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MANAGEMENT DISCUSSION & ANALYSIS
Axiata Group Berhad | Annual Report 2016
021
In India, the unprecedented competitive disruption by a new player significantly impacted Idea's financial performance which led to a sharp decline in its
share of results for the year from RM368.8 million to RM65.1 million recorded in the current year. Over the last two years, as Idea continued to expand its
scale of operation, higher depreciation and amortisation cost and net interest and finance cost were registered as a result of higher investments which further
impacted Idea's profit for the year.
Similarly, M1’s financial performance was negatively impacted by an anticipated new entrant to the market which resulted in share of results for the year
decreasing by RM29.0 million. M1's service revenue for 2016 decreased as traditional telecommunication services continued to be impacted by OTT services.
In 2016, Axiata continued its strategic investments and M&A for long-term growth which resulted in the Group incurring higher finance costs. Net finance costs
of the Group rose by 54.7% to RM1.0 billion and mainly attributable to the increase in borrowings by RM5.9 billion with the acquisition of Ncell.
To support the enlarged customer base and with the aim to be the number one player in 4G and achieve data network leadership in all markets, OpCos
have increased investment in 4G LTE network in 2016. This has resulted in higher depreciation and amortisation costs by 35.0% YoY, especially in Malaysia,
Indonesia and Bangladesh. The impact of accelerated depreciation incurred for network modernisation in some OpCos and the amortisation of intangible
assets arising from the acquisition of Ncell have also contributed to a higher depreciation, impairment and amortisation.
Performance-wise, despite showing early signs of stablilisation in the final two quarters of the year, Celcom registered a PATAMI of RM966.5 million versus
RM1.3 billion in 2015. Excluding XL’s tower sales gains, XL performance would have further impacted the Group’s overall performance.
Group Financial Position
At 31 December 2016, the Group's balance sheet and liquidity positions weakened versus the prior year but remains stable. The Group’s gross debt to EBITDA
was at 2.64x based on Ncell's annualised EBITDA as opposed to 2.25x in 2015 resulting from new debt and the weakening of the Ringgit Malaysia against
the US Dollar.
Below are the key highlights of Group Balance Sheet:
•
Total equity
increased by RM2.9 billion mainly due to:
o Forex gains on currency translation of subsidiaries, Associates and joint ventures of RM1.4 billion
o Netted off with the recognition of put option of non-controlling interest in the Robi-Airtel merger of RM1.3 billion
o RM2.8 billion increase in non-controlling interest mainly due to the acquisition of Ncell and the Robi-Airtel merger
•
Total assets
net increased RM14.4 billion driven by:
o RM9.0 billion increase in intangible assets of spectrum and goodwill arising from the acquisition of Ncell and the Robi-Airtel merger
o Property, plant and equipment growth include RM6.1 billion targeted investments in network infrastructure across the Group’s footprint as well as
RM2.0 billion of assets from the acquisition of Ncell and the Robi-Airtel merger during the year
o Trade and other receivables increased by RM841.3 million due to acquisition of the net assets of Ncell coupled with Airtel following the Robi-Airtel
merger
•
Total liabilities
stand at RM41.9 billion, an increase by RM11.5 billion from 2015 mainly driven by:
o Increase in total debt by RM5.9 billion from the new borrowings to fund strategic acquisition investments
o Increase in total trade and other payables by RM3.3 billion was due to the consolidation of Ncell and the Robi-Airtel merger
o RM1.1 billion increase in financial liabilities represent newly entered put option of non-controlling interest
o Tax liability increased by RM595.9 million mainly due to allocation of purchase price upon the acquisition of Ncell and the Robi-Airtel merger
Cash at year end was at RM5.3 billion, a slight decrease of RM178.3 million as compared to RM5.5 billion in 2015. The decrease was a result of higher investing
activities of RM10.8 billion which was imminent due to the Group’s expansion into Nepal amounting to RM5.2 billion, as well as RM5.6 billion for capex
investment to drive data leadership. This was then netted off against net cash flow from operating activities of RM6.8 billion, net cash flow from financing
activities of RM4.3 billion, as a result of proceeds from additional financing and forex gains from translation of bank balances of RM98.1 million.