KUCHING: With the completion of the merger with Digi.Com, Axiata Group Bhd (Axiata) is expected to recognise CelcomDigi as an associated company with a 33.1 per cent stake from this month onwards.

During its Analyst and Investor Day 2022, management reinforced its immediate priority in strengthening the foundation of the group following several major acquisitions made in this year.

Its key focus will be the frontier markets and unlocking future value with the aspiration to transform into a digital service provider in the long run.

Based on Public Investment Bank Bhd’s (PublicInvest Research) estimates, Link Net and the tower acquisition are not expected to provide significant earnings uplift in the near term, mainly due to high funding cost.

“Meanwhile, the rollout of 5G services would entail the payment of wholesale fees without any meaningful earnings contribution as we are not expecting take-up rate to be strong in the next one to two years,” it said.

“All in, we estimate that Axiata’s net profit could deteriorate by about 20 to 25 per cent in FY23. For now, we retain our neutral call on Axiata.”

Public-Invest Research saw that 2022 was a busy year for Axiata, making several major acquisitions to venture into the Indonesian fibre business as well as to expand its tower footprint.

In September, the group completed its acquisition of Link Net, a fixed broadband player in Indonesia while in October it was the tower acquisition in the Philippines.

It also secured digital banking licence in Malaysia. Lastly, 2022 also saw the completion of merger between Celcom and Digi.

“Going forward, Axiata will be focusing on strengthening its foundation to deliver organic growth and integrate new businesses,” the research firm said.

“However, we are mindful of the risk of integration cost that could potentially be a drag to bottomline in the near-term. Also, balance sheet de-leveraging is crucial given that interest rates are likely to rise further and USD to remain strong.

“Currently, 32 per cent of the group’s borrowings remain unhedged, with 28 per cent maturing in oen or two years (30 per cent in three to five years).

“In the longer run, Axiata aspires to transform from a communication service provider, which is essentially a telco, into a digital service provider to become more technology-focused.

“Hence, we believe Axiata Digital and the enterprise business would play a more active role in the future. This would enable the group to extract value and enhance shareholders’ return.”