Axiata Group buys 80% stake in Nepal mobile operator Ncell for RM5.9b (Update)

KUALA LUMPUR: Axiata Group Bhd is expanding into the Nepal market by buying an 80% stake in the number one mobile operator, Ncell Pte Ltd for US$1.365bil (RM5.907bil).

The telco company said on Monday it had signed a conditional sale and purchase agreement with TeliaSonera UTA Holdings B.V. and SEA Telecom Investments B.V. for the 100% acquisition of Reynolds Holdings Ltd.

“The acquisition of Reynolds for the purchase price of US$1.365bil plus customary adjustments at closing, effectively secures Axiata an 80% equity interest and controlling stake in Ncell,” it said.

Axiata added Ncell is the number one player in the market with 13 million subscribers representing 48.8% of the subscriber market share. It is a strong brand in Nepal, providing best-in-class services and customer care. 

Ncell has delivered revenue CAGR of 19.9% between financial year (FY2013 to 2015, with attractive earnings before interest, tax, depreciation and amortization (EBITDA) margin of 62.2% in FY2015. Its return on invested capital (ROIC) was over 70% in FY2015. 

Axiata president and group CEO Datuk Seri Jamaludin Ibrahim said the scarcity of a controlling stake and very sizable, high-quality assets within the group’s target region with a strong number one market leadership position, “makes Ncell a rare opportunistic asset to come by”. 

“We are also encouraged by the attractive valuation of this acquisition. Its implied trading multiple from the purchase price including controlling premium is 5.0 times which is below comparable companies within the region and precedent transactions,” he explained. 

Ncell’s implied last 12 months enterprise valuation over EBITDA of 5.0 times including controlling premium in Ncell was an attractive valuation compared to 5.7 times and 8.4 times for South Asia and ASEAN peers, respectively.

Jamaludin also said by consolidating Ncell to Axiata’s FY14 pro forma, the new asset would be immediately accretive to the group.

The move, he added would contributing 9% to revenue and 19% to prpfiot after tax and minority interest (PATAMI) and would make it one of the highest contributors to earnings for the Group. 

“Ncell’s strong cashflow generating ability would provide further support to the group’s dividend policy,” he added. 

Jamaludin added, “As with all our investments, we see our entry into Nepal as a long-term strategic move for the Group. At the same time, Axiata is also committed to playing a major part in the development of the country by offering high-speed data connectivity and products in par with its economic progress. Being a responsible corporate citizen and major contributor to the country’s economy is key to our long-term vision.”

Axiata said Nepal is one of the emerging economies with steady GDP growth in Asia. 

“With a mobile penetration of unique subscribers of 51%, the country has experienced a mobile subscriber growth at an average of 18% from 2012-2014,” it said. 

Ncell is the number one operator in Nepal with a stronghold of nearly 57.5% revenue market share and 48.8% subscriber market share. 

Axiata said the unique mix of a controlling stake of the number one player in a healthy, growing market at an attractive valuation presents Axiata both a rare and an opportunistic expansion of its footprint in South Asia. 

After the acquisition of Ncell, Axiata would have contiguous presence and reach in five key countries across South Asia. 

Axiata’s combined footprint in South East Asia and South Asia will cover a total population of 1.77 billion1 and further solidify the Group as one of the leading mobile operators in the region with over 280 million customers from 268 million now.