edotco to benefit from mega-merger


AXIATA Group Bhd ’s tower company, edotco Group, is expected to be a major beneficiary of the mega-merger between Axiata and Telenor ASA’s Asian assets.

It will simply push the merged tower companies (edotco and Telenor Asia towers) to become the fourth or fifth-largest tower company globally.

This has been Axiata’s aspirations for edotco as it wanted to be the fifth largest by 2021, and it may be happening sooner than expected.

edotco as at mid-2017 was valued at US$1.5bil and has been going on a buying spree since then to increase its size.

Had the RM4bil deal with Pakistan’s Deodar not collapsed last year, it would have added 13,000 towers to its portfolio at one fell swoop.

“We believe the opcos’ biggest beneficiary is edotco. It has been looking for towers to grow the business and the opportunity has come. The injection of towers in return for shareholding allows it to be in the league of top-five globally,’’ says MIDF Research analyst Martin Foo.

“This also means that Axiata does not have to source more capital to fund other acquisitions by edotco. Axiata’s balance sheet will not be stretched,’’ he adds.

edotco and Axiata have a regional portfolio of towers exceeding 30,000 in Malaysia, Myanmar, Bangladesh, Cambodia, Sri Lanka, Pakistan and Nepal.

Similarly, Telenor Asia has about the same number of towers in Asia across Malaysia, Thailand, Bangladesh, Pakistan and Myanmar. Telenor’s 49%-owned unit, Digi.com Bhd , has over 3,400 towers.

Combining the towers, the towerco will have over 60,000 towers across Asia, ex-China and Japan.

As the business grows, there will be growth and that explains why Axiata president and CEO Tan Sri Jamaludin Ibrahim is talking about towerco having 80,000 towers altogether.

“This is not even with any acquisition,’’ he adds.

Globally, China Tower is the world’s leader with 1.898 million towers across China as at 2018. It is followed by American Tower (170,000), India’s Indus Tower (124,000), US-Towercom (45,000), and US-Australia-Crown Tower (40,000).

The merger calls for operational synergies such as increased tenancy, capex and opex benefits from an efficient footprint and new-build optimisation, maintenance expense and other benefits. It also increases the towerco’s value from having a larger scale.

edotco accounted for 7.6% and 8% of Axiata’s group revenue and Ebitda, respectively, for financial year 2018 (FY18). Its revenue and profit after tax growth was 12.8% and 13.8%, respectively, while Ebitda remained flat. For FY17, its Ebitda was RM685mil, while revenue came in at RM1.55bil and net profit was at RM183mil.

Axiata has a 62.37% stake in edotco. Khazanah Nasional Bhd (10.75%), Japan’s Innovative Network Corp (21.51%) and Kumpulan Wang Persaraan (5.38%) make up the other shareholders. — By B.K. Sidhu

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