Dialog Posts Robust Q3 Financials

Dialog Axiata PLC announced, Thursday 7th November 2013, its consolidated financial results for the nine months ended 30th September 2013. Financial results included those of Dialog Axiata PLC (the “Company”) and of the Dialog Axiata Group (the “Group”) post-consolidation with subsidiaries Dialog Broadband Networks (Pvt) Ltd (“DBN”), and Dialog Television (Pvt) Ltd (“DTV”).

The Group demonstrated a strong revenue growth across Mobile, International, Digital Pay Television, Tele-infrastructure and Fixed Line businesses to record consolidated revenue of Rs16.1Bn for Q3 2013. Group Revenue for the nine months ending 30th September 2013 was recorded at Rs47.0Bn, delivering growth of 3% Quarter On Quarter (“QoQ”) and 14% Year to Date (“YTD”) respectively.

On the backdrop of strong revenue growth, Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) increased 4% QoQ with Q3 2013 EBITDA being recorded at Rs5.2Bn. Group EBITDA for the 1st nine months of 2013 was recorded at Rs15.3Bn, up 8% compared to the corresponding period in 2012, and featured an YTD EBITDA margin of 33%.

Performance below EBITDA continued to be negatively impacted by the depreciation of the SLR relative to the USD by 1.2% QoQ, resulting in the recognition of a non-cash translational foreign exchange loss of Rs222Mn in the 3rd quarter. The Group also recorded a non-cash translational foreign exchange loss of Rs856Mn in the 2nd Quarter. Inclusive of the recognition of the said non-cash translational foreign exchange loss, Group Net profit for Q3 2013 increased by 61% to be recorded at Rs1.5Bn. Group Net Profit for the nine months ended 30th September 2013 was recorded at Rs4.1Bn, a decrease of 20% compared to the corresponding period in 2012. While the corresponding period in 2012 featured substantial non-cash foreign exchange losses (totalling to Rs2.5Bn), the accounting impact of the said losses were mitigated through the recognition of the reversal of deferred tax provisions amounting to Rs2.3Bn. Group NPAT post normalisation for the non-cash foreign exchange loss was recorded at Rs1.7Bn for Q3 2013 and Rs5.0Bn for the nine months ended 30th September 2013 respectively, representing a decrease of 3% and 11% relative to the corresponding period in 2012 on similarly normalised basis excluding exceptional provisions and reversals.

At an entity level, Dialog Axiata PLC (“the Company”) featuring the Mobile, International and Tele-Infrastructure segments of the Group portfolio continued to contribute a major share of Group Revenue (87%) and of Group EBITDA (89%). Company Revenue grew by 3% QoQ on the back of its 8 Million over mobile subscriber base, to reach Rs14.1Bn in Q3 2013. Revenue for the nine months ended 30th September 2013 was recorded at Rs41.2Bn, up 12% relative to the corresponding period in 2012. Underpinned by strong revenue performance Company EBITDA increased by 7% QoQ to be recorded at Rs4.7Bn in Q3 2013.The Company EBITDA margin improved by 1 percentage point QoQ to be recorded at 33%. Company EBITDA for the nine months ended 30th September 2013 grew by 9% relative to the corresponding period in 2012 to be recorded at Rs13.6Bn, translating to an YTD EBITDA margin of 33%.

Company NPAT was impacted by non-cash translational Foreign Exchange Losses as alluded to previously. Company NPAT for Q3 2013 was recorded at Rs1.8Bn, an increase of 79% QoQ. Company NPAT for the nine months ended 30th September 2013 was recorded at Rs4.4Bn, representing a contraction of 14% compared to the corresponding period in 2012, due to the differential in exceptional charges and reversals (as alluded to previously with respect to Group Financials) recorded in the periods under comparison. On normalized basis (excluding exceptional charges and reversals), Company NPAT decreased by 6% on YTD basis relative to the 1st nine months in 2012. Following the expiry of its 15 year tax holiday in 2012, the Company recorded a provision for Income Tax on the basis of 2% of revenue amounting to Rs283Mn in Q3 2013 and Rs826Mn for the nine months ended 30th September 2013.

Dialog Television (DTV), the Digital Pay Television business of the Dialog Group consolidated growth momentum gained over previous quarters to record revenue of Rs2.6Bn for the nine months ended 30th September 2013 representing YTD growth of 20% relative to the corresponding period in 2012. DTV’s subscribed base surpassed the 300,000 milestone during the 3rd Quarter, representing an increment of 50,000 subscribers YoY.

Cost expansion arising from enhancements effected to DTV’s service offering including but not limited to the launch of HD services, expansion of channel genres and the launch of prepaid services resulted in contraction of EBITDA by 10% YTD to reach Rs447Mn for the nine months ended 30th September 2013. Accordingly DTV Net Profit for the same period was recorded at negative Rs19Mn, compared to a Net Profit of Rs96Mn posted for the corresponding period in 2012.

Dialog Broadband Networks (DBN) featuring the Group’s Fixed Telecommunications and Broadband Business recorded revenue of Rs4.4Bn for the nine months ended 30th September 2013, representing an YTD increase of 22%. Revenue growth YTD was achieved in the main through the successful consolidation of Suntel Ltd., supplemented by healthy growth in organic revenue streams. EBITDA for the same period improved by 5% to be recorded at Rs1.2Bn. The gain in EBITDA could not however be translated to NPAT performance due to the recording of additional depreciation charges accruing from build out of the company’s Fixed 4G LTE network and the amortisation of spectrum license fees associated with Fixed 4G LTE spectrum assets. DBN’s Net Loss for the nine months ended 30th September 2013 was recorded at Rs280Mn relative to the Net Loss of Rs126Mn recorded in the corresponding period in 2012. The Group continued to make strategic investments in High Speed Mobile and Fixed Broadband infrastructure. Group Capital expenditure for the nine months ended 30th September 2013 was recorded at Rs20.4Bn. Group capital expenditure for Q3 2013 included strategic investments made on account of Mobile license and 2G spectrum renewals amounting to Rs1.6Bn. On the back of significantly higher Capital expenditure, the Group recorded a negative Free Cash Flow of Rs5.2Bn for the nine months ended 30th September 2013.

Notwithstanding the expansion of capital investments, the Dialog Group continues to exhibit a structurally robust balance sheet with the Group’s Net debt to EBITDA being maintained at a modest level of 1.14x as at end of September 2013. The Dialog Group was reaffirmed a Fitch National Long Term Rating of ‘AAA(lka)’ / Stable in September 2013.