Dialog Revenue Grows 18%, Rs 2.1Bn Non-Cash Forex Loss from SLR Devaluation

Dialog Axiata PLC announced, Thursday 10th May 2012, its consolidated financial results for the three months ended 31st March 2012. 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 acquisition of 100% of the shares in Suntel Limited (“Suntel”) by DBN was completed on the 21st of March 2012. Accordingly the assets and liabilities of Suntel have been reflected in the consolidated balance sheet of the Group.

The Dialog Group recorded strong growth in revenue during the 1st Quarter to register Rs 12.9Bn, a significant increase of 8% relative to Q4 2011 and 18% relative to Q1 2011. Growth in group revenue was driven by healthy growth in segmental revenues pertaining to the Mobile, International, Digital Pay Television and Tele-infrastructure businesses of the Group.

Dialog Group EBITDA (Earnings before Interest, Tax, Depreciation and Amortisation) was recorded at Rs 4.5Bn in Q1 2012, up 27% YoY. EBITDA performance however exhibited a contraction of 4% on immediate QoQ basis, on the backdrop of significant inflation with respect to energy related costs and foreign currency denominated inputs. In addition to the aforementioned input cost dynamics, the QoQ comparison is further impacted by the recognition of Rs 311Mn Telecommunication Development Fund (TDF) refund in the previous quarter.

Downstream of robust performance with respect to Revenue and EBITDA, the depreciation of the SLR relative to the USD by 12.4% QoQ, resulted in the provisioning of a non-cash translational Foreign Exchange loss of Rs 2.1Bn, leading to the Dialog Group recording a Net loss of Rs 531Mn for Q1 2012. The Group’s PAT performance also reflects the absorption of acquisition expenses amounting to Rs 343Mn with respect to the acquisition of Suntel Limited, by DBN. Group PAT normalised for the exceptional (non-cash) foreign exchange loss and the one-off acquisition expenses, is recorded at Rs 1.9Bn – an increase of 14% QoQ and 85% YoY.

At an entity level, the Company continued to contribute a major share (91%) of Group Revenue and (92%) of Group EBITDA. The company continued to leverage its market leading position within Sri Lanka’s Mobile sector featuring a subscriber base of 7.4Mn, to deliver strong growth in revenue. The Company recorded revenue of Rs 11.8Bn in Q1 2012, up 8% relative to Q4 2011 and 19% relative to Q1 2011. The Company continued to deliver a healthy momentum in EBITDA, recording growth of 27% relative to Q1 2011 at a margin of 35%. Company EBITDA, however, contracted by 4% relative to Q4 2011 on the backdrop of significant inflation with respect to energy related costs and foreign currency denominated inputs, and as alluded to previously, the recognition of a TDF refund of Rs 311Mn in the previous quarter. Company EBITDA normalized for the impact of the one-off TDF refund in the previous quarter, registered growth of 4% on a QoQ basis.

Notwithstanding healthy momentum with respect to Revenues and Operating Profitability (EBITDA) and operating margins, Company PAT was severely impacted by non-cash translational Foreign Exchange Losses amounting to Rs 2.1Bn as alluded to previously. Accordingly, the Company recorded a Net Loss of Rs 407Mn in Q1 2012. Company PAT normalized for the aforementioned exceptional items grew 5% relative to Q4 2011 and 61% relative to Q1 2011.

DTV continued its positive growth trajectory with revenue recorded at Rs 677Mn for Q1 2012, registering growth of 22% relative to Q1 2011. EBITDA for Q1 2012 was posted at Rs 181Mn, an increase of 38% relative to Q1 2011. DTV EBITDA however exhibited contraction of 8% on a QoQ comparison, due to significant inflation with respect to energy costs and foreign exchange denominated inputs such as television channel content and Satellite transponder costs. Downstream of healthy EBITDA performance, DTV recorded positive PAT for the second consecutive quarter. DTV PAT for Q1 2012 was recorded at Rs 37Mn.

DBN, featuring Dialog’s fixed telecommunications business continued to consolidate its performance with revenue for Q1 2012 recorded at Rs 609Mn, registering a 4% growth relative to Q1 2011. DBN EBITDA was recorded at Rs 180Mn in Q1 2012, an increase of 26% relative to Q1 2011. DBN EBITDA however exhibited contraction of 14% on a QoQ comparison, due to significant inflation with respect to energy costs and network operating inputs. Downstream of healthy EBITDA performance, DBN recorded a negative PAT of Rs 147Mn in Q1 2012, an improvement of 25% relative to Q1 2011.

Group capital expenditure for Q1 2012 amounted to Rs 1.7Bn and was directed in the main towards strategic investments in High speed Broadband and Optical Fibre Network expansion projects, and the expansion of Mobile Telephony and High Speed Mobile Broadband services to meet growth in subscriber demand across the Group’s island wide network footprint.

The Group continued to record positive Free Cash Flows (FCF) for the ninth consecutive quarter, with Q1 2011 FCF being recorded at Rs 2.8Bn. In line with the generation of healthy free cash flows, Dialog Group continued to maintain a structurally robust balance sheet with the Group’s Net Debt to EBITDA ratio improving from 1.26xin Q1 2011 to 0.75x as at end of Q1 2012.