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Axiata’s Cambodia penetration no easy task, says analyst

Posted on January 22, 2013, Tuesday

KUCHING: Axiata Group Bhd (Axiata) expects its US$155 million (RM472.7 million) merger in Cambodia to be earnings accretive by end of this year but this will not be without challenges given the currently high penetration rate of subscribers in that country.

The merger, involving Hello Axiata Co Ltd (Hello Axiata) and Latelz Co Ltd (Latelz), would see Axiata holding a 90 per cent stake in the merged entity from which earnings would be mainly driven by cost efficiencies.

BIMB Securities Sdn Bhd (BIMB Securities) stated, “Prior to the merger, both Hello Axiata and Latelz were operating at a loss. With the merger, the group will be able to achieve greater economies of scale, operate more efficiently and having better cost saving measures.

“Nonetheless, this will not be an easy task for Axiata to acquire new customers given the high penetration rate of 80 per cent presently in Cambodia with total population of just 14.7 million.

“However, we believe the potential to grow is still available as there are many mobile phone users in the country having more than one SIM card.

“Furthermore, the long term prospect for the telco industry in Cambodia remains good given its strong population growth in the country,” it said.

BIMB Securities made no changes to its forecast and target price (RM6.64 per share) at this juncture as it was still too early to determine the outcome of the merger to be completed by end of the first quarter of financial year 2013 (FY13).

In addition, Axiata’s full year result would only reflect on its FY14 earnings, the securities firm stated.

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