KUCHING: Axiata Group Bhd (Axiata) looks poised to take advantage of Myanmar’s 60.3 million population by venturing intio the country’s telecommunications (telco) sector.
According to the research wing of Kenanga Investment Bank Bhd (Kenanga Research), the Myanmar government had opened up the telco sector and tender bids were expected to open in February with the licences expected to be issued by the end of June.
The licences to be issued would be for a 10-to-20 year period with players required to commit on providing reasonable tariffs and low initial registration fees to facilitate the accessibility and increase the tele-density targets in both the rural and urban centres.
The report highlighted that Myanmar’s 60.3 million population (twice of that of Malaysia) was currently monopolised by one telco carrier, state owned Myanmar Posts and Telecommunications (MPT) and that despite potential continuing monopoly of the sector, the large population so far only had a mobile penetration rate of nine per cent.
The report noted that with the penetration rate at that level, there was ample room to grow for newcomers to the sector.
“Nevertheless, the new investment opportunity may also come with some unforeseeable risks given that the political situation in Myamar is still uncertain, at least in the short to medium term,” the report stated.
Kenanga Research opined that funding would not be an issue for Axiata manage to penetrate into this new market.
As of the third quarter financial year 2012 (3QFY12), Axiata had a cash pile of RM8.6 billion with a gross debt by earnings before tax, depreciation and amortisation (EBITDA) ratio of 1.8 times.
The ratio despite being still below its optimal capital structure of two to 2.2 times gross debt/EBITDA ratio, suggested that Axiata still had room to leverage up its balance sheet if needed.
The research house estimated Axiata could raise up to RM3.1 billion if the company decided to maximise its optimal capital structure.