Dialog delivers net profit of Rs 1.59bn in first quarter

Dialog Axiata PLC announced, Thursday 9th May 2013, its consolidated financial results for the three months ended 31st March 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 recorded strong revenue growth across Mobile, International, Digital Pay Television, Tele-infrastructure and Fixed Line businesses to record consolidated revenue of Rs 15.24Bn for the 1st Quarter, demonstrating a significant growth of 19% relative to Q1 2012 and 2% relative to Q4 2012.
Group EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) was recorded at Rs 4.98Bn in Q1 2013, up 10% YoY and 14% QoQ with the Group EBITDA margin expanding by 3 percentage points QoQ to reach 33% in Q1 2013. The strong QoQ increase in EBITDA was driven in the main by higher revenue combined with the recognition of Rs 429Mn accruing from a TDC (Telecommunications Development Charge) refund received during the quarter. EBIDTA growth excluding the one-off TDC refund is recorded at 4% on a QoQ basis, yielding a normalised EBITDA margin of 30% in Q1 2013.

Underpinned by the positive EBITDA growth trajectory, Group NPAT for the quarter reached Rs 1.59Bn. The corresponding quarter in 2012 featured a Net Loss of Rs 531Mn which arose due to the recording of an exceptional non-cash translational foreign exchange loss of Rs 2.1Bn. On an adjacent QoQ basis Group NPAT increased significantly by 72%.

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 (86%) and Group EBITDA (89%). Company revenue increased by 13% compared to Q1 2012, to be recorded at Rs 13.34Bn. On the backdrop of strong YoY Revenue growth, Company EBITDA for Q1 2013 grew by 6% YoY to be recorded at Rs 4.42Bn, inclusive of the positive impact of a TDC refund of Rs 404Mn. Company NPAT for the quarter reached Rs 1.69Bn. Following the expiry of 15 year tax holiday which ended in 2012, the Company provided for a 2% revenue based tax expense of Rs 277Mn in Q1 2013.

Following the acquisition of a 10 MHz tranche of Mobile 4G LTE Spectrum auctioned by the Telecommunications Regulatory Commission of Sri Lanka on 28th of March 2013, Dialog launched South Asia’s first Mobile 4G LTE services in April 2013. Mobile 4G LTE services will supplement Dialog’s existing 3G HSPA+ High Speed Mobile Internet services. The company’s launch of Mobile 4G LTE services follows close on the launch of Sri Lanka’s first Fixed 4G LTE Service in December 2012, by Dialog Broadband Networks (DBN) commencing with city of Colombo, followed by expansion to the cities of Kandy, Jaffna and Galle. In combine, the advanced broadband technologies deployed by the Dialog Group will enable Sri Lankan consumers and enterprises to enjoy the region’s most advanced suite of Mobile, Fixed and Nomadic 4G LTE, 3G HSPA+, WiFi and Fibre Optic based High Speed Data Services.

In line with its expansive telecommunications service portfolio and service footprint extending across all 9 provinces of Sri Lanka, Dialog was chosen by Sri Lankan consumers to be the Internet Service Provider of the Year at the recently held SLIM-Nielsen People’s Choice Awards organised by the Sri Lanka Institute of Marketing (SLIM) and the Nielsen Company. Dialog was also voted as the Telecom Brand of the Year for the second year in succession.

DTV, the Digital Pay Television business of the Dialog Group consolidated the growth momentum of previous quarters, recording a revenue growth of 25% YoY to record revenue of Rs 848Mn for Q1 2013. DTV’s Pay TV Subscriber base grew by over 47,000 subscribers YoY to record a base of 274,000 as at end Q1 2013. DTV engaged in an aggressive service enhancement programme during the latter part of 2012 featuring the introduction of High Definition Services, preparation for a MPEG2 to MPEG4 technology migration and the launch of Prepaid Services. Cost expansion arising from the upgrade and service expansion activities resulted in a medium term contraction of EBITDA by 34% YoY. DTV’s Q1 performance is also characterised by a one-off provisioning of Rs 33Mn made on account of unrecoverable input VAT. Accordingly DTV recorded a Net Loss of Rs 14Mn for Q1 2013 compared to a profit of Rs 37Mn in the corresponding period of 2012.

Dialog Broadband Networks recorded revenue of Rs 1.46Bn in Q1 2013, a quantum increase of 157% YoY, driven in the main by the consolidation of Suntel Ltd., and supplemented by healthy growth in organic revenue streams. On the back of strong revenue growth and synergies achieved through the amalgamation, YoY EBITDA improved significantly by 125% to be recorded at Rs 405Mn. Accordingly the Net Loss for Q1 2013 reduced to Rs 62Mn, compared to a Net Loss of Rs 147Mn recorded in the corresponding period of 2012.

Downstream of healthy business results across all its business lines, the Dialog Group continues to exhibit a structurally robust balance sheet and healthy cash position. Group Free Cash Flow (FCF) was recorded at Rs 1.68Bn for Q1 2013 on the back of strong EBITDA performance. The Group’s Net debt to EBITDA decreased to 0.67x as at end of Q1 2013 from 0.87x as at end of 2012. Group Capital expenditure for Q1 2013 amounted to Rs 3.31Bn. Capital expenditure was directed in the main towards strategic investments in High Speed fixed and Mobile Broadband, which will further strengthen the Group’s coverage and quality leadership position through the upgrade of its high speed broadband infrastructure.