24 May 2012
Axiata valued its 19% stake Idea Cellular at 120 rupees although the shares were traded at only 80 rupees over the past four months, no impairments necessary as Axiata takes long term future prospect into consideration - President and CEO Datuk Seri Jamaludin Ibrahim
(AXIATA opening stock price today (24.5.2012) was RM 5.44)
*Idea Cellular closed at 75 rupees yesterday.
Axiata Group Bhd said there is no need for the company to make further impairment charges on Idea Cellular Ltd for now, even though its investment's market value has shrunk by about one-third.
However, it does not discount the possibility of a further impairment in the future, depending on how the India telecommunications industry progresses.
Axiata, via a merger between Idea Cellular and Spice Telecoms in 2008, acquired 19 per cent stake in Idea Cellular for about 143 rupees (RM8.03) a share in 2008.
Unfortunately, Idea's share price has been on a declining trend since the merger.
Last year, Axiata decided to book a RM1.1 billion impairment on Idea. Post impairment, Axiata's 19 per cent stake in Idea is now valued at about 120 rupees (RM6.73) a share.
For the past 12 months, Idea shares have been trading at an average of about 90 rupees a share and for the past four weeks, Idea shares were traded at about 80 rupees a share.
"For now, there's no need for further impairments, but we will continue to evaluate periodically.
"When we evaluate, it's not over a short-term basis, it's a long-term basis where we look at the whole prospect of the company and industry," said president and chief executive officer Datuk Seri Jamaludin Ibrahim after the company's annual general meeting yesterday.
Some Indian mobile operators have written off part of their investments after the country's Supreme Court order to cancel 122 mobile permits in February this year.
Among the biggest "casualties" was Uninor - a company majority controlled by Norwegian firm Telenor ASA. Uninor has lost all its telecom licences as a result of the Supreme Court's decision.
As a result, Telenor has reported a 79 per cent fall in its first quarter net profit at 583 million kroner, due to a 3.9 billion kroner (RM2.14 billion) write-off.
UAE-based Etisalat Group also announced that it will write off about US$820 million (RM2.57 billion), as part losses incurred from its India operations.
On how Axiata plan to utilise its cash pile, the company said it is expected to use part of the cash to reduce borrowings that are incurring higher interest rates, and will continue to be prudent on how it spends the money.