Sri Lanka’s currency and interest rate volatility worries Dialog’s parent Axiata

Axiata Group Bhd, which owns Sri Lanka’s leading mobile telecommunication service provider Dialog Axiata, has said that currency and interest-rate volatility in Sri Lanka, Bangladesh and Indonesia is a key risk going forward.

Axiata President and Group CEO Tan Sri Jamaludin Ibrahim made these comments while discussing the company’s 2nd quarter results in Malaysia.

However, he added that Axiata was “not overly concerned as half of its external debt is hedged, while 70% of borrowings are on a fixed interest rate basis”

He said the foreign-exchange translation impact seen on the financials of some of its operating companies is purely an accounting issue that does not affect the underlying performance of the companies.

Of greater concern, he noted, are the group’s capital expenditure and loans that are US dollar-denominated as those will be affected by US interest rates, which are expected to see a faster pace of normalisation.

Dialog Axiata posted group revenue of Rs. 52.7 billion for the six months ended 30 June 2018, which represents a growth of 17% year-to-date. Revenue growth moderated to 2% quarter-on-quarter to Rs. 26.6 billion for the second quarter of 2018. Group EBITDA grew 32% year-to-date and 4% quarter-on-quarter to Rs. 20.3 billion for the first half of 2018. EBITDA amounted to Rs. 10.4 billion for the second quarter.

Ibrahim went on to say that its fixed broadband offering via Dialog in Sri Lanka “has been quite ahead” and that it has begun expanding these services in Sri Lanka, as well as its native Malaysia and neighbouring Indonesia.