Dialog gets tailwind from strong rupee; mobile business plateaus

Profits at Dialog Axiata PLC received a tailwind from the appreciation of the rupee during the quarter ended March 31, 2019, while its mobile telephone operation—the group’s cash cow— showed signs of plateauing amid billions of rupees are regularly put in as capex to stay on top of rapidly changing technology.  

Sri Lanka’s largest celco with over 14.3 million subscribers reported an operating profit of Rs.4.66 billion for the January-March quarter up 8.6 percent year-on-year (YoY).  
The revenues rose to Rs.28.9 billion from Rs.26.1 billion, up 10.7 percent YoY.

Dialog Axiata’s mobile operation reported revenue of Rs.21.5 billion, which accounted for 75 percent of total revenue of the group and largely unchanged from Rs.21.4 billion 
reported YoY.

With the maturing of Dialog Axiata’s core business, which is evidenced from the plateauing of its top line, the group diversified into e-commerce, doctor channeling services and more recently into financial technology services.

However, Dialog’s earlier bet on pay TV business is yet to prove itself as the losses have accumulated while the revenues languished.  

Dialog has netted 1.2 million pay TV subscribers with the segment revenues rising 12 percent YoY to Rs.2.1 billion. However, the segment’s operating loss for the quarter widened to Rs.184.6 million from Rs.80.1 million loss reported a year ago. 

The operating profit of the mobile business for the quarter under review was Rs.4.39 billion compared to Rs. 3.66 billion a year ago. 

The group’s fixed telephony and broadband business generated revenues of Rs.6.7 billion compared to Rs.3.7 billion in the year earlier period, an increase of 81 percent YoY, due to the transfer of wholesale business during the reporting period, Dialog Axiata stated in an earnings release. 

The operating profit of this business segment fell to Rs.415.7 million from Rs.682 million due to higher depreciation stemming from the fixed 4G LTE investments, the company said.  
Dialog Axiata also said it had invested Rs.2.6 billion during the quarter on high speed broadband infrastructure. 

“For the first time in South Asia, Dialog successfully demonstrated a fully standards based 5G mobile service, integrating 5G network infrastructure with the world’s fastest foldable 5G device”, the earnings release said. 

Meanwhile Dialog reported earnings of 60 cents a share or Rs.4.88 billion for the quarter under review compared to 35 cents a share or Rs.2.84 billion reported for the same period, last year.  

The earnings were largely boosted by the non-cash translational forex gains resulted from the slight appreciation in the rupee against the dollar on account of the sizable dollar borrowings by Dialog. 

Such gains were Rs.1.5 billion during the quarter compared to a loss of Rs.508.2 million in the year earlier period. 

Such translational losses erased Dialog’s December quarter earnings in 2018 as the rupee shed its value by almost 20 percent against the US dollar last year. 

Malaysia’s Axiata Investments (Labuan) Limited holds 83.32 percent in its Sri Lankan unit, while the State-controlled private sector pension fund, Employees’ Provident Fund has 2.22 percent stake in the company.