New Business Units

The mobile industry is evolving rapidly, touching almost every aspect of the consumer’s daily life and operations. The overall market environment is changing fast, and thus driving a change in customer behaviour vis-a-vis telecom services, which subsequently impacts the business and operating models of telecommunications companies the world over, and Axiata in certainly no exception.

Since the launch of the smartphone more than five years ago, the telecommunications industry and the way it operates has been changing rapidly, as smartphones have created an incredible platform for large and small application developers alike to create new opportunities. As such, we are seeing voice revenue slowly tapering off, while SMS revenues have started to drop. Alongside this, data continues to grow exponentially as new technologies and spectrum availability evolve to further enhance the speed, capacity and efficiency of data networks.

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Telecommunications Industry Outlook

The digital data revolution in our markets is now at the inflection point with the ecosystem of high-speed networks, smartphones, and applications in place. Asian smartphone penetration may rise substantially faster than growth rates for Europe and from a lower base in Axiata’s markets. According to Informa Telecoms & Media, smartphone connections compound annual growth rate (CAGR) for 2012 to 2017 for Asia Pacific developing countries is 19% against 13% for Western Europe. Similarly, the market structures in Asia are often more favourable to enable ARPU accretion upon smartphone adoption. This bodes well for the Group given our footprint and strategic investments in the past few years. In 2013, Axiata’s data revenue, contributed 18% of total revenue, and is expected to be 20-30% by 2015. Numerous new applications and services are being developed each day to generate more demand. For telecommunications companies, many adjacent services, such as m-payment, m-advertising, machine-to-machine applications, are offering new opportunities for growth.

We expect to continue to face challenges from the changing marketplace, new and existing competition and adverse regulatory and global economic conditions. Competition with existing and new OTT players is expected to remain tough and will continue to emerge as substitution to our services, as voice and SMS in maturing markets are declining. The regulatory environment in our markets continues to be demanding, though we have seen new and positive developments.

These factors have made the industry outlook conversely challenging and full of opportunities at the same time. To capture these opportunities, we will transform our traditional core business to adapt to the new challenges, manage our operational cost, invest aggressively in data and moderately in new digital services, while adapting to specific country situation depending on the market maturity, regulatory condition and economic condition. At the same time, we will continue to pursue inorganic growth opportunities, primarily focusing on in-country consolidation.

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Axiata’s Strategic Objective

In its pursuit of becoming a regional champion by 2015, Axiata has identified key revenue growth opportunities and cost management initiatives that would effectively transform its business into a new generat ion telecommunications company.

One of Axiata’s new strategic approaches is to improve capital and operational efficiencies of its largest assets – its infrastructure network. This brought about the establishment of edotco Group (edotco), its new communications infrastructure solutions and services company in 2013. edotco will also be generating new opportunities for the Group by providing best-in-class infrastructure solutions for telecommunications operators and other businesses.

Given its network of over 13,000 sites in Malaysia, Bangladesh, Cambodia and Sri Lanka, and 12,000km of fibre network in Pakistan, edotco is one of the largest

independent telecommunications passive infrastructure companies in Southeast Asia and amongst the top 10 largest network infrastructure companies globally.

In addition to managing Axiata’s extensive passive network for operational efficiencies across the Group, edotco provides end-to-end infrastructure solutions and s e r v i c e s t o t e l e c o m m u n i c a t i o n s a n d n o n -telecommunications operators, diversifying Axiata’s revenue stream.

With a portfolio that includes towers, energy, transmission, operations and maintenance, edotco is focused on providing environmentally conscious energy solutions and innovative products that ensure the lowest total cost of ownership to its customers. edotco will also be providing a first-of-its-kind regional accessibility to its customers within an infrastructure presence in five countries within Asia with a vision to further expand within the region.

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edotco

Green Solutions for the Future of Telecommunications

The vision of edotco is to enable communications in a responsible manner. In doing so, the company has identified energy-saving solutions on its networks for the customers it serves. Innovative and forward-thinking solutions are being developed by edotco to promote green business practices. These include:

Design and Construction

o Using composite building materials to create structures that are durable and green.

o Designing and constructing telecommunications towers in accordance with the health and safety standards.

o Leasing antenna space to other wireless service providers.

o Equipment efficiency.

Renewable Energy

o Using solar energy, wind and other renewable sources to power the telecommunications towers.

Energy Consumption

o Promoting infrastructure and passive-site sharing among the network operators to reduce the number of masts, which in turn reduces energy consumption.

Equipment Efficiency

o Long-term investment on more environmentally-friendly equipment.

o Thorough equipment checks to enhance the life span of equipment and get optimum usage.

edotco’s products and services include:

offering speed-to-market and reach in multiple countries in Southeast Asia with different structures and heights to meet network requirements.

towers

for strategic end-to-end coverage in all major cities within our markets.

roof tops

an extensive list of sites in all operating countries for enchanced coverage inside high-rise structures or in large commercial complexes.

in building solutions (ibs)

end-to-end solutions with extensive fibre and microwave connectivity to our sites to accommodate current and future broadband technology.

transmission & last mile

connectivity

environmentally sound and innovative solutions that protect the network from interruptions during power outages, allowing focus on core business.energy

state-of-the-art 24/7 operations and maintenance centres using modern remote monitoring solutions so that status of sites can be checked and necessary actions can be taken.regional tower

operations centre (rtoc)

a dedicated service team to ensure that leasing solutions are delivered o n t i m e a n d t h a t c u s t o m e r experiences are satisfactory. Teams also facilitate safe, reliable, compliant a n d e n v i r o n m e n t a l l y s o u n d engineering and operations solutions for customers.

services

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DigitalEntertainment

DigitalAdvertising

$ DigitalMoney

DigitalCommerce

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Axiata’s Strategic Objective

The evolution of the communications industry and the shift in consumer behaviour from offline to online led to the establishment of Axiata’s digital services unit in late 2012, and further consolidated in early 2014, making the new business area a strategic focus across the Group.

The new business unit was set up to focus on driving new revenues from digital services such as in entertainment, commerce, money and advertising, and is now operating in four of Axiata’s markets.

This essentially places Axiata in the same space as OTT service providers, enabling the Group to expand its portfolio of services to cater to online customers on smartphones, tablets and fixed Internet. The move opens up new opportunities to capture increased share of customer wallet and reach beyond Axiata’s traditional mobile services and own subscriber base of over 240 million.

Axiata’s strategic and measured investments in digital services is important in positioning the Group in the ‘Digital World’, providing synergies, complementing and evolving its existing business, and paving the way for its transition into a new generation telecommunications company.

In 2012 and 2013, Axiata Digital Services set up the necessary foundations to establish itself as a serious mobile digital lifestyle provider and partner through a systematic approach to ecosystem and organising build. Several milestones were achieved in all areas of focus for the Group during the period.

Axiata Digital Services milestones for 2012 and 2013:

Celcom strengthened its focus in digital services via a new venture in mobile personal entertainment through its subsidiary ESCAPE. ESCAPE offers a wide variety of entertainment programmes such as movies, sports and special events that are available on smartphones, tablets, laptops and PCs.

XL launched its online shopping service, Elevenia in early 2014, which offers a host of popular consumer products through an anchor partnership with SK Planet, a subsidiary of SK Telecom. The site had close to 7,000 merchants and over 600,000 products for sale at launch. Similarly, Celcom introduced three new digital-commerce portals Bachabooku, Buzzaar and the Crescent in late 2013. The Buzzaar is an online specialty store that offers delivery of popular regional specialties from all parts of Malaysia to the customers’ doorstep. Bachabookuu is an online store providing local electronic books and magazines and the Crescent is an Islamic lifestyle hub offering a variety of products such as an online hijab store and digital content for Muslims.

Dialog made a strategic investment into a newly launched entity Digital Commerce Lanka (DCL) that was launched under the Wow.lk brand. DCL encompassed and absorbed the business operations and brand properties of Anything.lk and the e-commerce businesses of the Dialog Group. Accordingly, the joint venture facilitated the merger of daily deals category leader Anything.lk, most visited online mall iBuy.lk, B2B and C2C trading portal Tradenet.lk and myTrader.lk, an aggregated and unified e-commerce site present Sri Lankan consumers with an unparalleled digital commerce experience spanning daily deals, branded store offerings, B2B and C2C trading.

XL Tunai, XL’s money remittance and payment service has now expanded its services to allow online shopping, utilities payment, airline ticket purchases and many more. XL Tunai was ranked the second most popular e-money service by Infobank, a leading banking magazine at its Digital Brand Awards. Dialog enabled the world’s first inter-operable mobile money service on its digital-money platform, eZ Cash in March 2014. This initiative enables over 60% of the total mobile subscriber base in Sri Lanka to access and transact via eZ Cash mobile money accounts.

Dialog also introduced SMS payment vouchers allowing its customers to make purchases through mobile phones at various merchants. In partnership with leading global payment providers, Dialog launched the first mobile point-of-sale (mPoS) on smartphones and tablets in Sri Lanka. Under its Near Field Communications (NFC) portfolio, the company introduced the country’s first electronic travel card called ‘Touch Travel Pass’. In Bangladesh, Robi established the largest portfolio of mobile financial services in collaboration with six partners.

Axiata Digital Services was quick to make its mark in the digital advertising space with a comprehensive portfolio of digital advertising services including SMS, Banner, In-APP and Video Advertising. Celcom, and XL were first to launch location-based digital advertising services in Malaysia and Indonesia. In Indonesia, XL introduced AdReach and collaborated with other mobile operators to deliver commercial mobile advertising campaigns for several leading consumer products and brands.

DigitalEntertainment

DigitalAdvertising

$ DigitalMoney

DigitalCommerce

DigitalEntertainment

DigitalAdvertising

$ DigitalMoney

DigitalCommerce

DigitalEntertainment

DigitalAdvertising

$ DigitalMoney

DigitalCommerce

DigitalEntertainment

DigitalAdvertising

$ DigitalMoney

DigitalCommerce

MALL

187Axiata Group Berhad Annual Report 2013