• Wednesday, Jan 20, 2021
  • Last Update : 12:42 am

Robi flatters to deceive ahead of its mega stock market debut

  • Published at 01:02 am November 27th, 2020
Robi infograph 2020

Its Q3 profit down 77.2% year-on-year; revenue up slightly

All the razzmatazz surrounding Robi in recent months seems to have quietened on Thursday after the country’s second-largest mobile operator posted a 77.2 per cent slump in profit between July and September from a year earlier.

The operator, which is gearing up for its record-setting listing on the bourse, logged in a profit of Tk 38.9 crore for the third quarter of the year. 

While the operator maintains that its high profit in the third quarter of 2019 was thanks to the offloading of its 20 per cent stake in Edotco Bangladesh, a telecommunications infrastructure service provider, its profit this year is a decline of 33.4 per cent from the previous quarter, when the country was in the thick of the pandemic.

This makes for sobering reading for its investors, who jostled with each other last week to snap up a slice of its stock sale.

Robi’s main competitor Grameenphone posted a 22.4 per cent profit growth for the July-September quarter.

The third-quarter’s takings take Robi’s profit in the first nine months of the year to Tk 116.1 crore, up 1.9 per cent year-on-year. 

The operator logged in Tk 1,934 crore in revenue for the quarter, up 1.7 per cent from a year earlier.

Robi placed the blame for its underwhelming performance squarely on the tax regime. The operator's effective tax rate is 77 per cent, it said in a press release on Thursday.

Had it not been for the crushing 2 per cent minimum turnover tax, this profit figure would have looked far more appealing, it said. The turnover tax, which needs to be paid regardless of an operator turning in profit or not was hiked from 0.75 per cent in fiscal 2019-20, cast “the darkest spell” on Robi’s business, said its Managing Director and Chief Executive Officer Mahtab Uddin Ahmed while unveiling the third-quarter results.

“We hope that the government will allow us more fiscal headroom by addressing this stumbling block, so that we can share the fruits of improved performance with our new shareholders following the stock market listing,” he said.

Withdrawal of the 2 per cent turnover tax was one of the two conditions Robi had for going public, the talks of which began from 2013 at least. The government had on several occasions requested the operator to make its entry to the stock market but it put it off on the ground that it was not turning in profit consistently.

For instance, after two years of losses, the operator posted a profit of Tk 240.2 crore in 2015, only to sink back into the red. It next saw profit in 2019.

Robi's other condition was bringing down the corporate tax rate by at least 10 percentage points from the existing 45 per cent. Grameenphone got the corporate tax benefit when it got listed in 2019. The privilege was withdrawn a few years ago.

"We got a commitment from a high authority of the government but our conditions are yet to be met."

Robi is hopeful that its demands would be fulfilled soon. 

"Or else, it will send out a bad signal to foreign investors," Ahmed added.

During the quarter, Robi’s active subscriber base grew 4.5 per cent to 5.1 crore. 

Of them, 3.5 crore are internet subscribers, who yielded Robi Tk 684 crore in revenue, up 22 per cent year-on-year.

Robi’s voice revenue dipped 8.2 per cent year-on-year to Tk 972 crore during the quarter.

Analysts though are trying to stay optimistic ahead of Robi’s long-awaited stock market debut in the third week of December.

“We are concerned about its low profit vis-a-vis Grameenphone. We hope Robi’s profit will grow soon due to the company’s future plan being very smart,” said Abu Ahmed, honorary professor of Dhaka University’s economics department.

Investors will be disappointed if the company's business does not pick up substantially over the next two years, he added.

Robi will offload 52.4 crore shares, which is about 10 per cent of its stakes, for Tk 10 each under the fixed price method to raise Tk 523.8 crore from the market.

It intends to use 98.5 per cent of the Tk 523.8 crore IPO proceeds for network expansion, especially 4G, which it already has the widest coverage amongst the operators.

“Although Robi has a decent top line, the numbers drop significantly when it comes to the bottom line due to inefficiency in managing expenses,” said a recent report of Brac-EPL.

Its asset turnover is half of Grameenphone’s without any trend in improvement in efficiency.

Its net property, plant and equipment (PPE)/site is Tk 84 lakh, which is more than double of Grameenphone’s net PPE/site of Tk 38 lakh. 

“Therefore, it seems like Robi is inefficient in utilising its funds to construct sites for its subscribers,” the report said.

Robi has a much lower operating margin than that of Grameenphone due to the higher cost of revenue, maintenance and depreciation expenses. 

Moreover, due to a high debt number, the interest and lease payments pull down the earnings as well, the report added.

Robi Axiata is a joint venture between Axiata Group Berhad of Malaysia and Bharti Airtel of India. Axiata holds 68.7 per cent controlling stake in the entity, and Bharti holds the remaining 31.3 per cent share in the company.

The company commenced operations in 1997 as Telekom Malaysia International (Bangladesh) with the brand name ‘Aktel’. In 2010, it was rebranded as ‘Robi’ with the company changing its name to Robi Axiata.

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