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Issuer Credit Research

Issuer Flash: Axiata Group Berhad

Issuer Flash: Axiata Group Berhad

Report date: 2026-05-26 Event date: 2026-05-25 Event title: 1Q26 Results

1. Flash Conclusion

Axiata Group Berhad (“Axiata”)’s 1Q2026 results indicate that the balance sheet repair and portfolio restructuring effects observed in FY2025 have continued, at least at an early stage. Revenue from continuing operations declined by 3.2% YoY to RM2.800bn due to the translation impact of a stronger ringgit, but increased by 8.5% on a constant-currency basis. EBITDA rose 11.2% YoY to RM1.356bn, PATAMI from continuing operations was RM273.8mn, and operating free cash flow was RM509.7mn. Cost discipline in the telecommunications businesses, the initial benefits of XLSMART integration, dividends from CelcomDigi and Dialog, and the reduction in holding-company borrowings are credit positive.

However, it is not yet time to materially upgrade the credit view in the latest issuer_summary. Net Debt / EBITDA edged up from 2.46x at end-FY2025 to 2.51x at end-March 2026, which the company mainly attributed to the translation impact of the stronger ringgit. Holding-company cash was RM705mn, while holding-company borrowings were RM6.855bn, meaning holding-company creditors remain dependent on dividends from operating companies, bank borrowings, and capital-market access. These results reinforce the existing view of “stable to gradually improving,” but it remains necessary to confirm whether XLSMART can move to normalised dividends, whether dividends from CelcomDigi and Dialog continue, the funding burden from EDOTCO and Link Net, and the terms of the bank borrowings that replaced Sukuk 2026.

2. Announcement Details

Axiata announced its 1Q2026 results on 2026-05-25. Revenue from continuing operations was RM2.7999bn, EBITDA was RM1.3559bn, EBIT was RM583.4mn, and PATAMI from continuing operations was RM273.8mn. Underlying PATAMI on the company’s constant-currency definition was RM438.3mn, representing a substantial YoY increase. Operating free cash flow rose 19.9% YoY to RM509.7mn, group cash was RM3.624bn, and group borrowings were RM15.098bn. On a holding-company basis, cash was RM705mn, borrowings were RM6.855bn, and dividends received from operating companies totalled RM165.3mn for 1Q.

By business segment, the integration benefits at XLSMART and cost discipline in the telecommunications businesses stood out. CelcomDigi increased EBITDA and profit after tax by 4.7% and 8.8% YoY, respectively, and paid an interim dividend of 3.4 sen per share. XLSMART’s revenue increased 37.6% YoY, and Underlying PAT improved to IDR1.4tn, supported by lower integration costs and synergy realisation. Dialog recorded revenue growth of 9.2%, EBITDA growth of 23.1%, and a substantial YoY increase in PATAMI, and declared its first quarterly dividend of Rs0.70 per share. Robi and Smart also improved on a constant-currency basis. By contrast, Link Net remains in transition toward becoming a fibre company, with lower revenue and continuing operating losses. Boost turned profitable, including one-off income, while ADA recorded revenue growth but lower margins.

On capital structure, Axiata confirmed that Axiata SPV2 Berhad’s USD500mn Sukuk was fully repaid on 2026-03-24. In the FY2025 audited financial statements, the company had disclosed that it refinanced this maturity by drawing down a RM2.0bn revolving credit facility on 2026-03-19 ahead of maturity. Near-term maturity risk has been addressed, but because a public sukuk has been replaced with bank borrowings, maturity, interest cost, covenants, and undrawn facilities remain items to be confirmed.

3. Credit Interpretation

The positive aspect of these results is that earnings improvement does not depend solely on one market or on one-off items. Reported revenue appears lower due to currency translation, but in local-currency terms, many businesses recorded higher revenue and earnings. In particular, improvement at XLSMART, Dialog, Robi, and Smart is positive early evidence for the “post-portfolio-restructuring track record confirmation” that was emphasised in the 2025 issuer_summary. The fact that CelcomDigi and Dialog are paying dividends is also important for holding-company creditors, who focus more on cash movement from operating companies than on consolidated EBITDA.

At the same time, the figures should not be read too strongly. Dividend receipts of RM165.3mn in 1Q remain small relative to roughly RM1.7bn for FY2025. Given quarterly seasonality and the timing of dividend resolutions, it is too early to assess full-year dividend capacity from this figure alone. Boost’s profitability included RM51.0mn of one-off income, while ADA’s margins declined due to higher costs. Link Net remains loss-making during its transition phase, and it is necessary to distinguish between its long-term value as a fibre asset and its short-term cash consumption.

Leverage is on an improving trend, but the cushion is not yet substantial. Net Debt / EBITDA improved from 3.00x in the prior-year period to 2.51x, but edged up from 2.46x at end-FY2025. Stability around 2.5x would support the investment-grade foundation, but a return toward 3.0x is possible if XLSMART integration costs, EDOTCO refinancing, Link Net investment, and additional funding for technology businesses coincide. Therefore, 1Q26 only reinforces the conclusion of the latest issuer_summary, and the credit view remains “stable to gradually improving.”

4. Key Metrics

Metric 1Q26 Comparison / Supplement Credit Interpretation
Revenue from continuing operations RM2.800bn Down 3.2% YoY; up 8.5% on a constant-currency basis Reported results were affected by the headwind from a stronger ringgit. Local-currency performance improved
EBITDA RM1.356bn Up 11.2% YoY; up 25.9% on a constant-currency basis Cost discipline in the telecommunications businesses and integration effects are contributing
PATAMI from continuing operations RM273.8mn Substantial YoY increase Earnings improvement is positive, although foreign-exchange gains and lower finance costs also contributed
Underlying PATAMI RM438.3mn Constant-currency basis; substantial YoY increase Underlying earnings level has improved, but this should be treated as a company-defined metric
Operating free cash flow RM509.7mn Up 19.9% YoY Earnings improvement is also translating into cash generation
Net Debt / EBITDA 2.51x 3.00x in 1Q25; 2.46x in 4Q25 The improving trend has been maintained, although the ratio is slightly above 2.5x
Group cash / borrowings RM3.624bn / RM15.098bn Borrowings down 33.9% YoY Material improvement YoY; broadly stable QoQ
Holding-company cash / borrowings RM705mn / RM6.855bn Borrowings down 26.6% YoY Positive for holding-company creditors, but the cash cushion is not large
Dividends received from operating companies RM165.3mn Cumulative total for 1Q Recurring full-year dividend capacity is still being confirmed

5. Items to Confirm Next

The next focus is whether operating-company dividends actually accumulate in the second-quarter or first-half results. Dividends from CelcomDigi and Dialog are positive, but it is necessary to confirm cash receipts at Axiata itself, the effective cash movement after minority-interest deductions, and remaining capacity after holding-company costs and finance costs.

For XLSMART, the key question is whether integration progresses from “revenue growth and earnings improvement” to “normalised dividends and stable cash generation.” The company has stated that it plans to complete network integration by 3Q2026. Lower integration costs, continued ARPU improvement, and sustained synergies would be credit positive, but if the investment burden or customer migration costs become heavier, expectations for dividends to Axiata itself would be delayed.

For the RM2.0bn bank borrowing that replaced Sukuk 2026, the items to confirm are maturity, interest rate, collateral and guarantees, financial covenants, and undrawn facilities. Link Net, Boost, and ADA may create value under the Axiata28 strategy, but they should still be viewed cautiously as sources of repayment for holding-company debt.

6. Sources