Axiata And Its EBITDA Targets.

In another Business Times article: Axiata: Financial targets achievable

• Mobile operator Axiata Group Bhd is confident of meeting its main financial targets this year although first quarter results were slightly "off target".
  
  Its first quarter revenue increased 5 per cent over the same period last year. Earnings before interest, taxes, depreciation and amortisation (ebitda) fell 7 per cent.
  
  Axiata had targeted revenue to increase 6-11 per cent and ebitda, 4-6 per cent.
  
  "The first quarter is traditionally weaker. The growth is not linear ... Growth in many countries should be getting better," Axiata group chief executive officer Datuk Seri Jamaludin Ibrahim told reporters after its annual general meeting in Kuala Lumpur yesterday.
  
  Axiata operates in Indonesia, Sri Lanka, India, Singapore, Bangladesh and Cambodia.
  
  To achieve its ebitda target, it will continue to manage costs better. Initiatives include tower-sharing, better procurement and redesigning its network, among other things.
  
  It already plans to cut spending by RM1.2 billion, 20 per cent of which will be due to better efficiency.
  
  Compared with last year's fourth quarter results, Axiata's first quarter revenue and ebitda were 19 per cent and 36 per cent higher respectively, while net profit more than doubled.
  
  On another development, its 83.8 per cent-owned Indonesian unit, PT Excelcomindo Pratama (XL), may raise between US$300 million and US$600 million (RM1.07 billion and RM2.13 billion) via a rights issue for its recapitalisation plan.
  
  "What we are looking at is to see if there is a better and more optimal capital structure that can make XL more efficient capital-wise, perhaps reduce their interest, restructure the loans, and others.
  
  "There's no problem with XL. The business is good, the cash flow strong, the bank lines are there, and nothing can stop them from growing even if we (Axiata) do not do anything," Jamaludin said.
  
  XL, which has seen a 4 per cent dip in customer base in the first quarter, is embarking on a different market strategy. Instead of spending more resources to attract new customers, it is seeking to generate more revenue from existing customers.

I have only one issue.

• To achieve its ebitda target, it will continue to manage costs better.

EBITDA is earnings before interest, tax, depreciation and amortization.

And for the minority shareholder, what good is the EBITDA? Not a whole lot because the ITDA is real.

The Interest cost from the capital funding incurred by the company is real. Some call it the cost of capital. So is the taxes.

And all capital equipment will become obsolete one day. This is why depreciation costs is real.

So when a company focus on achieving EBITDA targets, I find it rather amusing. It's rather meaningless. I would rather the company show its shareholders the NET PROFIT!!

Hence, for me, I rather see Axiata focus on its net earnings target. This is more meaningful.

And yet again, just my flawed views.