Productivity Improvement through Higher Return on Capital by Axiata Group

Abstract

A company’s return on investment can be measured by how much value it can return to the equity shareholders. Equity is part of the enlarged capital structure of a company where the other component is debt. This case study looks at how well Axiata Group perform in providing returns to its capital providers through the Return on Capital (ROC) ratio. The telecommunications sector has grown significantly over the last few decades fueled by growing demand for voice, SMS and more recently data services. Telecoms operators have invested in the network infrastructure to enable 2G, 3G, 4G and the forthcoming 5G technologies across their market. The high capital expenditure required to deploy a nationwide network has put a lot of pressure to their ROC particularly when the revenue generated is being compressed by hyper competition from market players as well as Over-The-Top (OTT) application providers. Axiata Group has embarked on a turnaround plan to halt the decline in ROC and pursue higher returns through its ‘Triple Core Strategy’. The strategy focuses on value enhancement of existing services (example Voice, SMS & Data telecoms business) and value creation of new services (example Digital & Infrastructure business). It has also prioritized on efficiency gains and cost excellence to increase overall productivity. The outcome of the turnaround plan has been positive and Axiata Group is able to improve the ROC.