Malaysia's Axiata reports second quarter loss on technical impairment

KUALA LUMPUR (Reuters) - Malaysian telecoms firm Axiata Group Bhd swung to a second-quarter net loss of 3.36 billion ringgit ($818.5 million) after an impairment charge relating to the merger of an associate company.

Idea Cellular Ltd, a loss-making Indian firm in which Axiata has a stake, is undergoing a merger with Vodafone India Ltd. The charge, amounting to 3.38 billion ringgit, was due to its reclassification from a strategic investment to a financial one on Axiata's books.

Axiata's equivalent net profit from a year ago was 407.2 million ringgit.

With Idea's merger, Axiata's 19.7 percent stake has been diluted to 16.3 percent as it did not participate in a preferential share issuance. The stake was expected to further shrink to 8.2 percent when the merger is completed.

Chief executive officer Jamaludin Ibrahim told reporters at a briefing on Friday that Idea's performance will have no impact on Axiata's financial results going forward.

"As we have ceased equity accounting of Idea, we expect profit after tax and minority interests to return to its normalised run rate each quarter," he said.

The share dilution allows Axiata to review and reassess the investment but Jamaludin said there is no immediate plan to divest Idea completely.

"We are quite opportunistic depending on the price. With the merger to become the largest (telecoms operator) in India, and the partnership with Vodafone, we are optimistic about the future," he said, noting also the consolidation of the market was a positive.

Revenue for the April-June period fell 3.2 percent to 5.9 billion ringgit due to an unfavourable foreign exchange impact at its Indonesia, Nepal and Cambodia businesses and losses at its Bangladesh operations.

The second-largest telecommunication firm in Malaysia by market value, Axiata said cost initiatives delivered 800 million ringgit in savings in the first half of its financial year, on track for a full-year savings target of 1.4 billion ringgit.

The group aims for 5 billion ringgit of cost reduction in the next five years.

The firm announced its appointment of Ghazzali Sheikh Abdul Khalid as interim chairman on Thursday, after former chairman Azman Mokhtar stepped down following his resignation at Axiata's largest shareholder Khazanah Nasional.

Axiata's shares rose 2.2 percent to 4.72 ringgit on Friday. Its shares have fallen 14 percent in the year-to-date.

($1 = 4.1050 ringgit)

(Reporting by Liz Lee; Editing by Elaine Hardcastle)