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Risks Identified by The GroupAPPENDIX 11. Axiata’s ability to achieve its strategic objectivesdepends on its reaction to competitive forces suchas price wars. The market for mobile services inmany of the countries in which the Group operatesis highly competitive. Increased competition fromexisting and new mobile operators has resulted in,and is expected to continue to result in operatorslowering monthly subscription fees and tariffs,providing mobile phone subsidies and offeringattractive products and services packages.2. Axiata operates in a region with varying degrees ofpolitical, fiscal and legal stability. This exposes Axiatato a range of political developments, and changesto regulations and laws. Any adverse changes intrends, restrictions on ownership in assets byforeigners, nationalisation of assets, adverse changesarising from, or uncertainty in the implementation ofeconomic or legal reform, or a general economicslowdown as a result of changes in labour costs,inflation, interest rates, taxation or other political oreconomic developments in the key markets in Asiain which the Group operates, could materially affectthe growth, prospects, financial condition or resultsof operations of the Group.3. Axiata’s financial results depend on the contributionof two major OpCos; Celcom and XL account for70% of its revenue and 90% of its PATAMI. Anyadverse developments in these two OpCos could assuch adversely affect the Group’s financial condition.In managing such concentration risks, the Groupcontinues to face difficulties and risks whencommencing businesses in new markets or expandingits operations in certain emerging markets.4. The general macroeconomic environment in theregion and the countries in the region influence theo p e r a t i n g r e s u l t s o f A x i a t a . A s m o b i l etelecommunications is predominantly a consumerdependentindustry, any economic slowdownexperienced in any of its markets may adverselyaffect the financial health of its subscribers andconsequently affect its operating revenues,profitability and growth.5. Axiata is exposed to treasury risks such as currencyexchange rates and interest rates due to the variouscountries it operates in. It may not be commerciallyviable for the Group to hedge all its currency andinterest rate exposures, and volatility of interestrate and currency in the countries in which theGroup operates could as such adversely affect theGroup’s financial condition and results ofoperations.6. Axiata is affected by cost increase or high inflationleading to lower returns. Any increase in commodityor food prices in the countries in which the Groupoperates could lead to political, social and economicinstability or decrease the income of consumers andpotential customers of the Group, which in turncould have a material adverse effect on the Group’sresults of operations, financial condition andprospects.7. Axiata’s longer term performance is also verydependent on its discipline in capital expenditure(CAPEX) and the screening of the right CAPEXspending. Being in a highly capital intensive industry,the right CAPEX spending is crucial for the Group toremain competitive and continue providingtechnologically innovative and compatible serviceswhich meet customers or potential customersrequirements.Annual Report 2009 • 087