Local telcos battled it out in 2017 with mixed bag of results from ‘Big 3’

Telcos to focus on enlarging revenue via customer retention, growing premium customer segments in 2018


Malaysia’s three main telecommunications providers (telcos), also known as the “Big 3”, displayed a mixed bag of results for the past year — a sign that they need to keep up with the times to circumvent customers from switching between packages offered by the companies.

On an earnings basis, Maxis Bhd and Celcom Axiata Bhd showed largely positive signs of growth with high single-digit expansion in net profit.

DiGi.Com Bhd, on the other hand, registered declines in earnings and revenue, even though its subscriber base continued to outnumber those registered to the other two listed telcos.

Maxis’ net profit expanded 8.9% to RM2.19 billion for the financial year ended Dec 31, 2017 (FY17), from RM2.01 billion in FY16.

Maxis attributed the marked improvement mainly to its postpaid growth and integrated services, with a partial offset by decreases in the prepaid segment.

Its revenue inched up 1% to RM8.7 billion from RM8.61 billion registered in the past year, while service revenue was 0.8% higher at RM8.525 billion versus RM8.455 billion in 2016, supported by the strong growth in the postpaid segment as well as integrated services.

Normalised earnings before interest, tax, depreciation and amortisation (Ebitda) rose 2.1% to RM4.6 billion in 2016 from RM4.5 billion the year before, while Ebitda margin stood at 53.9%.

As for Celcom, its profit after tax (PAT) and minority interest (Patami) for FY17 grew 8.6% to RM1.05 billion from RM966 million previously.

The company’s yearly revenue was largely unchanged at RM6.66 billion compared to RM6.62 billion posted in the preceding year. Service revenue stood at RM605.58 million, contributing 90.9% to total revenue.

Its parent, Axiata Group Bhd, deemed the results a success for the country’s oldest telco.

Celcom’s sluggish performance in FY16 — including a 24.3% drop in Patami and a 9.8% dip in revenue — had contributed partly to Axiata’s 75.1% plunge in PAT for the year, causing the group to embark on a RM1.4 billion turnaround plan that involved improving network and coverage, as well as regaining pre- paid market share.

Normalised Ebitda for the year improved to RM2.64 billion compared to RM2.53 billion the year before, with a normalised Ebitda margin of 39.6%.

DiGi, on the other hand, posted a net profit of RM1.48 billion in FY17, down 9.2% from RM1.63 billion posted in the 12 months prior — mostly dragged by lower revenue in the prepaid segment.

Revenue for the year was 3.9% lower at RM6.34 billion compared to RM6.6 billion achieved in the previous year. Service revenue declined 5% to RM5.91 billion in FY17, attributed mainly to lower revenues from prepaid legacy services.

Ebitda stood at RM2.89 billion for the 12 months in review, with Ebitda margin at 46%.

Most Subscribers, Highest ARPU

Despite DiGi’s lower earnings, it maintained the largest subscriber base compared to the other two competitors.

DiGi ended the year with 11.75 million subscribers, of which 9.27 million were prepaid users and 2.48 million were postpaid subscribers.

As at the end of 2017, Maxis had a subscriber base of 10 million, of which prepaid subscribers numbered seven million users while postpaid users amounted to some 2.8 million subscribers.

Celcom placed third with 9.55 million subscribers as at end-2017, comprising 2.82 million postpaid subscribers and 6.72 million prepaid users.

Yet, subscriber numbers don’t fully determine a telco’s trajectory, thus one must also examine its average revenue per user (ARPU).

Maxis remained in pole ARPU position, with blended ARPU of RM58 for the year against RM56 in 2016. Maxis’ postpaid ARPU was unchanged at RM102 and prepaid ARPU higher at RM42 against RM40 previously.

Meanwhile, Celcom’s blended ARPU for FY17 rose year-on-year (YoY) to RM45 from RM41 previously, with postpaid ARPU at RM84 from RM78 a year ago, and prepaid ARPU higher YoY at RM32 from RM30.

DiGi’s blended ARPU stood at RM43 for the fourth quarter ended Dec 31, 2017 (4Q17), up from RM41 as at end-3Q17. Postpaid ARPU inched upwards to RM78 from RM77 in the 3Q, while prepaid ARPU rose to RM34 from RM32 previously.

What To Expect In 2018

Analysts are expecting telcos to focus on enlarging revenue via customer retention and growing their premium customer segments in 2018.

This fits in with Maxis’ statement that it will continue to focus on retaining and growing its quality prepaid subscribers, while its flagship postpaid MaxisONE plan contributed monthly ARPU of RM117 inFY17.

DiGi also said that it would concentrate on its postpaid segment as one of its key focus areas this year.

Other players such as U Mobile Sdn Bhd and Telekom Malaysia Bhd’s UniFi mobile also continue to give the Big 3 a run for their money.

While the price wars of 2016 appear to have abated somewhat, telcos will likely wage war behind the scenes going forward, with all eyes on keeping customers loyal and satiating the ever-rising demand for data and quality services.

Maxis closed seven sen lower at RM6.03 last Friday for a market capitalisation of RM46.94 billion, with 2.5 million shares traded.

Axiata saw its share price slip two sen to RM5.65, with a market capitalisation of RM51.03 billion. The stock saw 7.86 million shares changing hands.

DiGi’s stock rose one sen to close at RM4.90, giving it a market capitalisation of RM38.1 billion and 3.6 million shares of the company were traded.