Digi’s profit up on postpaid, Internet biz despite weaker revenue

Impact from the interconnect rate revision and prolonged intense data competition have weighed on the revenue growth of the industry

by MARK RAO / pic by MUHD AMIN NAHARUL

DIGI.COM Bhd’s net profit rose 2.1% year-on-year (YoY) on postpaid and Internet growth, but revenue continued to decline on the challenging operating environment for Malaysian telecommunications companies (telcos).

For the second quarter ended June 30 this year (2Q19), the company posted RM392.48 million in net profit against the RM385.34 million managed in the corresponding quarter last year, while revenue dipped 4.3% YoY to RM1.55 billion in the quarter.

The rise in profitability was largely owing to growth in the postpaid and Internet businesses, coupled with a deferred tax overprovision of RM16 million recognised in its books during the quarter.

For postpaid, higher turnover was brought in from the increase in postpaid subscribers to 2.9 million.

However, average revenue per user for the segment was marginally lower at RM70 (2Q18: RM71) due to the increased mix from entry-level postpaid plans, partially offset by plan upgrades from existing subscribers.

Turnover from Internet services also came in higher due to the larger Internet customer base of 9.3 million and 83.1% smartphone base, while average monthly data usage totalled 11.46GB per customer.

On another note, total revenue for the telco came in lower for the quarter, following the dip in service revenue by 3.6% YoY to RM1.4 billion.

The impact from the interconnect rate revision, alongside prolonged intense data competition, were cited as weighing on the revenue growth of the Malaysian mobile industry.

Prepaid, for example, was among the segments impacted as data revenue contracted on aggressive data offering and channel transformation in the market.

Subsequently, Digi’s net profit for the first half of the year (1H19) contracted 4.7% YoY to RM733.98 million, while revenue dipped 5.8% YoY to RM3.06 billion.

The telco did, however, managed to lower total costs borne in 2Q19 to RM798 million (2Q18: RM850 million) as part of ongoing efforts to improve on operational efficiently and leverage on a robust cost structure.

Operational cashflow was also lower for the quarter by 21% at RM491 million. Expenditure was mostly utilised for capacity upgrades and fibre network expansion to 9,100km, deployment of network function virtualisation and LTE-A network coverage to 70% of the population.

Digi’s network currently connects 11.4 million customers, while its 4G LTE coverage stands at 90%.

For the quarter, the company declared a five sen dividend per share for shareholders, bringing the total dividend declared for 1H19 to 9.3 sen share.

Its CEO Albern Murty said the telco aims to ramp up digitalisation efforts and leverage on customer data to continue to perform amid a challenging market.

“We aim to deepen our customer insights capabilities and digitalisation efforts to drive differentiated customer experiences, connecting more Malaysians with services that matter most to them,” he said in a statement last Friday.

“We have started executing on this strategy and remain resilient in the middle of challenging market conditions.”

Growth for the telco this year was primarily driven by its easy device ownership programme — namely PhoneFreedom 365, as well as higher demand for entry-level plans and growing subscriptions from businesses.

Digi operates under Norway-based telco Telenor Group, which is in the middle of merger talks with Axiata Group Bhd.

The merger, which will result in the creation of Malaysia’s largest mobile operator, is aimed at leveraging on scale and their respective expertise to compete in the challenging telco industry regionally.

Digi also announced the resignation of its non-ED Tone Ripel, who is leaving the company to take up a new responsibility in the company’s parent, Telenor.

The 49-year-old will be replaced by Lars Erik Tellmann, a 47-year-old Norwegian national, its exchange filing last Friday stated.