The end of results season in February uncovered an interesting trend for telecommunication (telco) players: different strategies gave way to different results.
Overall, the telco sector recorded a mixed bag of mixed fourth quarter of financial year 2016 (4QFY16) results, with Maxis Bhd (Maxis) emerging as the stronger player over its competitor Celcom Axiata Bhd (Celcom) and Digi.Com Bhd (Digi).
While Celcom’s parent company, Axiata Group Bhd (Axiata), ended the year with disappointing 4Q16 earnings, Affin Hwang Investment Bank Bhd (AffinHwang Capital) highlighted that Maxis held up pretty well operationally amidst shrinking sector revenue.
According to AffinHwang Capital, Maxis’ revenue market share – amongst the three celcos – ended at 39 per cent as at end 2016, the group’s second year of gain.
The growth in Maxis’ market share was, however, at the expense of Celcom and Digi’s shrinking revenue base.
“Combined revenue for the three celcos amounted to RM21.8 billion, down five per cent from 2015 and represents the third consecutive year of decline,” it said in its report earlier this week.
This can be largely attributed to non-listed fourth player, U Mobile Sdn Bhd (U Mobile), grabbing a recognisable chunk of market share.
Looking at the sector’s cellular subscriber base, AmInvestment Bank Bhd (AmInvestment Bank) said in a separate report that Digi remains the leading mobile subscriber.
“Since edging out Maxis with the largest mobile subscriber base in 2QFY16, Digi has retained the group’s pole position with 12.3 million users,” it said, adding that this translates to a market share of 34.8 per cent versus Maxis’ 33.7 per cent and Celcom’s 31.5 per cent.
“Its revenue has also grown to overtake Celcom by two per cent in 4QFY16; now the second largest after Maxis,” the research firm said.
Digi had in fact gained prepaid customers at Maxis and Celcom’s expense, it said.
Although mobile subscribers declined by 150,000 to 35.4 million in 4Q current year 2016 (4QCY16), Digi gained 50,000 subscribers in 4QCY16 while Maxis lost 120,000 and Celcom 80,000, largely in the prepaid segment which experienced a net attrition of 869,000 to 26.8 million.
Digi’s prepaid subscribers instead climbed 211,000, as both Maxis and Celcom removed inactive users from their database.
“This drove prepaid average revenue per user (ARPU) by RM0.67 per month quarter on quarter (q-o-q) to RM35.70 per month,” the research firm said.
“Amidst increasingly larger data quotas and improved features offered to customers, the postpaid segment rose at a faster pace by 201,000 q-o-q and 255,000 y-o-y to eight million while ARPU increased RM3 per month to RM88 per month.”
Prepping up on prepaid, postpaid
On the other hand, AllianceDBS Research Sdn Bhd (AllianceDBS Research) opined that Maxis was the better performer in the prepaid segment for 2016.
The research house explained that despite losing 574,000 subscribers, prepaid revenue did not fall much as Maxis managed to offset it with higher ARPU (from RM39 to RM42).
“DiGi defended its prepaid subscriber base well but it came at the expense of lower ARPU, which we think was also largely due to the weak migrant workers sub-segment.
“Celcom suffered a whopping 1.85 million subscriber loss while ARPU had remained stagnant,” the research house said.
As for the postpaid segment, AllianceDBS Research noted that Digi gained market share in the postpaid segment in 2016 albeit from a lower base, with a 10.6 per cent revenue growth versus flattish growth for peers.
This was mainly achieved through subscriber gains, which AllianceDBS Research believed was reflective of improving customers’ perception of Digi’s network quality from the group’s aggressive rollout of 4G LTE network.
“To our surprise, Maxis defended its premium subscribers of the postpaid market quite well in 2016 (ARPU of RM104 vs RM80 for DiGi and Celcom), despite the more aggressive and attractive pricing by peers,” the research house said.
Affin Hwang reckoned that the growth in the sector’s postpaid subscribers vis-à-vis the prepaid segment is being underpinned by growth in demand for data and hence better demand for packages that offer a larger data plan.
Summary: Digi and Maxis are fighting it out to be the number one telco in Malaysia while Celcom performance is not that great compared to both market leaders. Oh dear, pity Celcom!