Telco Deep Dive: How Malaysia’s industry fared in Q1 2015

• Maxis retakes pole position in terms of total subscriber base
• Celcom now has the smallest subscriber base in prepaid segment

DURING the first quarter of 2015, the Malaysian mobile industry shrank by more than 500,000 subscribers, one of the biggest quarterly declines in recent years.
 
However, it was not the first time we witnessed such a drop. In the third quarter of 2014, the total mobile subscriber base declined by 89,000.
 
In 2006, the industry also saw a decline of approximately 500,000 subscribers following the implementation of a prepaid registration exercise mandated by the Malaysian Government. The bulk of the decline came in the second half of 2006.
 
Take Celcom Axiata Bhd, then known as Celcom Bhd, for example – it managed to grow its subscriber base by over 742,000 during the first half, before experiencing a decline of 1.5 million subscribers in the second half of 2006.
 
Fast forward to the present. During the first quarter of 2015, the total mobile subscriber base declined to 44.42 million, versus 44.93 million in the fourth quarter of last year.
 
The overall decline was partly driven by Celcom’s shrinking customer base.
 
During the quarter, its total customer base fell by 5% to 12.28 million, versus 12.97 million in the fourth quarter of 2014. It attributed the decline to the intense competition in prepaid subscriber acquisition.
 
Besides the decline in the mobile subscriber base, the industry also saw a change in rankings, with Maxis regaining its leadership in the mobile subscriber base.
 
For a deeper insight on how the industry fared in the first quarter, let’s look at the some of the numbers and break them down.
 
The return of the king

For many years, Maxis Bhd had been holding the top position in terms of total mobile subscriber base. However, a few years ago, its market leadership came under attack by aggressive competition from rivals Celcom and Digi.Com Bhd.
 
As a result, it slipped, and Celcom overtook Maxis to become the largest mobile operator in Malaysia in terms of subscriber base.
 
In 2014, Celcom had a 34.8% market share while Maxis had 34.6%.
 
Meanwhile, Digi is steadily growing its subscriber market share as well. During the first quarter, its mobile subscriber base expanded by 270,000 subscribers to hit a market share of 31.4%.
 
Although Maxis has regained its lead, don’t expect Celcom or Digi to stay cowed. After all Celcom, at one point, was the smallest player in the prepaid space before it staged a slow but steady climb to the top spot.

While the earlier table shows how the top three players performed in the first quarter, the table above is a snapshot of the entire mobile space, which includes mobile virtual network operators (MVNOs) and privately-held mobile operators like U Mobile.
 
From this full perspective, based also on figures from industry regulator the Malaysian Communications and Multimedia Commission (MCMC), it can be seen that besides Celcom, ‘Other’ players in the sector have also experienced a decline in subscriber base.
 
While the MCMC did not reveal which mobile operators are contributing to the decline, it is believed that U Mobile may be one.
 
U Mobile chief executive officer Wong Heang Tuck, in a recent conversation with Digital News Asia (DNA), revealed that the company had taken measures to ‘wipe out’ a substantial number of inactive subscribers.
 
“We churned out some one million subscribers,” he told DNA after a signing ceremony between Telekom Malaysia Bhd and U Mobile in Kuala Lumpur.
 
While Wong did not reveal how many subscribers U Mobile had as at end-2014, a U Mobile official claimed that the company’s current subscriber base is more than four million.
 
Assuming U Mobile had four million in the first quarter, which telcos do the remaining 3.2 million subscribers in the ‘Others’ category belong to?
 
Based on industry observers’ feedback, a large portion of the 3.2 million are probably on Tune Talk (approximately 1.5 million), while the balance may likely be split amongst Merchantrade Mobile, XOX Bhd, redONE, and others.
 
Revenue trend and market share

In terms of revenue, the mobile industry – without factoring in revenue from U Mobile (as it is not publicly available) and the various MVNOs – experienced a slight decline in the first quarter of 2015.
 
The top three players registered total mobile service revenue of RM5.39 billion (US$1.44 billion), compared with RM5.4 billion (US$1.45 billion) in the first quarter of last year.
 
Do note that mobile service revenue does not take into account the sales of devices or the fixed-line business.
 
The Q1 decline was mainly driven by Celcom, as it was the only player amongst the incumbents to register a downtrend. The shortfall came from its voice and Short Message Service (SMS) business.
 
SMS suffers bigger than usual decline

A look at MCMC’s statistics also shows that there was a sharp decline in text messages. Although SMS volume has been trending down, it has never before fallen at such a pace.
 
In the first quarter of 2014, total SMS volume in the country was 14.24 billion, declining to just over 10 billion in the fourth quarter.
 
By the first quarter of this year, SMS volume had fallen by approximately 2.3 billion to scrape by at 7.77 billion.
 
The decline was likely driven by the increasing adoption of smartphones as well as the skyrocketing popularity of messaging apps such as WhatsApp, Line, WeChat and KakaoTalk.
 
Prepaid consolidation?

During the first quarter, the total prepaid subscriber base in the industry shrank by 620,000 subscribers to 36.16 million.
 
The decline was mainly driven by Celcom’s performance in that segment. During the quarter, it recorded 9.54 million prepaid subscribers versus 10.17 million in the fourth quarter of last year.
 
This also saddles Celcom with the smallest prepaid subscriber base, with Digi recording 9.93 million prepaid subscribers and Maxis leading with 9.98 million.
 
In terms of revenue, it appears that Maxis was the biggest winner in the first quarter as it gained the most ground. During this period, its prepaid mobile revenue market share jumped to 33.4%, from 30.5% and 30.7% in the first and fourth quarters of 2014, respectively.
 
Though it gained the most market share, Maxis still couldn’t dethrone Digi in the prepaid space, with the ‘Yellow Man’ staying strong at pole position with a 36.6% market share.
 
Postpaid status quo

The postpaid landscape remained pretty much unchanged for the top three players. Maxis was almost untouched in this space, with a commanding 42.1% subscriber market share and a 45.2% revenue market share.
 
Although Celcom suffered in its prepaid business, its postpaid business remained somewhat stable. During the quarter, it lost a marginal number of subscribers, while revenue fell 1% to RM739 million (US$197.8 million).
 
Nevertheless, its position as a strong No 2 player in this space was not threatened.
 
Digi was the only player amongst the top three to register growth in both its postpaid revenue and subscriber base.
 
Summary
 
With all these leadership changes, it will be interesting to see if Maxis can hold on to the overall top spot, if Digi can defend its prepaid turf, and if Celcom can get aggressive enough to regain lost ground.
 
One thing is for sure, this sector is becoming increasingly interesting to watch.
 
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