Celcom sees resilient H2 2020 performance, commits US$246mil capex for FY2021

• To focus on enterprises and SMEs with its 5G approach
• Hits 2.7% revenue growth to US$400mil in 4QFY20

The second half of 2020 proved to be a resilient time for Celcom Axiata Bhd. In a virtual press briefing yesterday, the mobile operator said that it recorded a 306,000 growth year-on-year (YoY) in its overall subscriber base. Celcom also recorded “an overall positive growth” with quarter-on-quarter (QoQ) improvements in Subscribers, Revenue, Cost, Profitability, and gaining market share.

It attributes business growth and profitability to a “continued focus on operational excellence and cost management.” Management is committing a capital expenditure of approximately US$246 billion (RM1 billion) for FY2021, and targets to increase network capacity, reduce network traffic congestion and improve 4G coverage nationwide.

For its 4QFY20 results, the telco hit 2.7% revenue growth to US$400 million (RM1.62 billion) from the 4QFY19 quarter, while its pre-tax profit increased by 10.6% to RM785 million.

[RM1 = US$0.246]

Net profit for the quarter dropped 20% to RM193 million versus the previous quarter, amid accelerated depreciation as it continues to sun set its 3G network.

Prepaid customer base growth continued, with 203,000 new subscribers (+3.7% QoQ) from Truly Unlimited Plan, recording eight consecutive months of positive net adds since May 2020. Postpaid subscriber base increased with 75,000 new subscribers QoQ (+2.5%), supported by prepaid to postpaid conversion, with a resilient ARPU (average revenue per user) of RM84.

The telco also recorded an improved QoQ profitability combined with revenue growth of RM42 million (+2.7%) and EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortisation) improved by RM75 million (+10.6%). 

“2020 was a challenging year for many Malaysians due to the movement controls. Celcom stood by closely and supported the rakyat from all walks of life, offering assistance and relief to those in need,” Idham Nawawi (pic), its CEO, said.

“Our growth trajectory in H2 2020 has been the result of our continuous innovative efforts and supportive initiatives throughout Q3 and Q4. As more consumers are digitally engaged for business, working from home, education and entertainment, we are working tirelessly to raise the quality of our 4G network coverage and speed up more network investments to ensure a consistent network experience.”

Data explosion

With the popularity of video on its network, it was little surprise that data traffic more or less exploded towards the tail end of 2020. Celcom recorded more than 50% data traffic growth with 431 million GB, compared to 4Q19 with 287 million GB. Data usage per month per user also increased by 40% YoY with 20.8GB per month per user as compared to 14.6GB per month per user in 4Q2019. With its users already ranked the 17^th heaviest mobile data users in the world in a 1H 2020 report, its 4Q2019 jump in data usage will likely see its users rise even higher in the global ranking.

Idham said that Celcom’s accelerated network investment of more than RM250 million is in its final stages of completion. This has resulted in a reduction of network traffic congestion while delivering consistent network service and experience.

Furthermore, Celcom’s accelerated network investments includes setting up a dedicated Rapid Response Team to address Covid-19 challenges, prioritising network coverage, optimisation and upgrading works within rural communities.

According to Idham, since December last year, Celcom has deployed new network base stations, upgraded and optimised 4G coverage in rural areas nationwide, namely Kampung Jemukan, Sarawak, Kampung Bukit Pampong, Raub, Pahang, Bukit Petai, Jeranggau, Kelantan, Kg Bunuk, Sarawak, Kg Mambong, Puncak Borneo, Sarawak and several more.

The accelerated network investment program targeted over 4,700 network sites nationwide to be upgraded and optimised with capacity upgrades, installation of new 4G equipment and core network optimisation programs, which included almost 1,000 4G network sites in Sabah and Sarawak.

In addition, Celcom conducted a nationwide cluster optimisation programme on an additional 3,600 network sites to address video buffering issues and deliver better voice and video quality with an August 2021 target for completion.

“Our accelerated network investments for 2021 will focus on increasing 4G LTE population coverage to 95.6% (currently at 93%), deliver a consistent HD video experience, improve indoor coverage and deliver a seamless VoLTE (voice over LTE) experience,” said Idham.

The focus on video is in reaction to the fact that it experienced 150% growth in Facebook and 70% growth in YouTube traffic. Traffic from these platforms made up almost 60% of its total traffic.

Idham also announced the shutting down of its 3G network by end 2021.

Aware of the concern this may cause to its customers who are happy with their 3G devices, Idham reassure that Celcom understands the importance of delivering a consistent network experience across Malaysia, leaving no one behind. “Affected customers can therefore migrate to our 4G network by easily owning a 4G smartphone through our affordable device packages.”

The 3G sunset

On the 3G sunset, Idham said that they have been offering a significant amount of upgrades to their 3G subscribers. The impact has been significant. Two years ago, Celcom had 2.7 million 3G users – by the end of 2020, they had about 800,000 still on the 3G network.

Idham noted that part of the remaining 3G devices are also machine-to-machine (M2M) devices, such as smart meters being operated by a few companies including Tenaga Nasional Bhd and Air Selangor.

Additionally, Celcom has around 200 3G sites nationwide without 4G capabilities. “We have a plan to upgrade all these sites into 4G, while those that fall under USP (Universal Service Provision) areas will see us working with the Malaysian Communications and Multimedia Commission (MCMC),” he elaborated.

While there will be some impact on Celcom’s financials through the accelerated depreciation of 3G equipment and the additional expenditure due to the Dec 2021 deadline, on the plus side, it can utilise the 3G spectrum earlier for 4G.

“Celcom will continue to invest in deploying the latest end-to-end technology such as 4T4R multiple-input and multiple-output (MIMO), Carrier Aggregation, 256 Quadrature Amplitude Modulation (QAM) and many more. To date, Celcom’s network remains the nation’s widest network with over 11,500 sites nationwide, serving over 13 million users,” Idham emphasised.

Onwards to 2021, and 5G  

Going forward, Celcom said it remains committed to drive multiple digitalisation initiatives as part of its main business focus. For 2021, it will continue to navigate the impact of the Covid-19, confident that the transformation conducted internally will help it survive the pandemic’s effects.

“Our 4G investment will continue to support traffic growth, and also the high-definition video experience and also enhance our coverage,” said Idham. The telco is also doubling down on new growth areas, especially new Enterprise products, as well as their Home segment. This is part of their RM1 billion capex plan for 2021.

Idham stated that 2020 had been a “very interesting year” for the enterprise market, both from trying to grow as well as trying to support customers impacted by the pandemic. Celcom saw more customers coming in for digitisation help, with existing customers relying on it for additional support to tide through Covid-19.

In 2020, Celcom continued with its Celcom Home convergence offerings. Today, it has 4.5 million homes passed through.

Aiming to capture market share, it will launch a single-build bundle proposition with mobile and family lines with its fibre offering. It has also started introducing attractive add-ons including entertainment.

“This is something we are excited about, and it is something that we will continue to grow and invest in the future,” Idham says.

Regarding the accelerated 5G rollout, Idham shares that Celcom will place emphasis on the enterprise segment. This is perhaps evident through the telco’s efforts across 2020 in relation to 5G, beginning with the 5G use cases in Langkawi early in the year, as well as their partnerships with Huawei and Ericsson.

“What’s important for the success of 5G, is for industry adoption. Industries need 5G to transform the way they do business,” he says.

It also has its eyes on the SME segment. “What we’re doing is building a local ecosystem that can help us spearhead and become a catalyst for 5G application for SMEs,” he adds. To this end, Celcom has been working with ecosystem providers, as well as developing a vendor development program (VDP) to build more “glocal” Malaysian-made 5G ecosystem providers.

While he declined to comment on the government’s decision to operate the 5G network, preferring to wait for more details, Idham came out strongly in support of the just announced Malaysia Digital Economy Blueprint (MyDigital). “Celcom strongly supports the MyDigital as its overall framework is very comprehensive from cloudification, content creation and ecosystem building, positioning the nation as a leading regional digital economy.”

He sees opportunities for Celcom to assist the government in its cloud technology and digital adoption.