2Q18 roundup: Telcos add subscribers, see improved service revenues

• Some growth seen in 2Q compared to the last quarter 
• Price pressure, service quality and connectivity key realities of local telco scene

IN THE last quarter, we saw the Big Three telcos suffer from subscriber base and service revenue declines. This quarter however, saw all three telcos experience growth in subscriber base and service revenue, signifying some growth in the domestic telco sector.

Digi maintained its leading position in terms of overall subscriber base during the second quarter of this year (see table below), although it did see a marginal decline in subscriber numbers.

Maxis and Celcom meanwhile, both added subscribers during the quarter, with Maxis recording the highest gains in terms of subscribers.

As mentioned previously, all three telcos saw their service revenues improve, with Maxis leading in terms of service revenue, recording RM2.1 billion during the quarter, compared to RM1.98 billion in 1Q. However, it was Celcom that posted the biggest gain in service revenue in 2Q, clearly ahead of its industry peers.

In a statement accompanying its 2Q results, Axiata Group Bhd group president and chief executive officer Jamaludin Ibrahim had pointed out that Celcom was the only operator in Malaysia to record growth in service revenue and total revenue for the quarter, “indicating clear and commendable signs its turnaround is well on track”. Axiata Group is the parent company of Celcom.

Maxis meanwhile, continued to lead in the prepaid average revenue per user or ARPU category at RM42 with a slight increase in this area. Celcom also saw an increase in prepaid ARPU during the April-June 2018 period. Digi however, saw its prepaid ARPU remain unchanged at RM32.

As with the prepaid category, Maxis also maintained its lead in the postpaid ARPU category, seeing a +RM 2 improvement in postpaid ARPU over the previous quarter. Celcom maintained its second position in this category, although it saw ARPU unchanged at RM87 while Digi saw an increase of RM1 in postpaid ARPU.

The table below shows a comparison of capital expenditure (capex) spend by each of the telcos in 1Q and 2Q respectively. Celcom continued to be the biggest spender in terms of capex during the second quarter, with Maxis as a close second.

In its 2Q18 results media statement, Maxis noted that “delivering the best network experience for customers is important to us, and we continue to invest significantly in our network,” adding that these investments have enabled them to handle the increase in capacity for their customers’ accelerating data usage, while providing the best experience.

Analysts Digital News Asia spoke to said price pressure and service quality and connectivity are key realities for the domestic telco industry going forward.

AmInvestment Bank telco analyst Alex Goh noted that while Digi remained the leader in terms of subscribers for 2Q, Maxis was the clear postpaid leader where more than 50% of its revenue was from the postpaid segment.

“Everyone is going to be under intense pressure,” he said of the telco players. He added that while Maxis has been able to improve ARPU, it remains to be seen how long it will be able to sustain this with price pressure in the industry from telcos such as U Mobile, which now has an unlimited data plan for postpaid users.

Having said that, logically with price pressure, higher priced packages should be affected, yet Maxis has a loyal customer base and for a long time, was perceived to have the best connectivity. Now it has competition from Celcom in terms of connectivity, he pointed out.

Goh noted that new customers however, would be more sensitive to pricing, with the younger generation tending to go for the lower priced packages offered by players such as U Mobile and Digi.

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