2014 in Review: The telco battleground

• 2014 was indeed a ‘Year of Battles’ with market shakeups
• Key events include M&As, setting up of venture funds

EARLY this year, Celcom Axiata Bhd chief executive officer Shazalli Ramly said that 2014 would be the ‘Year of Battles,’ with the gaps between all players narrowing, resulting in stiff competition for market share.
 
“We believe this will be the year of battles, where all of us (mobile operators) will be fighting for a share of customers’ emotions and … customers’ wallets,” Shazalli told a media conference when the company released its 2013 numbers.
 
He was right. There were several interesting twists to the telco plot this year.
 
Industry observers expect Celcom, which surprised the market by securing the No 1 position in terms of subscriber base, to take advantage of its momentum and widen its lead against rivals Maxis Bhd and DiGi.Com.
 
But while it managed to grow its market share, at Maxis’ expense, Celcom registered three quarters of (year-on-year) decline in terms of revenue and earnings. The declines were due to issues with its IT transformation programme.
 
For the nine months ended Sept 30, 2014, Celcom managed to grow its subscriber market share* to 36.1% (versus 35.49% as at Dec 31, 2013).
 
During the same period, Maxis’ subscriber market share* fell to 33.36%, from 34.81% at the end of 2013.
 
DiGi had the biggest gain, with its market share* jumping from 29.68% as at December 2013 to 30.5% in September 2014, with some 11.36 million subscribers in hand.
 
(* Note that the market share comparisons above do not take into account U Mobile’s subscriber base, which is not publicly available on a regular basis. Based on MCMC data, which factored in U Mobile numbers, Celcom has a total subscriber market share of 30%, followed by Maxis with 28.4%, DiGi with 25.2%, and U Mobile with 10.3%)
 
The LTE front
 
Besides intense competition on the retail front, the telcos were also aggressively competing in terms of their 4G LTE (Fourth Generation/ Long-Term Evolution) coverage.
 
Maxis announced that it planned a capital expenditure (capex) of RM1.1 billion in 2014. While it is uncertain how much it pumped into 4G LTE, the company recently claimed that its 4G LTE network now has a population coverage of 21% and covers key markets centres and state capitals.
 
[RM1 = US$0.29]
 
Celcom announced it would be spending not more than RM1 billion in capex this year. The funds will be partly used to expand its 4G LTE sites from approximately 700 as at end-2013 to 2,014 sites by end-2014.
 
Meanwhile, DiGi said it will be investing up to RM900 million. Part of the funds will be used to increase its HSPA+ 3G coverage to 86% (versus 80% in March 2014) and to grow its LTE footprint to 1,500 sites.
 
Blurring boundaries
 
Analysts expect the competition to be more intense in 2015 as Malaysia’s mobile and fixed players scramble for a bigger piece of the broadband pie.
 
Fixed-line player Telekom Malaysia Bhd, via its acquisition of Packet One Networks (Malaysia) Sdn Bhd (P1) early this year, is expected to step deeper into the wireless broadband space by offering mobile broadband products. This will certainly keep the incumbent mobile players on their toes.
 
In August, it launched its inaugural LTE service, branded TMgo, in the northern Malaysian state of Kedah.
 
And while the fixed-line incumbent is invading the wireless space, the mobile players are also looking at offering fixed-services.
 
Maxis has launched fixed broadband services. Based on a presentation, as at the third quarter of 2013, its fixed-line services have connected 72,000 homes.
 
Next Page: 2014 recap