DiGi subscriber base slips, telco expects to regain traction

• Subscriber base declines marginally in Q1
• First quarter net profit jumps 47%

For the first quarter ended March 31, 2014, the company, 49% owned by Telenor ASA, saw its subscriber base declined by 1% or about 110,000 to 10.88 million, compared with the 10.99 million it had on Dec 31, 2013. Its postpaid subscriber base fell by 14,000 to 1.69 million and its prepaid base fell by 96,000 to 9.2 million.

The last time it experienced a quarter-on-quarter subscriber base decline was in the first quarter 2013, when its total customer base fell to 10.37 million (versus 10.49 million in the fourth quarter of 2012).

According to the company, the marginal decline was partly driven by “seasonal effects on churn and gross adds” against a backdrop of flattish postpaid demand.
It however launched its 'Best For Internet' plans in early March, a move that seemed to address the decline and help the company achieve its year-end goals.

“This has gained traction and [will] contribute stronger net adds momentum into the following quarters,” a DiGi spokesperson told Digital News Asia (DNA) in an email reply.

“Under our guidance, we expect revenue to grow by 4-6% and this will be mainly driven by the prepaid sector… . Over the next few quarters, we believe prepaid growth will still be strong.”

Besides revamping its plans, the company has also embarked on other initiatives to help drive growth.

“These include stronger network coverage and quality, strengthening the distribution network through cluster management, and channel expansion to include more points of sales for our customers,” said the spokesperson.

Profits continue to grow

During the first quarter, DiGi reported a 47% jump in net profit to RM485 million against RM329 million in the same quarter a year ago. Revenue rose by 4% to RM1.72 billion while earnings before interest, tax, depreciation and amortization (EBITDA) rose by 8% to RM778 million.

[RM1 = US$0.31]

The company attributed the profit growth partly to its “strong boost in usage of mobile Internet services."

Overall, its EBITDA margin was relatively stable. The Q1 2014 margin was one percentage point higher than in Q1 2013, partly driven by “stronger service revenue growth" and benefitting from an "efficient cost structure,” DiGi said.

However, when comparing Q1 2014 EBITDA margin to that in Q4 2013, there was a slight dip. DiGi attributed the decline partly to higher network expansion-related operational expenditure.

As part of its 'Internet For All' mission, DiGi plans to expand its third generation (3G) and Long-Term Evolution (LTE) network footprint this year.

Its network expansion goals include expanding its HSPA+ 3G to 86% population coverage (versus 82% population coverage now), as well as to grow its LTE footprint to 1,500 sites. There are also plans to expand its fibre network, which now spans more than 4,100km.

For the quarter, its capital expenditure was at RM202 million, which is in line with the company’s plan to invest up to RM900 million in capital expenditure this year. At RM202 million, this also translates to a spending of RM18.56 per subscribers during the quarter. {This amount is derived after taking the Q1 2014 capex and dividing it by its Q1 2014 subscriber base]

Its average revenue per user (ARPU) was relatively stable. In terms of blended ARPU, it was unchanged at RM47. There was a slight decline on its postpaid ARPU at RM81 (versus RM82 in Q1 2013), while ARPU for its prepaid segment, its largest contributing segment, grew slightly to RM41 (versus RM40 in Q1 2013).

While ARPU was relatively flat, the good news is that its customers are starting to spend more on Internet services. During Q1 last year, its customers spent an average of RM8 a month on Internet services. This has grown to RM11 in Q1 2014.

The growth in demand for Internet services was able to cover the decline in voice and messaging services. During the quarter, its customers made an average of 249 minutes of phone calls, versus an average of 267 minutes a year ago. In contrast, data traffic grew from under 8,000 terabytes (TB) in Q1 2013 to just under 10,000 TB in Q1 2014.

“Our stronger, more stable network, and expanded network coverage has also allowed us to bring high quality Internet connectivity to more Malaysians, in more areas across the country," DiGi chief executive officer Henrik Clausen said in a statement.
 
“In the coming months we will continue to introduce game-changing innovation that will allow our customers to enrich their Internet experience on our brand-new network,” he added.

Related Stories:

DiGi’s Internet for All: From ad campaign to corporate mission

DiGI’s RM900 mil capex bet on 3G and LTE
 
Helping yourself by helping others: DiGi’s take
 
 
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