Digi eyes top spot in mobile Internet space

• Aims to keep growth momentum going, boosting network coverage and quality
• Expects capex to be around RM900mil annually over next 3yrs

MALAYSIA’S third largest mobile operator – depending on how you slice it – Digi.Com Bhd has set an ambitious goal of becoming the best mobile Internet provider in the country, mainly by focusing on improving its customers’ experience.
 
“The goal is to become the best mobile Internet provider for the mass market. We definitely can hit it in the next three years,” declared chief operating officer Albern Murty (pic above), who will take on the chief executive officer (CEO) role on April 1.
 
“However, there are a few strategic pillars that we need to pay attention to, in order to achieve this target,” he conceded.
 
Claiming the top spot would involve several metrics such as coverage and network quality, among others.
 
Digi’s Third Generation (3G) mobile network currently covers 86% of the population, while its Fourth Generation Long-Term Evolution (4G LTE) network has 32% coverage.
 
Digi has more reason than most to focus on growing its mobile Internet business. As the only mobile operator amongst the incumbents to register revenue growth in 2014, it needs to ensure the right strategies are in place in order to maintain the growth momentum and to gain market share.
 
In fiscal 2014, Digi’s revenue rose 4.2% from the previous year to RM7.02 billion, while rivals Celcom Axiata Bhd and Maxis Bhd suffered declines in revenue. [RM1 = US$0.28]
 
Voice revenue fell 3.6% to RM3.88 billion, while its short messaging service (SMS) revenue suffered a 19% decline to RM547 million.
 
Its Internet revenue was able to offset the decline, jumping 39% to RM1.71 billion.
 
“We need to ensure that we have the right network in order to deliver a good customer experience, as well as the right plans and bundles to attract customers,” said Albern.
 
Digi is 49% owned by Norwegian telecommunications giant Telenor ASA.
 
As part of Digi’s efforts to improve customers' experience, it has formed 220 teams to monitor network quality, each dedicated to a single cluster, and to upgrade the network before it gets too congested.
 
“Each cluster has daily actions, targets and so forth. It’s a lot of hard work ... . This is essential, so that we know where to put our next site,” said current CEO Lars-Ake Norling, who will next month take the helm at Thailand’s Total Access Communication PCL (dtac), another Telenor subsidiary.
 
Optimism remains
 
Digi, which expects revenue to grow by the low- to mid-single digits this year, is confident that it would be able to achieve its No 1 mobile Internet operator target without hurting its wallet too much.
 
It will spend around RM900 million this year on capital expenditure (capex), roughly the same as it spent in 2014. It will also spend a similar amount over the next few years.
 
“We are not looking at increasing capex over the next three years,” said Albern.
 
The bulk of the capex will be spent on improving its mobile Internet coverage and quality. The company, however, did not provide a breakdown of how much it will be spending on 3G, and how much on 4G.
 
Albern sees the ongoing investment as a necessary step, saying the company expects the number of mobile Internet users to grow.
 
Currently, 56% of its customers are active mobile Internet users. “In three years, we expect 80-85% of our customers to be active mobile Internet users.
 
“This will be driven by the availability of affordable smart devices,” he added.
 
While many companies are bracing for a tough 2015, partly due to weaker consumer sentiment as a result of the implementation of the Goods and Services Tax in Malaysia, Digi expects demand to be positive this year.
 
“I'm not too concerned for now. At this point in time, I’m still quite confident that consumer demand will remain strong this year,” said Albern.
 
“We still see the growth potential. At the macro level, we need to monitor closely. But we believe that communications is very essential for Malaysians. It is a tool for doing business, it is becoming a necessity,” he added.
 
Meanwhile, Digi said that its plan to set up a business trust remains “on track.” It first announced this plan in April 2013.
 
“It’s just that it takes time to get all the questions answered ... not just from our side, but also from the stakeholders,” said Norling (pic).
 
“We are still engaging with the stakeholders on setting up the business trust,” he added.
 
A business trust is a business enterprise set up as a trust structure. It is managed by a trustee-manager who holds the assets on trust for unit holders of the business trust.
 
In Digi's case, the objective of setting up a business trust is so that it would be able to increase its capital efficiency and return excess cash to shareholders.
 
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