Celcom remains optimistic despite Q1 revenue dip

  • Q1 2014 revenue decline the first for Celcom since Q1 2006
  • Encouraged by smartphone adoption in suburban, rural areas
Celcom remains optimistic despite Q1 revenue dip

ALTHOUGH Celcom Axiata Bhd's most recent financial results broke its winning streak of consecutive quarters of revenue growth, the country’s largest mobile operator believes it has every reason to be optimistic.

For one, the company is expecting the take-up rate of its data services to improve as more customers start to use smartphones.
“If you look at our customer profile, you will see that we have a lot of customers in the rural and semi-urban areas. So, in terms of the take-up rate of smartphones, we have been slightly behind compared with our competitors," said Celcom chief executive officer Shazalli Ramly.
“However, we are starting to see increasing numbers of people switching to smartphones. This can be partly attributed to the affordability of the devices,” he told a media briefing in Kuala Lumpur on June 11.
For the first quarter ended March 31, 2014, the company had 4.65 million smartphone users, representing an increase of 51% against the 3.08 million users in the first quarter of 2013. The number also shows that currently, 35% of its customers are smartphone users, a big improvement compared with the 23.6% in the first quarter of 2013.
Overall, broadband subscribers increased by 20% in the first quarter 2014 to 1.23 million, compared with 1.03 million a year ago. However, Celcom also revealed that the number of big screen broadband subscribers decreased to 505,000 from the 617,000 subscribers it had in the first quarter of 2012. During the same period, small screen subscribers jumped 76% to 723,000.
The trend of decreasing big screen broadband users is consistent within the industry. Maxis Bhd, one of Celcom’s fiercest rivals, revealed that its wireless broadband subscriber base shrank 4% quarter-on-quarter to 570,000 in the first quarter of 2014. Maxis chief executive officer Morten Lundal attributed the decline to the trend of “people preferring to surf the Net via a tablet or other mobile devices," as opposed to a wireless dongle.
Nevertheless, Celcom said that the overall encouraging trend in both “smartphone penetration” and mobile broadband customers have resulted in a 16% increase in data revenue to RM368 million. [RM1 = US$0.31]
The increasing availability of affordable smartphones in the market certainly played a key role in the growth of its data revenue. However, Shazalli argued that the quality of Celcom's own network played a major role in growing the data business as well.
He said that the company, which has just completed the first phase of its "IT transformation," has also completed its Project Zoom, where its sales teams in each district will have access to real-time information on the district’s network utilisation rate as well as consumer behaviour patterns.
“Should a network utilisation rate in a particular district get to near congestion, we will slow down on customer acquisition. We are serious on that,” said Shazalli.
Celcom is currently upgrading and expanding its network in the east coast of Peninsular Malaysia, as well as in East Malaysia, with the work almost completed, he added.
Once this is complete, the company would be able to serve its customers better, he claimed.
Celcom has allocated RM950 million as capital expenditure (capex) this year. From the amount, about RM400 million will be used to roll out LTE (Long-Term Evolution) networks, said Shazalli. The company now has over 1,093 LTE sites nationwide, and hopes to have 2,014 sites by the end of this year.
Ending 31 quarters of consecutive growth
During the first quarter of 2014, Celcom’s revenue fell 3.6% year-on-year and 5.3% quarter-on-quarter to RM1.91 billion. The result basically ended an impressive run of 31 quarters of consecutive revenue growth which started in 2006.
Service revenue saw a 2.3% quarter-on-quarter decline to RM1.81 billion. However, when compared with the same quarter a year ago, it had a marginal 0.03% gain.  [Service revenue excludes revenue generated from selling mobile devices].
The mobile operator also registered a net profit of RM515 million for the quarter, a marginal 0.2% increase versus the RM514 million in the first quarter 2013, but a 22.1% fall compared with the RM661 million in the fourth quarter of 2013. The decline was partly driven by the lack of tax incentives in 2014.
“Also, in the first quarter, we were more focused on our network quality and capacity improvements. Hopefully, Celcom can go through another great run after this,” said deputy chief financial officer Jennifer Wong Chui Fen.
Revenue and earnings aside, the company managed to grow its subscriber base during the quarter. It now has 13.29 million subscribers, up from 13.14 million in the fourth quarter of 2013. Both its prepaid and postpaid customer base grew in the first quarter, with an additional 150,000 prepaid subscribers and 10,000 more postpaid subscribers.
While blended average revenue per user (ARPU) remained stable at RM46, there was a slight decrease in postpaid ARPU – from RM88 in first quarter 2013 to RM85 in first quarter this year.
Besides banking on suburban customers signing up for data plans, Celcom also hopes that 2014, the year of the World Cup, could also help drive the company forward, Shazalli said.
“Traditionally, in World Cup years, we are more aggressive and colourful. Hopefully, this time it will be the same,” he added.

The FIFA World Cup kicks off June 12 in Brazil.
Related Stories:
Celcom CEO: 2014 will be the ‘Year of Battles’
Celcom integrates customer experience with Oracle, Accenture
Celcom partners nTels to offer M2M Connected Services

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