Maxis likely to face challenges in near-term, say analysts
By Goh Thean Eu February 13, 2014
- 2014 going to be ‘work in progress’ year for Malaysia’s largest cellular player
- Maxis still believes in Home Services’ potential, plans to review the business
ANALYSTS expect that Maxis Bhd, the country's largest mobile operator, would likely continue to face challenges in the near-term, especially in the prepaid segment.
The senior management of Maxis, during a briefing with analysts on Feb 11, reiterated that service revenue this year is likely to be below the estimated industry growth of 5%, but to be in line with industry growth in the second half of 2014.
For the full year, it expects service revenue growth in the low, single-digit range.
“2014 is expected to be a gestation year for Maxis – [the] focus is not on driving margins but to drive top-line growth. This year, management expects Maxis to grow service revenue in the low single-digit range, implying slower than industry revenue growth of 5%.
“Maxis is likely to underperform peers in the first half before gaining some traction in the second half as the group implements various transformation measures encompassing new products, branding, customer experience, distribution, people and incentives,” said AmResearch in a research report on Feb 12.
For the full year ended Dec 31, 2013, Maxis registered a net profit of RM1.77 billion while revenue was at RM9.1 billion, versus RM1.85 billion in net profit and RM8.96 billion in revenue in 2012. [RM1 = US$0.30]
It ended 2013 with 12.89 million subscribers, comprising 2.77 million postpaid subscribers, 9.53 million prepaid subscribers and 596,000 wireless broadband subscribers. In 2012, it had 14.09 million subscribers, comprising 2.64 million postpaid users, 10.77 million prepaid subscribers and 679,000 wireless broadband customers.
“While postpaid trends remain encouraging, Maxis is likely to continue to lose market share in the prepaid segment. [Its] management initiatives to improve distribution and boost brand perception will take time to execute,” Maybank Investment Bank analyst Tan Chi Wei said in a report.
Most analysts believe that 2014 will be a “work in progress” year for Maxis. They believe that once Maxis’ restructuring is completed, the company would be in the position to regain its market share.
During the year, there was a slight decline in service revenue, but there was growth in other segments like Enterprise Fixed Services, International Gateway Services and Home Services. In terms of profitability, most of its segments were profitable, with the exception of the Home Services business.
The Home Services business, which is still relatively a new segment Maxis is penetrating, registered an EBITDA (earnings before interest, tax, depreciation and amortisation) loss of RM185 million in 2013, versus a loss of RM109 million in 2012.
During the Feb 11 analysts’ briefing, Maxis’ management said it plans to review the segment as well as the segment’s collaboration agreements.
“While the management continues to believe the segment could gain traction over the long run, the group plans to review the segment as well as the collaboration agreement (with Astro), given the current dismal outcome,” said Kenanga Investment Bank analyst Cheow Ming Liang.
On the same issue, CIMB Investment Bank analyst Kelvin Goh said that Maxis should exit the home/ fibre broadband business.
“We maintain our view that Maxis should exit the home/ fibre broadband business because it has been sapping resources and the wholesale of Telekom Malaysia’s HSBB (high-speed broadband) network lacks strict regulatory oversight,” said CIMB Investment Bank analyst Kelvin Goh.
“While postpaid trends remain encouraging, Maxis is likely to continue losing market share in the prepaid segment. Management’s initiatives to improve distribution and boost brand perception will take time to execute,” said Maybank Investment Bank’s Tan.
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