Slugfest: Malaysia’s Big 3 telcos in H1 2015

• Resurgence in total subscriber base after a decline
• Maxis still dominates, Digi inching into No 2 spot

AFTER suffering a decline in terms of total subscriber base in the first quarter 2015, Malaysia’s mobile industry saw signs of resurrection in the second quarter.
 
In the second quarter (Q2 2015), the top three mobile operators Maxis Bhd, Celcom Axiata Bhd and Digi.Com Bhd reported a total subscriber base of 37.43 million, compared with 37.23 million subscribers in Q1 2015, and 37.30 million in Q4 2014.
 
The increase was mainly driven by Digi and Celcom, which recorded quarter-on-quarter increases of 130,000 and 60,000 subscribers, respectively. Maxis added about 10,000 new subscribers to hit 13.27 million total subscribers.
 
The first half also saw the positioning of the top three players remain more or less the same – Maxis still dominated the postpaid business, Digi flexed its muscles in the prepaid segment, and Celcom was trying to regain lost momentum.
 
Unlike the previous reporting season, the first half of 2015 offered new information: The smartphone penetration of all three players. Previously, only Maxis and Digi revealed their smartphone penetration rates.
 
Before we look at how well each of the telcos performed in the smartphone segment, let’s look at all the key operational numbers.
 
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Revenue

Based on the top three telcos’ overall revenue, service revenue [service revenue excludes sales from devices], and market share, it appears that Maxis and Digi were able to gain market share at the expense of Celcom.
 
The first half also saw Maxis continue to strengthen its position as the top player in the industry – it expanded revenue and service revenue market share by 0.5 and 1.3 percentage points year-on-year, respectively.
 
Equally interesting is that Digi, which was once positioned at a distant third, is now inching closer to the No 2 spot. The revenue market share gap between Celcom and Digi is now at two percentage points, versus 3.5 percentage points a year ago.

One can see that Celcom is still struggling to grow its prepaid revenue market share, while Maxis made huge gains, expanding its market share by about 2.6 percentage points to 33.2%.
 
Although it dominated the prepaid segment, Maxis suffered a slight decline in postpaid revenue market share. The first half saw Celcom and Digi increasing their market share by 0.3 and 0.4 percentage points, respectively.
 
Nevertheless, one can safely say that it is not a major sign for concern for Maxis, as the company still commands a strong 44% market share.
 
Mobile subscribers

Maxis and Digi added some 1.7 million new subscribers during the 12 months ended June 30, 2015, while Celcom lost more than one million subscribers during the same period.
 
Although Maxis improved its overall subscriber market share and prepaid subscriber market share, it nevertheless experienced a decline in its postpaid subscriber market share.
 
Digi, on the other hand, was the only player that managed to grow both its prepaid and postpaid market share.
 
While Celcom’s first half 2015 numbers showed a decline compared to first half of last year, there is  some good news: During the second quarter alone, the company managed to grow its subscriber base (versus Q1 2015) after suffering three consecutive quarters of net subscriber loss.
 
According to Axiata Group Bhd president and group chief executive officer Jamaludin Ibrahim, most of the net adds came during the last two months of Q2.
 
Celcom managed to regain some momentum thanks mainly to aggressive marketing campaigns and products, especially its P38 postpaid plan.
 
It was also probably why Celcom was able to grow its postpaid subscriber base market share during the first half. 

For the first time, all three operators disclosed their smartphone penetration rates. This is an important statistic as it indicates how well the companies are positioned for future growth.
 
Not surprisingly, Maxis had the highest smartphone penetration rate among the top three operators. Digi came in second with 57% market share while Celcom had only 55%.
 
All eyes will now be on Celcom, to see if its P38 plan can push its smartphone penetration to greater heights and if it can overtake Digi in the third quarter.
 
After all, Celcom managed to grow its smartphone penetration rate by 18 percentage points (versus Digi’s 15 percentage points) between June 30, 2014 and June 30, 2015.
 
Profitability and capex

While some may be surprised to see Digi recording a higher net profit than the mighty Maxis, in reality, Digi already achieved that in the 2014 financial year.
 
Nevertheless, it is not entirely fair to judge these three telcos’ profitability on net profit or even Earnings Before Interests, Tax, Depreciation and Amortisation (EBITDA), as they do not exactly have the same product offerings.
 
Maxis, which has lower net profit than Digi, has investments in its Home Services, where it offers fixed broadband services to homes. Digi and Celcom, on the other hand, do not offer that.
 
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Telco Deep Dive: Q&A with the Big 3 (Part 2)
 
 
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