Digi Q3 2015 revenue dips, Internet revenue surges 18%

• Hit by GST concerns, weaker ringgit, fierce competition
• 4G LTE leadership crucial for the company, says CEO

CELLULAR provider Digi.Com Bhd reported third quarter 2015 (Q3 2015) revenue had dropped to RM1.67 billion from RM1.76 billion in the corresponding period last year, although Internet revenue grew 18% year-on-year and 4.5% quarter-on-quarter.
 
Total revenue in the nine-month period for the quarter ended Sept 30 2015 was RM5.19 billion compared with RM5.22 billion the year before, it said in its filing with Bursa Malaysia. [RM1 = US$0.24]
 
In a statement, chief executive officer Albern Murty (pic above) attributed the overall lacklustre third quarter to volatile consumer sentiment from the GST (Goods and Services Tax) that was rolled out in April, a shrinking wallet size from the weaker ringgit, and fierce competition.
 
Meanwhile, its Internet revenue growth was driven by the 58.4% smartphone penetration rate of its subscriber base, the company said.
 
Postpaid Internet subscribers rose to 1.4 million or 78.8% of total postpaid subscribers from 68.9% a year ago.
 
Despite aggressive data pricing and quotas, its postpaid internet revenue rose 14.7% while postpaid service revenue strengthened 2.8%, from a year ago, the company said in its statement.
 
A similar upward trend is seen on prepaid with Internet revenue surging 20.1% year-on-year to RM335 million on the back of higher prepaid Internet penetration of 56.8%, it added.
 
Digi said it also saw a steady increase in its active Internet customer base to seven million or 60.2% of its total base, which it believes is a reflection of growing consumer confidence in its network performance.
 
The company’s LTE subscribers rose to 1.5 million as at end Q3 2015, an increase of more than twofold from a year ago, amounting to 13.2% of its total subscriber base, the company said.
 
Currently, it said its 4G LTE (Fourth Generation/ Long-Term Evolution) network reaches 50% of the Malaysian population, and it plans to build an additional 1,500 4G LTE sites by the end of this year.
 
The company claims to now have the widest 4G LTE network in the country, a position which it said position gives it “the edge in accelerating Internet adoption, and expanding its postpaid share, to fuel steady subscriber and revenue growth moving forward.”
 
Albern said the Internet growth was a result of Digi’s stronger network and customer focus.
 
“We’ve … focused effort in completely modernising our network and fibre infrastructure capabilities over the last three years to give us a solid foundation and competitive advantage to fast-track 4G LTE rollout to more than the 28 cities we are already in.
 
“4G LTE is a game changer … taking a leadership position on 4G LTE is therefore crucial for us to make inroads in postpaid and the fast-growing mobile Internet segment,” he added.
 
Digi today delivers 4G LTE on the 1800MHz and 2600MHz spectrum bands, and overlays both spectrum bands for 4G LTE in an increasing number of key market centres to provide customers with wider network coverage, greater capacity, and improved indoor and outdoor Internet experiences, it said.
 
“Our focus now is to fuel data momentum to drive future growth,” Albern said.
 
“In the coming months we will continue to make access to high-speed Internet easy through our wide service touchpoints in stores and online, with competitive smart device bundles and plans, and innovative digital service offerings that will allow our customers to enrich their Internet experience,” he added.
 
During the quarter, Digi invested another RM223 million with a year-to-date cumulative investment of RM616 million in capex (capital expenditure) primarily on 4G LTE network deployment nationwide.
 
The company has committed to spend around RM900 million in 2015, with aggressive plans to further expand its 4G LTE footprint in the fourth quarter.
 
Service revenue remained steady at RM1.584 billion (Q3 2014: RM1.584 billion) against downward pressure from persistent price competition and weak consumer sentiments.
 
Earnings before interest, tax, depreciation and amortisation (EBITDA) moderated to RM719 million from RM789 million a year ago, primarily due to adverse foreign exchange developments in the quarter, and intense competition.
 
Profit after tax also narrowed to RM397 million during the quarter (Q3 2014: RM487 million) from moderated EBITDA and higher progressive depreciation from its network expansion exercise.
 
Digi announced that it will pay a third interim tax exempt dividend of 5.1 sen per ordinary share equivalent to RM397 million or almost 100% payout ratio to shareholders on Dec 4. A total of 17.1 sen dividend per share has been declared year-to-date, equivalent to RM1.33 billion.
 
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