Telco battleground Q1 2017: Return of the King

Telco battleground Q1 2017: Return of the King: Page 2 of 2

By Goh Thean Eu August 25, 2017

Capital expenditure breakdown

Telco battleground Q1 2017: Return of the King: Page 2 of 2

Although Digi has the smallest capital expenditure allocation planned for 2017, it was the biggest spender in the first quarter with RM197 million.

This was not entirely surprising as most mobile operators tend to have relatively lower capex spend during the first quarter. For example: Maxis’ capex for Q1 2016 was RM162 million, Celcom’s was RM174 million and Digi’s capex was RM171 million.

For telcos, most of the money goes to two areas: improving network quality and coverage; as well as upgrading the IT system. The trend is expected to remain the same over the next several years as the telcos leverage on technologies like 5G and big data analytics.

Who will lead by the end of this year?

In late May, Digi introduced its Infinite postpaid plan which comes with unlimited data and calls. At RM150 a month, customers will get unlimited data with no restrictions on speed and tethering. It also has a RM80 Infinite postpaid plan which has restrictions on speed and additional charges on tethering.

The launch of the new plans signal that the competition in the mobile space will continue to be intense and that the industry could be moving towards the introduction of more unlimited data plans.

“We do not foresee competition in the mobile space to be easing off anytime soon,” said Alliance Research analyst Toh Woo Kim.

“We expect other Malaysian mobile operators to react by introducing their unlimited data plans as they compete for subscribers and try to maintain market share. At the very least, some of the higher end plans by Maxis and Celcom would need to be adjusted, while similar plans would also need to be introduced to counter the very attractive RM80 Infinite plan.”

When contacted by Digital News Asia, analysts believed that Maxis was likely to lead in most metrics, with Digi narrowing the gap on the prepaid revenue front, and Celcom catching up on the postpaid subscribers end.

“While Maxis is expected to maintain its leadership in the overall segment, I expect that it will be a neck-to-neck race between Maxis and Celcom on the postpaid front,” said a head of research from a local brokerage.

A look at Alliance Research’s report revealed that Maxis will continue to grow its overall revenue in 2017 (+2.6% at RM8.84 billion) while Digi’s revenue is likely to remain flattish at about RM6.57 billion (2016: RM6.597 billion). Meanwhile, in terms of the bottom-line, both these telcos are likely to post lower profits.

And who will win bragging rights as the leader in total subscribers come end 2017? Will that even matter as they all work to keep EBIDTA margins above 40%?

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[Ed Note: This article first appeared in Telco Deep Dive 2017. You can download the entire pdf through the image of the cover above. We will also be running each of the stories from the Telco Deep Dive on DNA. Please send us your feedback at [email protected].]