Three key takeaways from Digi's Q4 numbers

  • Digi registered 10 consecutive quarters of postpaid revenue growth
  • Prepaid business continues to decline

Three key takeaways from Digi's Q4 numbers

[Article updated at 10.55am. An earlier version omitted % difference in revenue and net profit.]

DIGI.COM Bhd, one of the country's top mobile operators, announced its fourth quarter results on Jan 23-- whereby both its net profit and revenue suffered a decline.

For the full year ended December 31, 2016, its revenue declined 4.6% to RM6.59 billion (versus RM6.91 billion in 2015), while net profit declined 5.2% to RM1.63 billion (RM1.72 billion in 2015). 

For the fourth quarter alone, revenue fell 3.2% to RM1.67 billion, and net profit fell 2% to RM374.63 million, respectively.

These declines were not entirely surprising, as competition with the incumbents (Maxis and Celcom) and newer players (U Mobile and others) remained intense. This may also partly explain why its share prices remained somewhat stable -- at the RM4.80 - RM5.10 level over the past three months. 

Nevertheless, the company remains encouraged with its 2016 achievements.

"This has been a year of strong execution for Digi. We have kept focused delivering excellent, quality Internet experiences for our customers on mobile while remaining solid in our operational performance. 

"Customers are increasingly recognising the quality of our 4G plus network, Internet and digital services, benefiting from the significant invesments in 4G LTE, 4G+, fibre and digitisation efforts we have made over the years," said Albern Murty, Digi chief executive officer, in a statement.

During the year, the company invested RM780 million (or 12.5% of service revenue) in capital expenditure (capex). The bulk of it was spent on improving overall network coverage. As at end December 2016, its 4G+ network covered 41% of the population, and 4G LTE network covered 85% of the population. 

The investment in 4G+ and 4G LTE networks also resulted in strong growth in LTE customers. In 2016, its LTE subscribers jumped 81% to 4.2 million. 

This year, it hopes service revenue will remain at around the 2016 levels -- which was about RM6.23 billion. It also hopes that its Ebitda (earnings before interest, tax, depreciation and amortisation) margin will stay around 45% in 2017.

It also plans to allocate 11-13% of service revenue to capital expenditure.  

Besides these headline numbers, there are three key takeaways from the Q4 results. These key data points may be signs of possible changes in market dynamics.

Best postpaid net additions in nine years

Three key takeaways from Digi's Q4 numbers

For most part of the past decade, Digi's postpaid quarterly net addition has been about 30,000-60,000. (Net addition = new postpaid customers minus those postpaid subscribers who left during the period)

However, during the fourth quarter 2016, it registered a net addition of 105,000 postpaid customers. It was the 10th consecutive quarter that Digi grew its postpaid subscriber base. It was also one of the rare quarters when it surpassed the 100,000 mark on a quarterly basis. 

In fact, the last time Digi achieved such high postpaid net additions was exactly nine years ago - fourth quarter 2008 - when it posted a net add of 123,000 postpaid customers.

It was also a memorable quarter for its postpaid business, as it recorded RM511 million in postpaid service revenue -- its highest ever. 

Now Digi has 2.1 million postpaid customers. While Digi is still a few hundred thousand customers away from the second strongest postpaid player (Celcom: 2.87 million postpaid customers), do not expect Digi to lift its accelerator paddle as it aims to continue its strong postpaid momentum in 2017.


Next page: Prepaid numbers continue to decline...

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