Maxis stays forward of the competitors

  • U and Unifi may very well be actual threats to the Big Three
  • eSIMs may decrease distribution obstacles for challengers

Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

THE third quarter ended Sept 30, 2018 noticed the Big Three telcos hit when it comes to general subscriber base and repair income, with because the clear chief amongst the three when it comes to service income, pay as you go and postpaid common income per consumer (ARPU).

As will be seen from the desk under, Maxis Bhd and Celcom Axiata Bhd suffered a quarter-on-quarter decline in general subscriber numbers, whereas Digi managed so as to add subscribers throughout the quarter, trumping general weak market circumstances.

Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

In phrases of service income, Maxis was the one telco that noticed a rise throughout the quarter (and a marginal one at that), whereas Digi and Celcom each suffered declines on this space.

In an announcement asserting its 3Q outcomes, Maxis expounded on the prospects for the monetary yr ended Dec 31, 2018: “We expect to see a more difficult operating environment emerging caused by the termination of a significant network sharing arrangement, the of broadband re-pricing, the introduction of sales and service and intense competition.”

The telco added: “We maintain our guidance for the financial year ending Dec 31, 2018 with service revenue and EBITDA to decline by mid-single digit and high single digit respectively, base capital expenditure to be around RM1 billion and free cash flow (excluding upfront spectrum assignment fees) is expected to be at a similar level to financial year 2017.”

Digi in the meantime, stated in an announcement that regardless of the market challenges forward, “Digi will continue to aim towards improving 2018 service revenue growth development, sustaining EBITDA margin around 46% – 47% and delivering efficient Capex between 11% – 12% of service revenue.”

Commenting on Axiata’s 3Q efficiency, group chairman Ghazzali Sheikh Abdul Khalid stated: “The results for 3Q18 are in line with our expectations for what has become a roller coaster year, affected mainly by regional geopolitics, aggressive market conditions and other externalities.”

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Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

Maxis led in pay as you go ARPU for the third quarter, with Celcom posting larger pay as you go ARPU than Digi. Maxis famous in an announcement that their Hotlink Red Prepaid pack continued to indicate constructive traction, attracting excessive cell web customers, as they enhanced their utilization of information analytics to create worth for our clients. “Despite seasonality effects in Q2 2018, our mobile revenue continued to grow, contributing to 58.3% of prepaid revenue for the quarter,” it stated.

Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

Maxis additionally led when it comes to postpaid ARPU throughout the third quarter of 2018, adopted carefully by Celcom. Commenting on this space, Maxis stated: “Postpaid ARPU was relatively stable at RM93 for the quarter. The growth in Postpaid was primarily driven by the strong demand for our innovative device and value-accretive propositions. In addition, our Hotlink Postpaid Flex has shown steady growth and together with our MaxisONE Share, continued to attract entry level Postpaid subscribers, as well as those migrating from Prepaid to Postpaid.”

Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

In phrases of capital expenditure (capex), the largest spender for 3Q18 was Celcom, who spent RM855 million, whereas Maxis spent RM195 million for the quarter, which it attributed to the upper spend on IT transformation in 3Q17.

Telco Deep Dive: Maxis stays ahead of the competition in 3Q18 roundup

Commenting on the telco sector efficiency in analysis be aware on Oct 31, 2018, CIMB Research noticed that the cell market has seen extra secure competitors since mid-2017, after experiencing a interval of intense competitors in mid-2014 to early 2017.

“The telcos launched new/revised offers that better monetise data between June 2017 and February 2018. Between March and August 2018, the market was largely stable with the Big Three mobile operators (Maxis, Celcom, Digi) keeping quiet on the promotions front, although U Mobile did launch new headline-grabbing RM30/RM50 unlimited prepaid/postpaid offerings, with 3/5Mbps speed caps.”

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The analysis home foresees intense competitors returning to the Malaysian cell market. “In our view, the Malaysian cell market is overcrowded, with 4 main gamers – Maxis, Celcom (a subsidiary of Axiata Group), Digi and U Mobile – and a brand new challenger (TM’s Unifi Mobile) that’s well-funded and might leverage on its complete mounted infrastructure to help the rollout of its 4G cell community.

The analysis home famous that markets which have too many gamers are typically much less predictable, with a better likelihood of a single telco performing irrationally and sparking off a value warfare.

“We imagine that U Mobile and extra so, Unifi Mobile, are nonetheless working at sub-optimal scale and therefore, would need to acquire market share to achieve higher economies of scale.”

Additionally, there’s the specter of U Mobile to the Big Three. According to CIMB Research, U Mobile is more likely to see a drop in community high quality and protection as its 3G RAN sharing settlement with Maxis was terminated in end-2018.

“To fully close the network gap, we understand from U Mobile’s chief network officer that it would need to build around 2.1K new sites. Assuming U Mobile is able to ramp up its network rollout to 750-1,000 sites p.a. (from the usual 400-500 p.a. in the past), starting in mid-2017 (post-termination notice to Maxis), we estimate that it would be able to close the network gap by end-2019F or 2020F. This may put U Mobile in a better position to compete against the Big Three mobile operators.”

Lastly, CIMB Research believes eSIMs may decrease distribution obstacles for challengers. It famous that Apple has included eSIMs in its newest iPhone XS, XS Max and XR. “We believe other handset manufacturers may follow Apple’s lead in the coming months, especially the brands,” the analysis home stated.

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