As a mobile connectivity and internet services provider with long-standing history in Malaysia, Digi.Com Bhd (Digi) has an ambition to ensure that the group maximises on the opportunity of internet and data growth.
Chief executive officer Albern Murty revealed in an exclusive interview that Digi recorded double digit growth in postpaid in 2017 which started off on the strategy that the group was going to move towards the larger base of focus for postpaid’s distribution.
In addition, Digi, which comes from a very strong prepaid base, took up position in the third quarter of 2017 (3Q17) and ended the year as the largest operator in terms of subscribers.
“We wanted to move then into maximising the opportunities that both the internet growth, trends that users are looking at, and then of course, to add digital services into that picture.
“This is also the same thing that we are going to do moving into 2018 which is really to dominate the data internet boom and then to capture the digital service position in 2018,” Murty told BizHive Weekly.
“Part of that is, as I said will be very important for us, is the postpaid growth. We’ve also seen very good postpaid growth in East Malaysia – both in Sarawak and Sabah.
“Most of that is coming from our own base of prepaid customers maturing, moving from traditional voice-SMS into data and then now, moving onto commitment plans as commitment plans are both made more affordable but also much more relevant to their lifestyle.”
Shift towards new offerings
Digi noted in a management and discussion analysis for 3Q17 that its relentless focus to deliver robust internet experience fuelled internet revenue growth of 8.3 per cent quarter-on-quarter and 15.6 per cent year-on-year.
The group went on to highlight that its internet and digital-based offerings supported better monetisation and internet revenue growth, paving the way for 1.6 per cent higher sequential service revenue with all-time high postpaid revenue and stabilised sequential prepaid revenue.
With these digital services, Digi started to shift the way it served its customers, rather than relying on physical channels and contact centres.
“We’ve also moved a lot of our customers interacting with us on our digital platforms,” Murty added. “Started off on the web, our Digi Store Online, but also now on MyDigi, where we have close to 2.3 million customers using that service both for self-help but also now for rewards and running their own usage needs.
“For example, when they run out of quota or when they want to do a reload top-up, transfer for family or pay bills and so on, so forth. MyDigi’s becoming both a lifestyle app but also a self-serving app, that’s something that we did in 2017.
“We will continue to develop new features (for MyDigi) going into 2018.”
The CEO stressed that Digi will continuously take on and work with partners either on digital services or on services that are relevant for its end users.
“We’ve always been known as an innovative player in the past and even the last couple of years, we’ve been showing that we have been able to innovate in spite of the intense competition in the marketplace,” he said.
“That will continue and these are the areas where we will continuously differentiate oursevles both in making the core part of the business – connectivity – affordable and continue (enhancing) customer experience on data but at the same time, choosing key partners that we will take services out to the market that is relevant.”
Murty believed that Digi has the right mix of both postpaid and prepaid offerings in the market and reach to customers, both physically and in digital stores, and in terms of availablity for customers to be able to enjoy the best offers in the market.
“Going into 2018, the data growth is not going to slow down. Data growth is going to continue and I also think that consumers and trends will drive that, not just us.
“I think there will be much more affordable devices on 4G coming out in the market and we need to assume that customers won’t stop using data overnight.
“I think data is going to be continuously required so we have a huge opportunity to serve those customer and to monetise that,” he said.
Drawing strengths from 900 Mhz allocation
Mid-2017 saw Digi taking on the 900 megahertz (MHz) position with the spectrum made available to the group from July last year and rolling out both the 4G LTE and 4G Plus LTE-Advanced (LTE-A) network to more rural areas of Malaysia.
Beginning July 1, Digi switched on its new 900MHz spectrum, which allows mobile phone signals to reach further from base stations to offer wider coverage, and it brings the telco’s consistent, high speed 4G Plus network to more topographically challenging parts of Malaysia such as Sarawak.
According to Digi, the 900MHz spectrum allows mobile phone signals to reach further from base stations to offer wider coverage. The group also noted that mobile signal on the new 900MHz spectrum not only reach further from base stations, but also penetrate walls better to offer stronger indoor coverage.
As of 3Q17, Digi continued to take leadership position on LTE-A network with coverage expanding to 49 per cent of population nationwide.
“Our 4G LTE network alongside with new LTE 900Mhz capabilities reached 87 per cent of population to deliver better indoor 4G coverage,” the group said.
Latest statistics from Digi revealed that in building a network that supports East Malaysia’s increasing demand for more data, 4G LTE now reaches 74 per cent of the population in Sarawak while its faster 4G Plus (LTE-A) network covers 37 per cent of populated areas in the state.
“The 900MHz is very important for us because it allowed us to really take coverage, especially in markets like Sarawak and Sabah, but also in Peninsular, where we can leverage and make sure that we have broader coverage on 4G and also penetrate into buildings,” Murty explained.
Digi highlighted in the management and discussion analysis for 3Q17 that the solid development on 4G Plus network significantly improved market perception of its network while actively driving internet revenue growth, with subscribers’ average monthly data usage increasing almost two times to 6GB from a year ago.
(SOURCE: Digi)
‘Extremely high data demand from East Malaysia’
Digi, on the whole, constantly looks at pockets of growth of internet across the whole country. However, Murty observed that particularly in Sarawak and Sabah, mobile is the first source of internet and connectivity.
“This is why we spend a lot of time focusing on both the Sabah and Sarawak region
s – to particularly ensure that we have networks that can support that growth that is being driven not just by the operators but also by digital services and trends that customers pick up,” he said.
With Sabah and Sarawak, Murty observed that upon launching of a new network or network expansion, “we can see that the demand is extremely high”.
“There are users who latch on to the network almost immediately, which is why we prioritise East Nalaysia as one of the focus areas,” he said.
“The reason for that is we had a base of customers, there in those two markets, that were predominantly, quite a long time ago, mainly on prepaid.
“As data penetration and data grew, a lot of them started to shift on to both prepaid data and postpaid plans with commitment.
“We have been able contribute to both by building up a more robust 4G and 4G Plus network to the state.”
With the leverage of spectrum, Digi can basically take more capacity on to the mobile network.
Digi is also looking at how it can take traffic from Sabah and Sarawak back to Peninsular Malaysia and also to make sure that the provider is able to provide a robust network back and forth.
Growing portfolio of offerings
On the digital services side, Murty highlighted that any launches in the market by Digi such as Internet of Things (IoT) solutions and it will also be available in East Malaysia.
An example is iFleet, a business-to-business (B2B) solution targeted at commercial vehicles, the first IoT solution Digi introduced from its range of Connected Vehicle offerings.
The intelligent fleet tracking solution enables businesses to track their fleet in real-time and is currently the most robust all-in-one solution available in the market.
iFleet is supported by Digi’s consistent, high speed 4G LTE network.
“We have iFleet customers that are using connected trucks now in East Malaysia extensively to deliver consumer products almost to the doorstep,” Murty enthused.
One example is Atlas Edible Ice (Sarawak) Sdn Bhd which announced its partnership with iFleet on November 27, 2017 to enhance the performance of its commercial fleet to effectively navigate Sarawak’s topography and meet the growing local food and beverage (F&B) sector.
According to Digi’s chief digital officer Praveen Rajan, with Atlas Ice, Digi is now seeing the first seeds of success from the group’s connected vehicle strategy and commitment to translating intelligent digital solutions into real business value with bottom-line impact for its customers.
“iFleet will continue to disrupt the fleet management solutions market with a best-in-class, end-to-end solution for an affordable fee,” he said. “We look forward to helping many more businesses move toward their efficiency and service goals.”
Digi also ventured into the financial technology (fintech) space with the launch of its first e-wallet vcash in November 2017, which is available in some key touchpoints across the country.
The group highlighted that vcash is basically a mobile payment application that offers Malaysians an easy, more convenient way to pay, send, request and store money in their smartphones.
vcash is a solution offered by Digi in partnership with Valyou Sdn Bhd, an e-money issuer authorised by Bank Negara Malaysia (BNM) and is now available for all Malaysians on the Google Play Store or Apple App store for free.
“As Malaysia moves towards becoming a cashless society, spurred by BNM’s strategic measures to accelerate the country’s migration to e-payments, users may find vcash as their go-to e-Wallet that offers a secure and superfast payment service using QR codes.
“Beyond payments, vcash also enables funds transfers between vcash users and also to non-vcash users, facilitates cash deposits and withdrawals at any time, and purchase of items from the in-app vcash store. Users do not have to pay transaction fees for using any of the features above,” the group said in a statement.
With consumers moving on to the online shopping platform, Murty observed that payments via cash on delivery are still a common occurrence here.
“Payments can be done on delivery, traditionally payments have to either be done by bank account (transactions) or by credit cards, which a lot of Malaysians are still not used to,” he said. “Believe it or not, 70 per cent of domestic e-purchases are delivered and it’s cash-on-delivery.”
With vcash, Murty believed that “there is a huge upside in terms of making payments, a big digital way of transacting and we believe we can do that.”
In East Malaysia, vcash can currently be used at Digi Stores to cash in and cash out and pay for peripherals.
“These are just small examples, but very relevant examples for end-users in Sarawak…how digital shift will happen and how we can be part of that ecosystem.”
Analysts expect future spectrum allocation in 2018
Looking ahead, the research arm of Public Investment Bank Bhd (PublicInvest Research) expects Malaysian Communications and Multimedia Commission (MCMC) to review and re-allocate some of the spectrum in the 700MHz, 2,100MHz, 2,300MHz and 2,600MHz bandwiths in 2018.
“The 2,100MHz band is due for expiry in April 2018,” PublicInvest Research said. “Although the current allocation under this band appears to be fair (each incumbent holding 2x15MHz + 1x5MHz), we believe the pricing, particularly the upfront cost, could be revised upward.”
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) also noted in a 2018 Outlook report that the 2,100Mhz spectrum band are currently being helmed by Maxis Bhd (Maxis), U Mobile Sdn Bhd (U Mobile), Celcom Axiata Bhd (Celcom) and Digi.
“Thus, this could create uncertainties among the four mobile service providers should they be able to retain their respective portion beyond 2018,” it said.
Also, smaller operators were given allocation under the 2,600MHz band but going forward, PublicInvest Research expected this to be re-farmed to the major operators in order to improve efficiency and maximise revenue collection by the government.
“Meanwhile, the valuable 700MHz band may only be made available to the telcos once digital television broadcasting is closer to successful launching, perhaps in the second half of 2018 (2H18),” the research arm said.
A total of eight blocks of 2x5MHz will be made available and PublicInvest Research anticipated Telekom Malaysia Bhd (TM), Maxis and Celcom to be allocated two blocks each while Digi and U Mobile may receive one block each.
On the other hand, taking cue from the rollout of mobile services on 2,600Mhz, MIDF Research viewed that Maxis, Digi, Celcom, U Mobile and YTL Communications Sdn Bhd (YES) would stand a better chance of getting a fair portion of the coveted 700Mhz.
“In addition, these companies also have the financial capability to fund the spectrum fee,” the research arm said.
Meanwhile, PublicInvest Research pointed out that Digi has the strongest balance sheet with low gearing level.
Hence, the research arm reckoned that funding for the spectrum will not be an issue for Digi.
“Separately on Digi’s shariah compliance status, it has already regularised its conventional debt ratio to within 33 per cent threshold in 2Q17 with the establishment of Islamic debt financing,” the research arm added.
“Even under scenario of further borrowing is required for the payment of 700MHz spectrum, the ratio is not likely to go beyond the threshold as Digi has a RM5 billion Islamic bond (Sukuk) programme in place.”
Given that the successful bidders would need to pay a hefty sum for the 700Mhz, MIDF Research did not discount the possibility that the spectrum allocation for much awaited 2,300Mhz and 2,600Mhz could be postponed further.
“This would provide more time for the mobile telecommunication service providers to strengthen their respective financial position,” it said.
Overall, MIDF Research expected competition to remain intense among the mobile service providers as they are constantly solidifying their market
position.
Moreover, while more emphasis has been place on digital offerings, the research arm did not expect this segment to significantly contribute earnings in the near term.
“The hefty cost of acquiring and maintaining new spectrum allocation serves as a challenge to local mobile players.”