Telecommunication sector in for a bright future

KUCHING: The telecommunications sector is set to foresee great earnings ahead of time given the planned sale of iPhone soon.

TELCO MARKET GROWTH: DiGi signs an agreement with Apple Inc to sell the iconic iPhone in Malaysia.

According to ECM Libra Capital Sdn Bhd (ECMLibra), potential iPhone buyers may be in for a disappointment if they expect significantly cheaper iPhones to come in by  mid-year at a time when DiGi is expected to commence the sale of iPhones.

To recap, DiGi signed an agreement with Apple Inc to sell the iconic iPhone in Malaysia. However, no fixed date was mooted on the launch of the smartphone, except that DiGi would start selling the iPhone within the “coming months”.

In addition, the research house also noted that DiGi would benefit from a positive development as  it was poised to compete more effectively in the postpaid and wireless broadband market as a result of the announcement since the iPhone was wildly popular amongst Malaysian consumers.

ECMLibra also mentioned that the proposed sale of the smartphone would also help curb the decline of blended average revenue per user (ARPU) as well as a higher data revenue contribution to overall mobile revenue.

In its report, it stated that Celcom Axiata, a wholly-owned subsidiary of Axiata, was contemplating selling iPhones as well in Malaysia, besides DiGi.

However, it also expressed that this was subject to a viability study as the iPhone required a dedicated end-to-end system. ECMLibra reported that Celcom’s CEO Datuk Seri Shazali Ramly mentioned that Celcom had the means to market the smartphone two years ago, but it was then centering on its broadband service, given the strong growth back then.

Nevertheless, the research house noted that by offering the iPhone, DiGi would have taken on higher A & P costs and handset subsidies, which would have put downside pressure on DiGi’s earnings before interest, tax, depreciation and amortisation (EBITDA) margins this year.

It also observed that DiGi had to ensure its monthly data plans were more competitive than Maxis’, as Maxis had a higher 3G population coverage at 60 per cent compared with DiGi’s 30 per cent.

However, ECMLibra also gave its opinion on the downside pressure on DiGi’s EBITDA as limited since DiGi would not compete head-on with Maxis through handset subsidies, but conversely via the quality and reliability of network service. It believed that price competition would be detrimental and provided little value-added benefit to consumers if the network service was not up to par.

The research house also highlighted a news item that mentioned an online survey by system and device testing firm Fanfare which revealed that 57 per cent of smartphone users were unhappy with the overall performance of their devices. The reasons given included application glitches, system crashes and frozen handsets.

Thus, ECMLibra recommended that consumers who wanted to wait on their decision to buy an iPhone should only do so if they intended to procure a fourth iteration of the device, widely expected to be released in June or July. It gave this suggestion based on recent trends where Apple had introduced a new version of the iPhone in this period for the past three years.