Maxis to stay resilient despite competitive operating landscape

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REMAIN ROBUST: Maxis is expected to maintain the capex of about RM1 billion for its network development, particularly to improve service quality and enlarge its 3G footprint.

KUCHING: Maxis Bhd’s (Maxis) operations are anticipated to stay resilient despite its fairly competitive operating landscape, underscored by its strong branding and large network footprint.

The telecommunication company owns 38 per cent of the 37 million strong cellular subscriber base as at end-December 2011 and 40 per cent of the industry’s RM22 billion (US$6.94 billion) revenue pie for the year.

The group was expected to maintain its market shares in terms of both subscribers and revenue as it focused on attractive pricing packages to retain its leading position, RAM Rating Services Sdn Bhd (RAM Ratings) said in its recent research report.

“Maxis’ cashflow-generating ability remains robust moving forward, underpinned by its healthy profitability,” it added.

Supported by its solid footing in the local telco industry, Maxis registered a strong revenue of RM8.8 billion (US$2.77 billion) and an operating profit before depreciation interest and tax (OPBDIT) of RM4.37 billion (US$1.38 billion) for fiscal 2011, which translated into an OPBIT margin of 49.6 per cent.

“The OPBIT record is the highest among its Malaysian peers,” said RAM Ratings.

It also exhibited strong cashflow-protection metrics, with a funds from operation debt cover (FFODC) ratio of 0.63 times at the end of the period.

“We expect Maxis to maintain its solid financial performance, underpinned by the stable and supportive domestic regulatory framework,” the rating agency added.

Like the other mature telco markets, the Malaysian cellular telephony sector was saturated – the mobile penetration rate had reached 133.3 per cent as at end-June 2012.

Being in the mature phase, the market faced decelerating subscriber growth and declining switching costs.

That said, the broadband segment still had ample room for growth, underscored by the local broadband penetration rte of only 63 per cent, RAM Ratings highlighted.

On the financial front, Maxis was expected to maintain the capital expenditure of about RM1 billion (US$315 million) for its network development, particularly to improve service quality and enlarge its 3G footprint. This was envisaged to be comfortably supported by internal funds.

Given its generous dividend payout policy of distributing 75 per cent of its profit after tax, Maxis was expected to keep leveraging its balance sheet to meet its projected dividends in the absence of a strong uptick in earnings.

“Despite a steady cash generating aptitude, its FFODC ratio is expected to edge down gradually on the back of a higher debt load. Meanwhile, its gearing ratio is expected to remain high at close to one time,” the rating agency concluded.