Tuesday, September 29

New leader to aid DiGi’s strive for more efficiencies

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KUCHING: Analysts are sanguine on Digi.Com Bhd’s (DiGi) prospects following the official introduction of its new chief financial officer (CFO), Nakul Sehgal, in light of tightening competition within the telco sector.

Kenanga Investment Bank Bhd (Kenanga Research) said the new CFO has taken over the group’s financial seat since August 1.

Before this appointment, Nakul served as CFO of Telenor Hungary since January 2016, overseeing all financial matters and holds the responsibility for establishing and executing company’s strategy, and the enterprise risk management efforts.

Nakul joined Telenor Group in May 2010 as head of financial reporting in Telenor India and had held various leadership positions within the finance department. This paves the way to deliver 2017 guidance, Kenanga Research added.

“DiGi remains confident in delivering its FY17 targets — a low-to-mid single-digit YoY decline in service revenue, stable margins, and capital expenditure at 11 to 13 per cent of service revenue.

“This was despite competition to continue to be fairly active in the second half of the year,” it said in a report yesterday.

“Management believes the aggressive competitive pricing model is not sustainable for the long-run and thus will continue to focus on strengthening its network quality – via the newly assigned 900Mhz spectrum – as well as digital innovations to sustain its long-term growth.

“Besides, DiGi will continue to move away from the non-profitable segments to other segments such as providing total business solutions for both the SME and enterprise segments, to yield better margin.”

On the other end of the spectrum, AmInvestment Bank Bhd (AmInvestment Bank) does not expect DiGi’s efforts in monetising its digital platforms to materialise in the near to medium term.

“Recall that management has recently lowered its FY17F service revenue guidance to a low-to-mid-digit decline amid the unabated competition amongst cellular operators given the need to constantly offer more attractive value propositions to consumers.

“Hence, the prospects for Digi’s service revenue trajectory next year are ambiguous at this stage,” it said in a separate report.

Even though subscribers rose by 254,000 quarter on quarter to 12 million in 2QFY17, AmInvestment Bank saw that Digi’s 2QFY17 prepaid service revenue fell four per cent q-o-q as the segment’s subscriber increase materialised towards the end of the quarter as opposed to a generally lower base on average.

“Given the highly competitive landscape, we expect Digi’s subscriber growth and ARPUs to remain under pressure as both Maxis and Celcom are already aggressively improving 4G coverage and service quality,” it opined.

All in, Kenanga Research believe DiGi is heading towards in the right direction given that market prices offered by telecom players are already at a very competitive level, thus the key differentiating factors will likely come from the value-added services and consumer experience.

To note, DiGi has plans to enhance its operational efficiencies via expediting digital transformation as well as efficient use of the strategic spectrum.

“The group is set to introduce more digital services in the coming months that cater to customers’ evolving needs and digital lifestyle as well as drive differentiation through strategic business themes, cross networking, products and services, and channels,” it added.

“Besides, management also plans to transform its network to the cloud-based model (which is able to accommodate higher data capacities) and leverage on Telenor’s global scale on sourcing, infrastructure collaborations and talent.”