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Mobile Number Portability gives DiGi hope for further success

Here is an interview with DiGi by Starbiz


STARBIZ: No new spectrum – does that hinder DiGi’s growth?

Morten Lundal: We have significantly less spectrum than Celcom (M) Bhd or Maxis Communications Bhd. We are somewhat at a disadvantage because of that. If we could get more spectrum, we are clearly a player that would use this national resource efficiently.

STARBIZ: Given an option, which one would DiGi choose: the 3G spectrum or WiMax spectrum?

Morten Lundal:WiMax or 3G are similar as they both can offer broadband access to the Internet, but 3G offers a few additional things for a mobile operator. If we were to only compete for broadband, we would be indifferent.

But as a mobile operator, we would prefer 3G as we can also produce voice even more efficiently with it in the future. But DiGi is still very competitive without any of the two.

STARBIZ: What efforts are in place to get more spectrum?

Morten Lundal:There is a review being done now by MCMC (Malaysian Communica-tions and Multimedia Commission) for a spectrum re-allocation.

It is to make sure that valuable spectrum is being used and not left idle. DiGi is using all its spectrum efficiently, which is good both for consumers and the country.

STARBIZ: Has DiGi asked for more spectrum from MCMC?

Morten Lundal:We famously applied for 3G and WiMax without much success. When it comes to our future positioning, we will pose our views to MCMC in December.

STARBIZ: How much of spectrum or what type would be ideal?

Morten Lundal:We would like spectrum to produce voice as we are growing, and more spectrum will allow us to plan our network more efficiently.

We would like to have broadband spectrum, so that we could use DiGi’s competitive strength in driving more broadband penetration in Malaysia.

Given the way we made headway in the mobile sector, DiGi’s entry in broadband market will drive competition and expansion, which I think consumers would applaud and the Government would appreciate, since broadband growth is seen as important by all.

STARBIZ: When would the existing spectrum hit its limits?

Morten Lundal:We do not have ceiling as such. The only thing that happens when you have spectrum exhaustion is that we would have to add more cost and more sites than our competitors.

STARBIZ: Would DiGi work with another operator to get more spectrum?

Morten Lundal:We should rather ask MCMC. It is the regulator’s task to reallocate spectrum so that it is more efficiently used.

STARBIZ: What are the trends in consumer spending in the mobile sector?

Morten Lundal:When it comes to trends, we are part of an over-hyped industry.

Today, people love to be able to call anyone wherever they are or whenever they want, and SMS. That is a proven factor globally, but many advanced services like video calls are globally a flop as it is very difficult to change people’s behaviour.

Some services are proven successful in some segments in some countries but not at a global level.

Looking two years ahead, my take is nothing much would actually change – at least nothing that would affect our revenue composition significantly.

Voice telephony and SMS will remain strong. But over a five-year period, we may see non-SMS data growing, but not in a very significant way.

STARBIZ: Where can DiGi tap new growth?

Morten Lundal:As the fixed network dries out over the next decade, this transition will drive growth in the mobile sector.

Lower prices in the mobile sector will drive up confidence for people to call and usage patterns will be up, and that means growth.

Higher salaries will also increase mobile spending and these are growth areas that we can tap into.

Besides that, the barriers for consumers to reach out to DiGi are fast disappearing in terms of closing coverage gap, and the brand attraction is at least at par with other players.

With mobile number portability (MNP), the major barrier to choose DiGi would be removed. So there is room for growth in the mobile industry even though some say it would hit stagnation, but our challenge is to remain competitive.

STARBIZ: Where would the next fight be in the industry?

Morten Lundal:Pricing would be a factor in the competition. If you observe the mature markets, pricing is still very important for positioning in market share. We also have new players coming in and that will also add to the price focus.

STARBIZ: Currently, voice tariffs are in the 10 to 15 sen per minute range among operators. How low can it go in a competitive landscape?

Morten Lundal:At current prices, Malaysia’s voice call rates are very competitive, given the wide coverage, high quality and rapid innovation.

STARBIZ: Would mobile TV be the next killer application to drive mobile revenues?

Morten Lundal:The industry has a tendency of proclaiming what has not been proven yet to work to be the next big thing. Mobile TV has not been proven yet to not work but some still believe that will be big.

However, at least until now, mobile TV launched in any country has seen a very low consumer demand, so it would be pure speculation to say that mobile TV would be the next big thing to drive revenues.

It is one of those illusions the telecom industry tend to surround themselves with.

STARBIZ: Do you reckon DiGi would gain hugely from MNP?

Morten Lundal:I believe there would be a positive impact on DiGi. People chose their cellular numbers years ago, and with MNP they can have a chance to choose the operator they prefer and keep their numbers.

There are a lot of people who would love to change to DiGi but love their numbers even more. Now, with MNP, they can take their beloved numbers and join us.

Operators would be on their toes with MNP because customers would be able to move freely and even leave freely if the service is bad.

Hence, customer service would have to improve for customer retention. MNP is great for consumers.

STARBIZ: How important is customer retention to DiGi?

Morten Lundal:It is very important. We don’t like to tie our customers in with long contracts. We rather intend to give the best customer experience so that customers would trust us, and for that reason stay with us.

STARBIZ: What customer experience would DiGi offer to its 6.1 million mobile users in an MNP environment?

Morten Lundal:The functional attributes: the network is always on, you will always have access to services you want and you will be surprised by innovation now and then. It is important both that the basic always works and that the latest is always there.

The customer’s positive experience with the company’s service is important as well. It is not just about choosing the product but a preference for the company offering the product as well.

By having these attributes, we would be competitive in an MNP environment.

STARBIZ: DiGi topped the rankings in higher value creation among telcos in Asia-Pacific last year. How did you manage that?

Morten Lundal:Our focus was to compete in Malaysia and shareholders determined our value.

STARBIZ:Would there be a corporate exercise to split your shares to make your shares more accessible to the public?

Morten Lundal:No, we think the price per share is still affordable. (DiGi shares closed 30 sen higher to RM25 at Friday’s close).

STARBIZ: Would there be a cash call?

Morten Lundal:We have readily available funds to support our capital expenditure of between RM600mil and RM700mil this year, and RM700mil to RM900mil next year.

The funds are required to support growth and change to more modern and up-to-date platforms.

STARBIZ: Telekom Malaysia Bhd’s cellular unit, possibly Celcom, would make its debut on Bursa Malaysia mid next year. How would DiGi stack up against that unit?

Morten Lundal:Celcom itself is pretty comparable in size, but the holding company has ownership of foreign national assets whereas DiGi’s strength lies in that it is fully focused on the Malaysian market.

STARBIZ: Maxis Communications Bhd wants to be a regional player. Does DiGi have any such ambitions?

Morten Lundal:No, we are focusing on making great customer experience on efficient platforms in the Malaysian market.

P.s: Telco Talk Malaysia wants to meet the DiGi Chief Executive Officer in person. Will that happen?

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About Kugan

Kugan is the founder of MalaysianWireless. He has been observing the mobile industry since 2003. Connect with him on Twitter: @scamboy