Maxis reports Lowest Ever Postpaid Average Revenue per User (ARPU) [1Q20]

Maxis Berhad reported its First Quarter (1Q20) financial results last month. The Malaysia-based mobile Telecommunication service provider reported its lowest ever Maxis Postpaid ARPU in the past 6 years (likely lowest ARPU of all time) at RM81 in 1Q20 (vs RM84 in 4Q19).

“ARPU” stands for Average revenue per user.

It said that the Postpaid ARPU decreased due to:

• Loss of inbound & outbound roaming as a result of COVID-19 and MCO (Movement Control Order)
• Mobile Termination Rate Reduction
• Dilution from entry point Hotlink Flex

By market definition, there are currently 11.32 million Maxis mobile subscriptions as of 1Q20, up from 11.23 million it had at the end of December 2019 (4Q19). It added 86k new subscriptions during the first 3-months of 2020.

Maxis Postpaid subscriber base is now at 3.83 million as of March 2020, up from 3.76 million at the end of December 2019. It added 78k new subscription in the latest financial quarter.

As for Prepaid, there are now 7.39 million subscribers in 1Q20, up from 7.38 million at the end of December 2019. The Telco added 13k new subscriptions in 1Q20.

In terms of revenue generating subscriptions (RGS), Maxis reported 9.68 million mobile subscriptions including 5.88 million on Hotlink prepaid, 3.7 million on postpaid and 94k on Wireless Broadband. The Telco lost 286k revenue generation subscriptions in 1Q20.

Maxis revenue generating subscribers (RGS) are defined as active line subscriptions (postpaid and prepaid) that excludes those without revenue generating activities for more than 30 days.

There are currently 1.51 million non-revenue generating prepaid subscription in the Maxis network.

Maxis has never been able to add more revenue generating subscriptions to its prepaid subscriber base since the third quarter 2015 (3Q15). The Telco had 8.85 million prepaid subscribers (RGS) in 3Q15 and it gradually decreased over the past 4 years, now down to 5.88 million in first quarter 2020 (1Q20). Maxis blames the latest drop in its Hotlink prepaid subscriber base to “COVID-19 and MCO challenges in physical retail channels and field staff at home”

Maxis Hotlink Prepaid Subscriber Base since 2015 (RGS in million):

At the same time, despite “COVID-19 and MCO challenges in physical retail channels and field staff at home” contributed to slowed prepaid sales, Maxis managed to add more postpaid subscription due to “Strong prepaid to postpaid momentum with value accretive Hotlink Postpaid take-up“. MalaysianWireless notes that prepaid to postpaid conversion can only be processed at limited and selected authorised Maxis Centres. Meanwhile, during MCO period, Hotlink prepaid starter packs can be purchased online or at retail stores nationwide and customers could self register the prepaid line via the Hotlink Daftar app.

As for mobile Internet users, Maxis reported 8.3 million users in 1Q20, which is about 400k lower than the previous quarter (8.7 million Internet users in 4Q19). While Maxis did not increase its mobile Internet subscriber base in 1Q20, the Telco said late last month that “Some customers may not have the optimum Internet experience on some occasional evenings”.

Between January to March 2020 (1Q20), Maxis postpaid subscribers consumed an average 16.68GB/month (15.42GB in 4Q19) while prepaid subscribers at 16.89GB/month (14.75GB in 4Q19). The higher Internet usage in the 5G-ready Maxis network was also contributed by the free Internet quota it gave to customers. Since late March 2020, Hotlink prepaid subscribers are given an extra 20GB Internet when selected Internet pass are purchased. The Telco also gave free 3GB Internet to postpaid and prepaid users in March.

Maxis Fiber Connection base is now at 392k in 1Q20, up by 23k from 369k in 4Q19. APRU for fibre connection remains unchanged at RM109 from the previous quarter.

Key financials:

Q1 financial highlights year-on-year (yoy) – Q1 2020 vs Q1 2019, according to Maxis:

• Steady service revenue excluding wholesale at RM1,928 million, 2.8% growth versus RM1,876 million recorded in Q1 2019. This was due to the strong growth in postpaid and fibre business, offset by decline in prepaid and the industry wide reduction of Mobile Termination Rate (MTR).
• Continued postpaid leadership with revenue excluding wholesale growing 4.7% to RM972 million from RM928 million in Q1 2019. The quarter saw continued strong prepaid-to-postpaid migration as customers step up for higher value tiers especially Hotlink Postpaid Flex with increased connections per account. Subscriptions grew 13.7% yoy bringing the total to 3.4 million. Postpaid APRU decreased to RM86 from RM92, reflecting the MTR reduction, initial Covid-19 impact and the dilution effect from Hotlink Postpaid Flex.
• Prepaid segment experienced greater challenges this quarter. Apart from continued SIM consolidation, on-going migration from prepaid to postpaid and reduced the MTR, early impact of Covid-19 started to kick-in. Prepaid revenue was 10.4% lower at RM714 million against RM797 million recorded in Q1 2019. Nevertheless, with effective execution of digital channels for top-ups, prepaid ARPU remained stable at RM39 per month when compared to RM40 in Q1 2019.
• Demand for data grew exponentially especially from 18 March as the Movement Control Order (MCO) took effect. Our customers consumed an average of 16.8 GB of data per month on a blended basis during the quarter, 43.6% higher than Q1 2019. Although average data usage increased across all services of Home Fibre, Prepaid and Postpaid during MCO, this does not necessarily correspond with the increase in revenue as it is within existing data plans for many customers, while some are based on top ups.
• Continued positive momentum in fibre, with 40.0% growth in fibre connections yoy, bringing the total to 392k. The take up was primarily driven by strong adoption of MaxisONE Prime, resulting in steady ARPU from superfast fibre packages of 300, 500 and 800 Mbps. Fibre connections were slightly lower this quarter at 23k against 31k in Q1 2019 due to installation deferment as a result of the MCO.
• Normalised EBITDA remained healthy at RM920 million, 3.5% lower than RM953 million registered in Q1 2019. Consequently, Normalised PAT for the quarter was 10.9% lower at RM360 million against RM404 million in Q1 2019. The decline was mainly due to loss of wholesale business and higher impairment made to receivables as the Group revised the expected loss rates in view of the Covid-19 pandemic and its impact on economies worldwide which has caused a significant increase in credit risk.
• Normalised EBITDA margin on service revenue remained high at 47.4% against 48.9% in Q1 2019.
• Operating free cash flow increased 26.2% to RM713 million compared to RM565 million in the preceding year, mainly due to improved productivity and working capital management.
• Declared a first interim dividend of 4 sen net per share for the quarter, representing a dividend payout ratio of 87%. The Company is taking a prudent approach to ensure it continues to have the capacity to grow the business in line with its convergence strategy and invest in its network given the dramatic increase in demand.

In a media statement posted to Bursa Malaysia, Gökhan Ogut, CEO of Maxis said, “We had a good set of results for Q1 overall amidst early impact of Covid-19. We continued to lead the mobile market and turned in solid growth in our fibre business, confirming strong traction in our convergence ambition. For our Enterprise business, the quarter saw us bringing strong partnerships which enabled us to offer new solutions and deliver even more value to businesses in Malaysia. Moving forward, we foresee the Covid-19 situation evolving and we will continue to assess its impact on our operations. Fundamentally, we are strong and are prepared to overcome these challenging times with a well-developed BCP plan that has been in place for several years. For now, our first priority is the health and safety of our employees, as the Maxis’ front liners work 24/7 to ensure that consumers and businesses have uninterrupted connectivity and availability of services during this period.”