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Telenor Group: Increasingly Challenging for Digi to operate in Malaysia

Norway-based Telenor Group, a major shareholder of mobile service provider, Digi.com Berhad (Digi) said that competition has intensified in Malaysia and it has become increasingly challenging to operate due to macroeconomic development.

Telenor-Group-3Q20-Digi-Malaysia-Financial

In its Interim report for 3Q2020, Sigve Brekke, President and CEO of Telenor Group said the following:

In Malaysia, competition intensified especially on data revenues, and the macroeconomic development has become increasingly challenging. This resulted in increased downselling pressure and lower customer intake particularly in the entry-level postpaid segment. In addition, continued border closures and travel restrictions in response to COVID-19 continued to impact roaming revenues.

“Subscription and traffic revenues decreased by 1%. While prepaid revenues increased slightly as a result of higher internet and digital service revenues, postpaid revenues fell by 4%. As a consequence, gross profit decreased by 4%.

Opex remained stable as increased network costs were fully offset by lower commission cost. EBITDA decreased by 5%, or 8% excluding non-recurring items both this quarter and third quarter last year. The EBITDA margin was 51%.

Digi reported its third quarter (3Q2020) financial results last week:

  • Total revenue grew 8.7% q-o-q and 1.1% y-o-y to RM1,579 million on a wider range of innovative core product launches and digital solutions curated to suit customers’ connectivity needs.
  • Uplift in prepaid revenue substantially cushioned y-o-y service revenue decline, narrowing it to -2.8% despite lower regulated interconnect rates, and weaker roaming and consumer spend due to Covid-19.
  • Internet and digital revenue rose 9.8% y-o-y to RM1,004 million, represented 73.1% of service revenue against 64.6% a year ago.
  • Postpaid revenue stood at RM626 million.
  • Prepaid subscriber base grew, contributing to a 7% increase in Prepaid revenue for the quarter.
  • Profit After Tax (PAT) was RM321 million or 20.3% margin.
  • OPEX stood at RM397 million, having invested in advertising and promotional activities as sales efforts recovered post-MCO.
  • Ops cash flow at RM652 million or 41.3% margin having invested RM134 million capex for network enhancements.
  • Net debt to EBITDA ratio remained healthy at 1.5 times while conventional debt over total assets of 7.5% was well-within the Shariah threshold.
  • Third interim dividend of 4.1 sen per share equivalent to RM319 million, payable to shareholders on 17 December 2020.

Telenor said that in the first half of 2020, its operations in Asia and roaming revenues remained impacted by the COVID-19 situation. “However, as lockdowns have been eased, there are now early indications of recovery in Bangladesh and Pakistan, with stabilising trends in the number of new daily cases and economic activity gradually picking up again. In Thailand and Malaysia on the other hand, we saw increasing macroeconomic pressure, impacting customer intake and monetisation opportunities, and also resulting in downselling to subscriptions with smaller packages in the postpaid segment. Movement restrictions and COVID-19 countermeasures by local authorities remain intact, for example the temporary removal of the price floor in Myanmar, which impacts competition intensity,”

The Telenor Group’s mobile subscription base was 180 million at the end of the third quarter.

[Download PDF]- Telenor Group Q3 2020 Interim Report

About Kugan

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