Post on 12-Jun-2020
4Q 2015 results
Albern Murty, CEO 5 Feb 2016
Key highlights
Financial updates
Outlook
Q&A
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Disclaimer
This presentation and the following discussion may contain forward looking statements by Digi.Com Berhad (Digi) related to financial trends for future periods. Some of the statements contained in this presentation or arising from this discussion which are not of historical facts are statements of future expectations with respect to financial conditions, results of operations and businesses, and related plans and objectives. Such forward looking statements are based on Digi’s current views and assumptions including, but not limited to, prevailing economic and market conditions and currently available information. These statements involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not and, should not be construed, as a representation as to future performance or achievements of Digi. In particular, such statements should not be regarded as a forecast or projection of future performance of Digi. It should be noted that the actual performance or achievements of Digi may vary significantly from such statements.
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4
4Q 2015
Resilient 2015 full year performance with fastest growing data network serving over 12.1 million subscribers
Postpaid +2.8% revenue +119,000 subs
Prepaid -0.7% revenue +585,000 subs
Service revenue +0.2% growth
RM6.35 bn
4G-LTE > 65% coverage
nationwide RM904 mn capex
EBITDA 45% margin
(normalised*)
Dividend 99% payout
22.0 sen per share
* If exchange rate constant at 2014 year end rate
5
4Q 2015
Step-up on market positioning with solid core products and network
• Fast-track expansion of 4G-LTE network — Rapid LTE adoption rate with 2.3 million
subscribers, up 774K subscribers from last quarter
• Positive trajectory from competitive offers and robust LTE-A/4G-LTE/3G network
— Strong acquisition momentum with 450K net adds in the quarter
— Service revenue marginally higher sequentially at RM1,587 million
— Modest margins after accounting for seasonally higher smartphone demand, in addition to effects from continued intense competition and weak MYR currency
• FY2015 performance within guidance
— Low single digit service revenue growth of 0.2%
— 45% normalised EBITDA margin — Substantially stronger network and
infrastructure capability within RM904 million planned capex investment
6
4Q 2015
Deliver important milestones with greater customer focus, agility and impact
Stronger comeback in
the market with competitive
value proposition
Strengthen dealer loyalty and enhance physical and
online channels
Fastest growing network with
nationwide 4G-LTE coverage
Win frontline battles to maintain
leadership on NPS
7
4Q 2015
Building solid foundations for stronger data revenue opportunities
• Highly committed to deliver consistent and quality internet access • Superior 4G-LTE network with transformative improvement on high-speed internet
coverage and access
• LTE-A available in key market centres such as Klang Valley, Penang, Perak, Kuantan, Johor Bahru, Kota Kinabalu and Kuching
80 major cities &
secondary towns
LTE-A 28.8%
Population coverage nationwide
>5Mbps 80%
of the time
Legend
2G Coverage
3G Coverage
LTE Coverage
LTE CA Coverage
8
4Q 2015
Extensive 4G-LTE coverage for best internet experience
Signal strength depends on distance to base station
Good indoor experience & seamless mobility with coverage and 1800Mhz spectrum overlay
-110 dBm
-80 dBm
-100 dBm
-80 dBm
-100 dBm
-110 dBm
Consistent high quality 4G-LTE experience with 80% of coverage areas
within -100dBm
Automatic handover to 3G network at cell
edge beyond -110dBm
“You Tweet, We Build” campaign for customers to decide on areas for network deployment
9
4Q 2015
Competitive offerings with wide selection of relevant digital services content
iP6s launch, reload and year-end campaigns
Embracing digital transformation
• Intensified prepaid acquisition and retention drive via competitive core packs, attractive internet plans and tactical promotions
• Enhanced SmartPlan portfolio and SIM-only promotions
• Extensive 4G-LTE roadshows nationwide to capture customers that values affordable and consistent quality high-speed mobile internet access
• Increased presence and responsiveness through stronger distribution, go-to-market execution and customer focus
• Actively positioning for future growth — Forefront on digital services selection
for customers’ personalised lifestyle — Enriching digital engagement and self-
service capabilities through MyDigi app
• [Taking position in digital services vertical, contextual marketing]
• 6.9% y-y surge to 1,840K postpaid subscriber — Strong acquisition momentum on entry
level postpaid and progressive entry into high-end postpaid
— Well-supported by significant development on network and digital services propositions
• Progressively gained more than 78% internet subscribers and 76% smartphone users among Digi’s postpaid subscriber base
• Higher postpaid service revenue growth of 1.6% q-q and 3.4% y-y to RM450 million on resilient ARPU at RM80 and stronger subscriber base
• Full year postpaid service revenue up 2.8% to RM1,775 million with solid momentum to grow postpaid on the back of rapid high-speed data network expansion
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Postpaid
1,721 1,758 1,771 1,776 1,840
1,235 1,318 1,351 1,400 1,442
4Q14 1Q15 2Q15 3Q15 4Q15
435 434 448 443 450
83 81 82 81 80
Subscribers (‘000)
Service revenue (RM mn)
ARPU (RM)
Internet
Non-Internet
4Q 2015
Best ever postpaid growth on both acquisition and service revenue
• Strong turnaround with 385K net adds to 10.3 million prepaid subscribers
— Solid acquisition among Malaysians and retention of stronghold
— Successful drive on core products and best mobile internet propositions
• Defended well against intense price-fuelled competition on the back of cautious consumer spending
• Continued aggressive IDD and data pricing weighed down ARPU and service revenue growth
— Prepaid service revenue declined 4.6% y-y and 0.4% q-q to RM1,137 million although usage and demand significantly improved
• Full year prepaid service revenue resilient
with marginal decline of 0.7% to RM4,573 million
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Prepaid
9,700 9,933 10,044 9,899 10,285
5,217 5,306 5,493 5,624 6,060
4Q14 1Q15 2Q15 3Q15 4Q15
1,192 1,154 1,141 1,141 1,137
41 39 38 38 38
Subscribers (‘000)
Service revenue (RM mn)
ARPU (RM)
Internet
Non-Internet
4Q 2015
New prepaid products fuelled subscriber growth with 385K net adds
• Subscriber base rose to 12.1 million — Strong turnaround from prepaid and
higher postpaid demand — Driven by solid value propositions in
core products and active on-ground campaigns
• Internet subscribers rose 6.8% sequentially to
7.5 million or 61.9% of total subscribers
• ARPU trended marginally lower to RM44 but relatively resilient
• Significant shift in market conditions with Intense price competition on prepaid resulted in modest service revenue growth of 0.2% q-q and 2.5% lower service revenue y-y although backed by stronger demand and usage
• Full year service revenue grew 0.2% to
RM6,348 million
12
11,421 11,691 11,815 11,675 12,125
6,452 6,624 6,843 7,024 7,502
4Q14 1Q15 2Q15 3Q15 4Q15
1,627 1,588 1,589 1,584 1,587
Subscribers (‘000)
Service revenue (RM mn)
47 46 45 45 44 ARPU (RM)
Internet
Blended
Non-Internet
4Q 2015
Stronger subscriber base and improved sequential service revenue
8.6% 9.1% 8.5% 9.0% 9.9% 4.4% 4.1% 4.2% 4.3% 4.0% 5.2% 5.4% 5.4% 6.2% 6.0% 6.9% 7.1% 7.2% 6.4% 7.1% 4.0% 3.5% 3.8% 3.8% 3.9%
4Q14 1Q15 2Q15 3Q15 4Q15
Sales & Mktg Staff Cost O&M USO Others
29.1% 29.3% 28.6% 31.1% 30.7%
29.1% 29.2% 29.1% 29.7% 30.9%
4Q 2015
Cost base driven by higher smartphones demand and traffic cost hike from weaker of MYR currency
Total cost trend
525 551 481 464 537
473 463 462 470 490
998 1,014 943 934 1,027
4Q14 1Q15 2Q15 3Q15 4Q15
COGS Opex
+10.0% +2.9%
Opex (% of service revenue)
13
RM mn • Sequential COGS development driven by seasonally higher device cost and increased traffic demand
• IDD traffic cost remained significantly elevated with persistent hike on its underlying cost from weaker MYR currency
• Opex increased 4.3% q-q and 3.6% y-y to support acceleration of 4G-LTE network deployment and higher sales and marketing cost from significantly stronger acquisition activities
• Committed to drive efficiency and continuously pursue on more sustainable model and way of work [1] Net Opex = Opex + Forex/FV changes + Other Income
Net
Opex [1]
Opex
RM/ USD
1Q 2Q 3Q 4Q
2015 3.6206 3.6605 4.0514 4.2824
2014 3.2974 3.2345 3.1917 3.3661
Y-Y Var %
9.8% 13.2% 26.9% 27.2%
Average exchange rate for the quarter in RM per USD
4Q 2015
Underlying EBITDA and PAT moderated from continued competition intensity and adverse foreign exchange impact
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PAT and margin
801 775 788 719 701
45% 43% 46% 43% 41%
0%
10%
20%
30%
40%
50%
60%
70%
-
100
200
300
400
500
600
700
800
900
4Q14 1Q15 2Q15 3Q15 4Q15
EBITDA and margin RM mn
RM mn
• Higher take-up of smartphone bundles coupled with margins compression from aggressive price competition and inflated traffic cost from weaker MYR currency trimmed margins for the quarter
• Consequentially, full year EBITDA moderated to RM2,983 million or 43% margin
— Normalised EBITDA at RM3,104 million or 45% margin, if exchange rate constant at 2014 year end rate.
• DD&A remained relatively flat sequentially but
overall full year DD&A increased 27.8% to RM629 million from rapid network expansion post-modernisation
• PAT for the quarter remained subdued as a flow through from the above
— Full year PAT remained healthy at 25% margin or RM1,722 million
560 479 464
397 382
31% 27% 27% 24% 22%
0%
10%
20%
30%
40%
50%
60%
70%
-
100
200
300
400
500
600
700
800
4Q14 1Q15 2Q15 3Q15 4Q15
-2.5% -12.5%
-3.8% -31.8%
233 193 200
223
288
13% 11% 12% 13%
17%
0%
5%
10%
15%
20%
25%
30%
-
50
100
150
200
250
300
4Q14 1Q15 2Q15 3Q15 4Q15
4Q 2015
Delivered rapid 4G-LTE network deployment within planned capex
15
Ops Cash-Flow (OCF) and margin
Capex and Capex/ revenue RM mn
RM mn
• Accelerated network deployment in the final quarter to capture growing demand for 4G-LTE network for best internet experience and a solid LTE network position
• Full year capex as planned at RM904 million capex with rapid 4G-LTE network deployment
— More than 65% population coverage nationwide with 6,400KM of fibre network
— Re-farmed and overlayed 1800Mhz spectrum for 4G-LTE network
• Pro-actively developing new IT capabilities to
support digital-centric customer journeys, innovative product offerings, data analytical capabilities
• Ops Cash-Flow leveled sequentially as a flow through from moderated EBITDA and higher capex
— Full year at RM2,079 million or 30% margin
4G-LTE Covg
32% 33% 40% 50% 65%
568 582 588 496
413
32% 32% 34% 30%
24%
0%
10%
20%
30%
40%
50%
-
100
200
300
400
500
600
700
4Q14 1Q15 2Q15 3Q15 4Q15
4Q14 1Q15 2Q15 3Q15 4Q15
Total Assets 4,303 4,143 4,441 4,449 4,662
Total Equity 686 606 596 534 519
Interest-bearing debts
1,048 1,048 1,246 1,296 1,294
Cash & cash equivalents
526 357 303 306 234
4Q 2015
Resilient annual dividend yield of 4.2%
• Earnings per share (EPS) for the quarter at 4.9 sen and full year at 22.2 sen
• Close to 100% dividend payout for 4th interim dividend at 4.9 sen per share (net) equivalent to RM381 million, payable to shareholders on 25 March 2016
• Full year dividend summed up to 22.0 sen per share or RM1,711 million
– 4.2% dividend yield on average share price at RM5.20
• Net debt to EBITDA between 0.3x-0.4x level,
still relatively lower than industry rate and backed by solid balance sheet
• Remained highly committed to optimise working capital efficiency and shareholders’ value
7.2 6.1 5.9 5.1 4.9
7.2 6.2 6.0
5.1 4.9
100% 99% 99% 100% 100%
0%
20%
40%
60%
80%
100%
120%
(2.0)
3.0
8.0
13.0
4Q14 1Q15 2Q15 3Q15 4Q15
DPS EPS
EPS and DPS
16
Balance sheet
Payout Ratio
sen
RM mn
• Fortify network positioning and perception with widest and most advanced 4G-LTE network
• Innovative product offerings
• Customer focus as our way of work
• Leverage on digital services for differentiation
• Strengthen agility and capability to realise digital service strategies
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4Q 2015
Aspire to be customers’ favourite partner in digital life
• Remains highly committed and passionate on — Delivering greater network presence and
capabilities — Enabling quality internet and digital
services innovation — Enriching customers digital lifestyle and
convenience
• Continue to intensify its focus, consistency and quality of execution in driving growth in challenging market conditions and strive on best customer experience.
• Strategically anchor on 4G-LTE network to strengthen postpaid position and capture opportunities from growing internet demand for prepaid
• Continue to drive resilience and is in stronger position to address the challenges amid uncertain economic climate
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4Q 2015
An exciting year ahead from evolving customer expectation, competition and technological change
2016 Guidance
2015
Service revenue
Sustain at 2015 level
RM6,348 mn
EBITDA RM2,983 mn
Capex RM904 mn
Q&A
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Investor_Relations@digi.com.my
www.digi.com.my
#morethanconnectivity Thank you See you next quarter!
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Appendix
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32% 32% 34% 30% 33% 45% 43% 46% 43%
568 582 588 496 413
4Q14 1Q15 2Q15 3Q15 4Q15
801 775 788 719 701
4Q14 1Q15 2Q15 3Q15 4Q15
560 479 464 397 382
4Q14 1Q15 2Q15 3Q15 4Q15
1,799 1,791
1,723 1,675
1,725
1,627 1,588 1,589 1,584 1,587
4Q14 1Q15 2Q15 3Q15 4Q15
Revenue Service Revenue
Revenue
22
RM mn
4Q 2015
Performance summary
61.9% active internet subscribers ‘000
11,421 11,691 11,815 11,675 12,125
6,452 6,624 6,843 7,024 7,502
4Q14 1Q15 2Q15 3Q15 4Q15
Total Subs Internet Subs
PAT EBITDA Ops Cash-Flow
+3.9%
+6.2%
Included inflated cost of RM122mn in FY2015 if benchmarked against constant exchange rate at 2014 year-end rate
801 775 788 719 701
45% 43% 46% 43% 41%
0%
10%
20%
30%
40%
50%
60%
70%
-
100
200
300
400
500
600
700
800
900
4Q14 1Q15 2Q15 3Q15 4Q15
560 479 464
397 382
31% 27% 27%
24% 22%
0%
10%
20%
30%
40%
50%
-
100
200
300
400
500
600
4Q14 1Q15 2Q15 3Q15 4Q15
568 582 588
496 413
32% 32% 34% 30%
24%
0%5%10%15%20%25%30%35%40%45%50%
-
100
200
300
400
500
600
700
4Q14 1Q15 2Q15 3Q15 4Q15
RM mn RM mn RM mn
4Q 2015
Internet revenue growth for the year remained robust at 21.3%
23
Voice revenue
777 731 728 713 708
196 185 188 180 183
973 916 916 893 891
4Q14 1Q15 2Q15 3Q15 4Q15
Prepaid Postpaid
-8.4% -0.2%
RM mn
480 505 507 530 535
126 119 115 112 119 48 48 51 49 42
654 672 673 691 696
4Q14 1Q15 2Q15 3Q15 4Q15
Internet Messaging VAS
Data revenue RM mn
+0.7% +6.4%
4Q 2015
Positive take-up from new smartphone launches and 4G-LTE campaigns
24
200 180
281
134 102
4Q14 1Q15 2Q15 3Q15 4Q15
No. of smartphones & devices sold
Smartphone and internet penetration
‘000
%
• Strategically leverage on new smartphone launches and 4G-LTE campaigns to fuel stronger smartphone and internet adoption as well as acquisition
• Steady growth of smartphone and internet users to
— 59.2% smartphone penetration — 61.9% internet penetration
• Higher mix of high-end seasonally in demand
smartphones in conjunction with new launches and 4G-LTE campaigns
• Device and other revenue soared 51.6% q-q to RM138 million but total device and other revenue for the year moderated by 17.5% to RM566 million
— Gradually shift focus on smartphone sales to service revenue
— Promote higher sim-only packages
56.5% 56.7% 57.9% 60.2% 61.9%
49.3% 53.2%
57.1% 58.4% 59.2%
4Q14 1Q15 2Q15 3Q15 4Q15
Internet Smartphone
19%
4G-LTE subscribers
RM138 million
device and other revenue
4Q 2015
Key operating performance KPIs
25
(RM mn) 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 4Q13
Q-o-Q Y-o-Y
Subscribers (‘000) 12,125 11,675 11,815 11,691 11,421 11,345 10,903 10,885 10,995 3.9% 6.2%
Internet subscribers (‘000)
7,502 7,024 6,843 6,624 6,452 6,011 5,384 5,072 4,926 6.8% 16.3%
MOU 221 226 240 235 248 252 251 249 256 -2.2% -10.9%
Revenue 1,725 1,675 1,723 1,791 1,799 1,756 1,746 1,718 1,733 3.0% -4.1%
Service revenue 1,587 1,584 1,589 1,588 1,627 1,584 1,568 1,554 1,577 0.2% -2.5%
EBITDA 701 719 788 775 801 789 795 778 810 -2.5% -12.5%
EBITDA margins 41% 43% 46% 43% 45% 45% 46% 45% 47% -2.3pp -3.9pp
Depreciation & Amortisation
(169) (170) (150) (140) (132) (127) (115) (118) (122) -0.6% 28.0%
EBIT 532 549 638 635 669 662 680 660 688 -3.1% -20.5%
Net finance (costs)/income
(13) (12) (12) (9) (9) (5) (6) (6) (5) 8.3% 44.4%
Profit Before Tax 519 537 626 626 660 657 674 654 683 -3.4% -21.4%
Taxation 137 140 162 147 100 170 175 169 135 -2.1% 37.0%
Profit After Tax 382 397 464 479 560 487 499 485 548 -3.8% -31.8%
EPS (sen) 4.9 5.1 6.0 6.2 7.2 6.3 6.4 6.2 7.0 -3.9% -31.9%
Prepaid ARPU (RM) 38 38 38 39 41 41 41 41 41 0.0% -7.3%
Postpaid ARPU (RM) 80 81 82 81 83 82 83 81 83 -1.2% -3.6%
Blended ARPU (RM) 44 45 45 46 47 47 48 47 48 -2.2% -6.4%
4Q 2015
Revenue composition
(RM mn) 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 4Q13
Q-o-Q Y-o-Y
REVENUE 1,725 1,675 1,723 1,791 1,799 1,756 1,746 1,718 1,733 3.0% -4.1%
Service Revenue 1,587 1,584 1,589 1,588 1,627 1,584 1,568 1,554 1,577 0.2% -2.5%
Voice revenue 891 893 916 916 973 957 970 983 1,020 -0.2% -8.4%
Data revenue 696 691 673 672 654 627 598 571 557 0.7% 6.4%
Internet 535 530 507 505 480 449 409 374 348 0.9% 11.5%
Messaging 119 112 115 119 126 131 142 148 158 6.3% -5.6%
VAS 42 49 51 48 48 47 47 49 51 -14.3% -12.5%
Device and other revenue
138 91 134 203 172 172 178 164 156 51.6% -19.8%
Prepaid Revenue 1,137 1,141 1,141 1,154 1,192 1,153 1,135 1,127 1,138 -0.4% -4.6%
Voice revenue 708 713 728 731 777 763 772 784 806 -0.7% -8.9%
Data revenue 429 428 413 423 415 390 363 343 332 0.2% 3.4%
Postpaid Revenue 450 443 448 434 435 431 433 427 439 1.6% 3.4%
Voice revenue 183 180 188 185 196 194 198 199 214 1.7% -6.6%
Data revenue 267 263 260 249 239 237 235 228 225 1.5% 11.7%
26
4Q 2015
Reported COGS and OPEX
27
(RM mn) 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 4Q13
Q-o-Q Y-o-Y
COGS 537 464 481 551 525 536 524 514 514 15.7% 2.3%
Cost of materials 156 98 157 228 197 177 183 165 151 59.2% -20.8%
Traffic charges 381 366 324 323 328 359 341 349 363 4.1% 16.2%
OPEX 490 470 462 463 473 428 432 436 421 4.3% 3.6%
Sales & marketing 157 142 135 145 140 133 133 129 133 10.6% 12.1%
Staff costs 63 68 67 64 72 58 58 60 57 -7.4% -12.5%
Operations & maintenance 96 98 85 86 85 76 81 84 76 -2.0% 12.9%
Other expenses 174 162 175 168 176 161 160 163 155 7.4% -1.1%
USP fund and license fees 112 102 115 113 112 107 107 105 104 9.8% 0.0%
Credit loss allowances 14 12 8 8 9 10 6 8 7 16.7% 55.6%
Others 48 48 52 47 55 44 47 50 44 0.0% -12.7%
TOTAL 1,027 934 943 1,014 998 964 956 950 935 10.0% 2.9%
(RM mn) 4Q15 3Q15 2Q15 1Q15 4Q14 3Q14 2Q14 1Q14 4Q13 Q-o-Q Y-o-Y
Cash at start 306 303 357 526 259 403 372 411 550 1.0% 18.1%
Cash-flow from operations 532 523 744 551 524 780 770 664 826 1.7% 1.5%
Changes in working capital 79 98 (327) 29 1 93 (65) (68) (197) -19.4% >100.0%
Cash-flow used in investing activities
(281) (218) (198) (189) (226) (271) (191) (192) (126) 28.9% 24.3%
Cash-flow used in financing activities
(399) (409) (277) (561) (37) (746) (483) (443) (642) -2.4% >100.0%
Net change in cash (69) (6) (58) (170) 262 (144) 31 (39) (139) >100.0% -126.3%
Effect of exchange rate changes on cash and cash equivalents
(3) 9 4 1 5 0 0 0 0 -133.3% -160.0%
Cash at end 234 306 303 357 526 259 403 372 411 -23.5% -55.5%
Capex 288 223 200 193 233 276 193 202 130 29.1% 23.6%
Ops Cash-Flow (EBITDA – Capex)
413 496 588 582 568 513 602 576 680 -16.7% -27.3%
Ops Cash-Flow margin 24% 30% 34% 32% 32% 29% 34% 34% 39% -5.7pp -7.6pp
28
4Q 2015
Reported Cash-Flow