Highlights of the year
- 10.3% revenue growth to RM6.0 billion, driven by solid growth in mobile data revenues
- 15.2% EBITDA improvement to RM2.8 billion and EBITDA margin of 46.4%
- 28.1% growth in operating cash fl ow to RM2.2 billion
- Close to 10.0 million customers, of which 5.2 million are active mobile internet customers regularly accessing our mobile internet network
- RM1.4 billion dividend pay-out to shareholders; equivalent to 17.5 sen net dividend per share
CEO's Message
“To deliver on our aspiration of becoming a leading data provider, we have put in place an ambitious transformation programme that will bring us closer towards our mission of delivering Internet for All…”
Dear Shareholders,
It gives me great pleasure to report to you that DiGi has performed strongly in 2011, and has made signifi cant progress in transitioning into the mobile data space, whilst maintaining our solid market presence in mobile voice.
Mobile internet driving growth
Since 2009, DiGi has steadily grown its customer base by 29% to 9.9 million customers at end 2011. Within three years of launching our 3G broadband and internet network and services, we have reached 52% population coverage and made our Internet for All value propositions available in all key market centres nationwide.
At end 2011, DiGi had 5.2 million active mobile internet customers who regularly access our mobile internet network. DiGi now generates 29% of service revenues from mobile data products, marking a successful shift into the mobile internet arena.
Improved commercial focus and execution resulted in revenue growth in excess of 10% in 2011, strongly driven by smart-bundling and higher adoption of mobile internet across our subscriber base. All revenue segments recorded good growth, apart from voice revenues which recorded a marginal 1% year-on-year decline. DiGi has also executed well in terms of cost management, resulting in further improvement in EBITDA and EBITDA margin in 2011 to RM2.8 billion and 46.4% respectively.
Our network capital expenditure (capex) stood at RM610.0 million for the year, with the bulk of the capex spent on accelerating site roll-outs, and increasing capacity on existing platforms. As a result, DiGi’s operating cash fl ow amounted to RM2.2 billion at end 2011, a 29% increase over the RM1.7 billion achieved in 2010.
Reflecting the Company’s strong performance as well as solid fi nancial footing, total dividends paid to all shareholders has increased by more than 7%, from net 16.3 sen per share in 2010 to net 17.5 sen per share in 2011, after adjusting for the 10-for-1 share split which commenced trading on 24 November 2011. In the same month, the Company also completed the issue of redeemable preference shares which was subsequently redeemed in March 2012.
Looking ahead, I strongly believe demand for quality mobile data services will grow as a result of higher adoption of smart devices, availability of a wide variety of more customer-friendly data applications, and growing dependency on mobile internet access for work and play. This will in turn drive a signifi cant increase in the number of active mobile internet customers in the coming years.
My ambition is for DiGi to be the leading data provider. To deliver on this, we have put in place an ambitious transformation programme that will bring the Company closer towards our mission of delivering Internet for All. This includes the holistic transformation of our network, information systems and information technology infrastructure, and distribution, and have committed between RM700 million to RM750 million to achieving this.
By end 2012, DiGi aims to have a brand new unifi ed mobile network capable of delivering 2G, 3G and 4G/ LTE from a single base station site. Our Tomorrow Network will allow for swift roll-out of 4G/LTE services once the necessary spectrum is made available by the Regulator. This will enable DiGi to deliver highspeed internet and next generation services to more Malaysians through larger coverage.
Concurrently, the initial roll-out phase of the advanced network collaboration with Celcom-Axiata is completed; upon completion of the entire project, both parties will eventually share more than 4,000 sites nationwide. In addition, we have commenced work on Phase 1 of a joint aggregation and trunk fi ber roll-out which will enable both parties to carry higher traffi c volumes going forward.
Our IT platform modernisation will enable us to deliver a complete high-quality internet and content experience and drive more effective integration of third-party services to customers, businesses and developers. More importantly, the new billing system will also enable advanced charging and billing of data and content services going forward.
Whilst DiGi has very solid capabilities in distribution, new data services have created opportunities as well as fresh challenges in this area. To this end, we are in the midst of redefi ning our already strong distribution network, which when completed will allow us to better anticipate the needs of our customers, through a stronger distribution chain, and refreshed online and retail sales channels.
In late 2010, we commenced a holistic human resource transformation programme that will drive the Company towards our aspiration of being ‘Best on People’. I am pleased to note that we have made signifi cant progress in this area, and we have now established a comprehensive performance, development and rewards framework to drive change, motivate and empower all DiGizens.
DiGi has performed well in the past 10 years, and has constantly outgrown the overall industry. I intend to ensure that DiGi keeps this momentum, and I believe the Company has the right strategies, network and resources in place to support this ambition.
There will be challenges ahead, and one of them will be keeping the momentum of executing our business every day, while delivering a companywide transformation programme that will enable DiGi to stay ahead of the industry, in an environment where almost all growth will come from data.
In 2012, we aim to grow our revenue by mid-to-high single digit, and work towards further improvements in cost efficiency Based on our strong operational effi ciency focus, and a highly competitive cost structure established by the ongoing transformational efforts specifi cally in the network and IS/IT arena, I believe DiGi is well positioned to continue delivering substantial shareholder value.
Henrik Clausen
Chief Executive Officer
Business Review
Customers and ARPU
DiGi added close to 1.2 million new customers in
2011 (2010: 1.0 million). With these net additions,
DiGi now has 9.9 million customers. DiGi continued
to gain quality customers in targeted segments on
improved value propositions, increased customer
touch-points and expanded device portfolio.In terms of mobile internet customers, DiGi reported a higher number of small screen users, totalling 5.2 million at the end of 2011 (2010: 4.2 million).
In the prepaid segment, DiGi added 987,000 new customers (2010: 846,000) of which 81,000* were new prepaid mobile broadband customers. The ‘DiGi Easy Prepaid’ proposition continued to do well in attracting targeted customers. ARPU for the year was lower at RM43 (2010: RM46) on competitive price pressure.
In the postpaid segment, DiGi added 168,000 new customers (2010: 199,000) of which 21,000* were new postpaid mobile broadband customers. The slight decline in year-on-year net additions was primarily due to increased competition in the broadband segment. Postpaid ARPU improved to RM84 (2010: RM83) driven mainly by higher data usage.
Revenue Performance ReviewTotal revenue amounted to RM6.0 billion in 2011, up by 10.3% year-on-year (2010: RM5.4 billion) driven predominantly by the 8.1% year-on-year growth in service revenue as well as higher handset sales in the year.
Service revenue growth in the year came solely from data revenue which grew 37.8% year-on-year whilst voice revenue was slightly down, registering a marginal 0.6% year-on-year decline.
Cost and Margin Review
Group EBITDA was up by 15.2% year-on-year ending at RM2.8 billion (2010: RM2.4 billion) and EBITDA margin rose to 46.4% (2010: 44.4%). Key growth drivers were higher revenues and continued good cost management.
Overall, in 2011, the Group’s total cost base increased by 5.9% year-on-year to RM3.2 billion (2010: RM3.0 billion) whilst revenues increased by 10.3% as highlighted earlier.
The increase in cost base was principally driven by higher Cost of Services (COS) in 2011. COS jumped 12.1% year-on-year to RM1.6 billion (2010: RM1.4 billion) from higher handset costs as well as higher traffi c costs.
On the other hand, total operating expenses (OPEX) increased by a mere 1.2% year-on-year to RM1.7 billion (2010: RM1.6 billion) as increased sales and marketing expenses and higher USO-related accruals were off-set by lower operations and maintenance costs as well as lower staff costs. Sales and marketing expenses rose in tandem with higher sales and reload commissions whilst USOrelated accruals rose in tandem with the higher revenue base in the year.
Net Profit
DiGi reported a substantial jump in net profi t, rising from RM1.2 billion to RM1.3 billion (+5.9% year-onyear). The high net profi t was a result of lower prior (dating back to 2009) and current year effective tax rates on approved tax incentives related to mobile broadband network facilities.
As a result of this incentive, DiGi’s corporate tax rate is expected to fall below the statutory corporate tax rate over the applicable period.
Capital Expenditure and Network Updates
In terms of capex, DiGi spent RM610 million (2010: RM720 million) in 2011. The bulk of capex was spent on new coverage and increased capacity to ensure that DiGi can capture growth opportunities, particularly data growth going into 2012.
DiGi-Celcom Network Collaboration: Both parties have completed the initial phase of siteconsolidation and are moving on to the next phase of further site consolidation. Both parties have commenced work on Phase 1 of the joint-fi ber rollout for aggregation and trunk. DiGi is maintaining its guided savings targets and exploring additional initiatives to increase savings.
Network Modernisation: We have commenced physical RAN swap in Q4 2011 and we are on target to complete the network swap by end-2012. DiGi aims to have a fully-enabled LTE network that will facilitate quick LTE services roll-out when spectrum is available.
In terms of population coverage, DiGi’s current 2G and 3G coverage stood at 95% and 54% respectively.
Regulatory Updates
On 2600MHz, DiGi has received a letter of intent from the Malaysian Communications and Multimedia Commission (SKMM) regarding the intended allocation of 2x10MHz of spectrum for LTE. The allocation is subject to conditions, including the acceptance and the approval of the fi nal detailed business plan (DBP) by SKMM. DiGi has submitted its DBP within the required deadline. A fi nal decision is still pending from SKMM.
For the other spectrum bands including the 900MHz and 1800MHz, DiGi has yet to receive any further news with regard to the re-allocation process. SKMM has initiated a review of access pricing in Malaysia. A public enquiry is expected to take place in Q2 2012 with results likely to be known toward the end Q3 2012. This may result in new regulated access prices for services on the Access List following the review. DiGi will apprise the market as and when the outcome is known
