It has been almost 17 years since DiGi.Com Bhd made its way into the market through the launch of the country’s first digital mobile communications service — the fully digital GSM 1800 service. But it hasn’t always been smooth sailing for the telecommunications giant.
In 2002, when 3G network was in its prime as a revolutionary technology, DiGi was denied a chance to participate in the bidding for the 3G licence due to its high foreign ownership. At the time, Norway’s Telenor Group held a 61% equity interest in DiGi.
It was only after six years, during which Telenor pared down its stake to 49%, that DiGi received its 3G licence through a transfer from the debt-ridden Time dotCom Bhd for the sum of RM700 million.
Competitors, who won their 3G licences in 2002, had rolled out their services in 2005, while DiGi had to wait till 2009. Despite the delay in entering the 3G services market DiGi aggressively courted mobile Internet consumers. At the end of 2011, the company said its 3G broadband and Internet network and services had reached coverage of 52% of the population.
Its 2011 annual report revealed that mobile data products provided 29% of the total service revenue.
Based on the latest available figures as at June 30 this year, the telecommunications giant had 320,000 broadband customers and 5.4 million mobile Internet subscribers.
On June 30, the company marked a milestone when it reported that it had surpassed the 10 million customer threshold, chalking up a base of 10.2 million, of whom 23.5% were smartphone users. Comparing the second quarter of the financial year ending Dec 31 (2QFY12) and 2QFY11, the company said its market share has grown by close to 1%, reaching almost 28% of total market share.
“The majority of the growth is driven out of the data market. We have had good growth in terms of attracting new customers as well, simply because we are increasing our network and distribution sites.” “DiGi is competitive. We want to get our fair share of the market when we move into new areas. So, part of growth has been driven by data and the other part has been driven by us expanding our footprint and distribution,” said DiGi CEO Henrik Clausen in a recent interview with The Edge weekly.
With the mobile data market playing a more pivotal role in revenue growth for telecommunication companies such as DiGi, the company is stepping up its game in pursuing this slice of the cake through its mantra “Internet for all”.DiGi is into the second year of its three-year nationwide network transformation, involving the modernisation of its network and IT systems, improving its distribution channels and developing its people.
Its modernised network will be long-term evolution (LTE) equipped, in anticipation of the 2,600 MHz spectrum allocation, which is said to take place at the end of this year. The company said it is currently at 50% completion of its network swapping exercise. Clausen said the exercise is expected to be completed by next year. “We are doing this to accommodate data [growth] and to be ready for LTE-type services as well,” he said.
With the modernised network, Clausen said the market can expect to see DiGi moving more aggressively into the broadband connectivity market, providing Internet connection to laptops and computers. “With the network’s modernisation now halfway through, we believe that by this month, we will have a more significant share of the large-screen market than before. “The launch of LTE will allow us to be more aggressive in the large-screen segment because of the effective technology available to provide services to the market,” said Clausen.
Despite capital-intensive investments, dividend payouts have not taken a hit. The telecommunications company has been consistent in its dividend payout ratio. For 2010 and 2011, shareholders enjoyed a payout ratio of 108% of net earnings, well above its minimum payout policy of 80%. For 2011, its share price increased from RM2.51 to RM3.88, representing a 54.7% return. Year-to-date, the share price has jumped by 43.04% to RM5.45 per share.
For FY11, DiGi recorded 10.3% growth in revenue to RM6 billion from RM5.4 billion a year ago. Net profit increased to RM1.25 billion from RM1.18 billion previously, underlining growth of 5.9%. For the first half of FY12, the company recorded a revenue of RM3.15 billion, up 8.6% from a year ago, while its net profit increased to RM644.8 million from RM567.71 million previously, indicating a 13.6% rise.
“Overall, we will be within our target of mid to high single digit revenue growth for 2012,” said Clausen.
With the 2,600 MHz spectrum allocation poised for the end of the year, 2013 should prove to be an exciting year for the company when it launches its LTE services.
This article first appeared in The Edge Financial Daily, on Oct 16, 2012.
