Axiata Group Berhad - Annual Report 2016

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Axiata Group Berhad | Annual Report 2016 OPERATING COMPANIES BUSINESS REVIEW 038
BUSINESS
REVIEW
About Celcom
Celcom is Malaysia’s premier and most
experienced mobile telecommunications
company with the widest coverage in
the nation. It provides both prepaid and
postpaid mobile services to close to 11 million
subscribers. Celcom is also growing its position
in content and Value Added Services (VAS),
enterprise solutions, bulk wholesale services,
digital services and machine-to-machine (M2M)
solutions, in line with evolving technologies and
changing consumer behaviour in Malaysia.
Celcom has the widest network in Malaysia,
covering 95% and 90% of the population with its
2G and 3G networks respectively. With close to
4,800 4G LTE sites, Celcom continues to invest in
network coverage, capacity and performance to
maintain its technology leadership and position
as the country’s best mobile service provider
whilst looking to drive differentiation based on
a superior network and exceptional mobile data
and Internet experience.
Celcom is also a pioneer of industry leading
wholesale partnerships which include Mobile
Virtual Network Operators (MVNOs) as well as
domestic and international roaming. Celcom
currently has six MVNO partners that provide
additional channels to the market, covering
niche segments with strong growth potential.
Celcom views MVNOs as an important
alternative channel for servicing niche consumer
segments and continuously evaluates new
MVNO partnerships.
Celcom’s long standing partnerships with local
and global operators have resulted in a broad
Internet network coverage with roaming services
in 197 countries via 462 network partners. As
part of the Axiata Group, its customers also
enjoy great rates and consistent experience
whilst roaming.
Celcom puts high emphasis on Customer
Experience in all its products and services. This
is reflected in Celcom winning awards for best
telco, customer experience, brands and other
corporate accolades.
Business Review 2016
2016 was characterised by an intensely
competitive telco sector and an overall decline in
the market. Business and consumer confidence
in Malaysia reflected a declining trend in 2016,
resulting in lower overall expenditure on
telecommunications services. Despite these
trying market conditions, Celcom managed to
stabilise its core business in the second half of
the year.
The second half of 2016 saw Quarter on Quarter
(QoQ) improvements in service revenue, while
Earnings Before Interest, Tax, Depreciation and
Amortisation (EBITDA) improved more than 10%
in the fourth quarter of 2016. The organisational
refresh strategy that was introduced in Celcom
in the last quarter helped accelerate recovery in
some key areas.
The new management team rolled out
a turnaround plan after identifying key
challenges, which included sales and distribution
channels, products, regulatory and network.
This covered a revamp of Celcom’s postpaid
product, contributing to strong postpaid
subscriber and revenue growth in 2016. Data
and smartphone penetration within Celcom’s
base grew substantially throughout the year.
Active smartphone penetration rose from 59%
in the fourth quarter of 2015 to 64.4% in the
corresponding period in 2016, while the data
subscriber ratio rose from 54.4% to 61.9% of
total subscribers during the year, which resulted
in significant growth in data traffic of 105%.
The product portfolio revamp included
relaunching new Content Providers and VAS on
a new Application Programme Interface (API)
platform, a highly competitive roaming product
and a new offering targeting Overseas Foreign
Workers (OFW). These initiatives have aided in
further accelerating Celcom’s turnaround.
Initiatives focused on improving customer
experience and digital channels included the
migration of to celcom.
and the launch of a new Xpax App,
making it easier for customers to purchase and
use Celcom’s services. The remodelling and
restructuring of Blue Cube began in earnest in
2016, and will continue through 2017 to deliver a
superior experience to Celcom customers.
Last year the Company took aggressive steps
to improve its mobile network quality and
experience for its customers. As part of its’
network modernisation initiatives, the roll out
of the Klang Valley RAN Swap was initiated
Key Highlights
• Extremely challenging year due to
internal and external issues
• Strong data traffic growth of 105%
• 4G covering 76% of the population
by upgrading the 4G network to keep pace
with the increasing demands of smartphone
users. The reallocation of bandwidth impacted
the roll out process for the Klang Valley Swap,
due to the need to simultaneously undertake
spectrum refarming. These efforts, which are
set to continue into 2017, have significantly
improved quality and data download speeds,
from approximately 19Mbps to 23Mbps. The
aggressive roll out of 4G LTE-enabled base
transceiver stations (BTS) nationwide, have
resulted in significant improvements in Celcom’s
coverage, with 76% of the population covered
by 4G and 90% covered by 3G respectively.
These sustained efforts have had positive
impacts on the Company. In a survey initiated
by Celcom and conducted by an independent
external party, Nielsen Corporation, Celcom
was ranked number one in Net Promoter Score
amongst the big three operators in Malaysia,
while complaint resolution performance has
either met or exceeded statutory requirements
laid down by the Malaysian Communications and
Multimedia Commission.
Financial Performance
2016 saw Celcom gaining traction in stabilising
its market share with improvements in QoQ
revenue and EBITDA. Celcom also demonstrated
early signs of stabilisation with an improved
quarter with QoQ growth in service revenue,
normalized EBITDA and normalised Profits After
Tax and Minority Interests (PATAMI) of 1.4%,
10.9% and 1.8% respectively.
Positive take-up on enhanced postpaid offerings
such as First Gold 80 and First Platinum,
delivered higher postpaid Average Revenue Per
User (ARPU) of 4.1% and subscriber growth of
3.2% QoQ. Data revenue continues to be a key
driver for Celcom, increasing by 10.0% in 2016
driven by mobile Internet revenue growth of
19.0%. Data revenue accounted for 34.1% of
total revenue.
Outlook for 2017
While Celcom’s performance in the second
half of 2016 has been encouraging, the
telecommunications sector will continue to
be highly competitive in 2017, with limited
opportunities for growth. Other challenges
include spectrum refarming, along with the
entry of new players. Data traffic is expected to
continue its strong growth trajectory, offsetting
continued decline in voice traffic and associated
revenues. Increased penetration of smart
devices and LTE enabled phones will underpin
further growth in data revenue.
Celcom will continue its focus on delivering
an industry leading customer experience in