Competition heats up among telcos in IDD segment

PETALING JAYA: After fighting a price war in the prepaid arena,
players in the telecommunication sector seem to be in a mood for
another battle in the international direct dialling (IDD) segment.
Recently, Maxis Bhd
has up the ante and become more aggressive with cheaper new prepaid and
IDD packages among migrant workers with attractive headline rates.
Maxis' aggressiveness has proved to be fruitful for the telco and
continues to gain traction.
Following this, DiGi.Com Bhd,
which controls some 50% of the migrant worker market, responded to its
rival's rate cut by slashing IDD rates for key migrant markets by up to
77% in April.
On top of the IDD competition, the industry is also going through intensifying competition in the broadband segment.
An analyst said there was yet to be a full-fledged price war as Celcom Axiata Bhd seemed to be absent in the fight.
However, he said Celcom had not been a big player in the IDD market for migrant workers.
He sees competition heating up in device offerings such as smartphones and tablet.
“Maxis
seems to be going all out to win the war. It has been so aggressive in
launching new products one after another to win back some market share.
It has also been aggressively winning back postpaid customers by
offering so many promotions,” an analyst said.
At a recent result briefing, chief executive officer Sandip Das said Maxis would “continue to be aggressive” in all its business segments to gain more market share.
“Starting
late last year and going into the first quarter, in a series of major
market moves, we have introduced attractive pre-paid tariffs, post-paid
data bundles and reduced IDD rates.
“As a result, we have had a
promising start to year 2012 with the best first-quarter revenues and
the lowest seasonal impact in five years,” Das said.
In the
first quarter ended March 31, Maxis' net profit rose 6.12% to RM572mil
against RM539mil previously. Revenue increased 4.5% to RM2.22bil from
RM2.13bil a year ago.
CIMB
Research said DiGi cut its IDD rates in mid-April including that to key
migrant countries by up to 77%, but left SMS rates to these
destinations unchanged. However, its rates are still higher than that
of Maxis for calls to China, Indonesia, Myanmar and Nepal.
“We
think Maxis' rate cut earlier this year is beginning to bite into
DiGi's market and the latter had to respond to protect its share. DiGi
had earlier brushed off Maxis' threat by saying that there is no need
to respond.
“We believe Maxis will continue to aggressively
address the large and growing migrant market as part of its strategy to
recoup the slide in voice market share. This market contributes to an
estimated 5% of Maxis' revenue,” the research house said.
It added that there could be a small impact on Celcom as the IDD segment contributed about 9% of its revenue.
CIMB
Research believes there is still some price elasticity left in this
price-sensitive migrant market and the price cut would spur greater
usage but margins will be squeezed.
It said despite the intense
competition, Celcom had yet to respond to the substantial price cut and
its prices were currently higher than that of it rivals.
“We
believe it (Celcom) is sitting out of this price war as prices are
nearing costs and will wait for the dust to settle before deciding on
its next move.
“For example, the regulated interconnect rate in
Bangladesh is 3.5 US cents per minute or 11 sen, which gives Maxis and
DiGi just a 3 sen per minute gross profit. Bangladeshis make up the
second largest group of migrant workers in Malaysia,” CIMB Research
said.
Additionally, it said there could be a small impact on Celcom as the IDD segment contributed to about 9% of its revenue.
Separately,
the research house said Maxis would come under pressure this year as it
responded to competition. “Margins will come under pressure as it
ratchets up sales and marketing expenditure for new services and to win
back market share.”