DiGi banks on 4G growth

by **Cals** Mon 22 Jul 2013, 10:10

DiGi banks on 4G growth
Business & Markets 2013
Written by Afiq Isa of theedgemalaysia.com
Monday, 22 July 2013 09:48

KUALA LUMPUR: DIGI.COM BHD [] will spend RM650 million over the next three years to facilitate the implementation of its 4G long-term evolution (LTE) Internet network, said CEO Henrik Clausen.

In an interview with The Edge Financial Daily, Clausen outlined DiGi’s plan to capitalise on the mobile Internet segment and high-speed 4G services in the coming years.

“We will expand our 4G LTE coverage to key urban centres nationwide with 1,500 sites targeted by the end of 2014, which we think is a reasonably aggressive target in growing the network” he said.

Earlier this month, DiGi launched its 4G LTE broadband subscription plans with a view to targeting heavy data users.

For the moment, 4G network coverage is limited to select locations within the Klang Valley with high Internet traffic. In the next implementation stage, DiGi will begin offering 4G on smaller screens with a suite of LTE-enabled devices such as the iPhone.

To date, the company has swapped 85% of its network equipment nationwide as the company prepares for a 4G rollout, alongside expanding its 3G coverage to more than 75% of the populated areas, by the end of this year.

As part of the Telenor’s global network of companies, DiGi is leveraging on the group’s experience in 4G LTE deployment, having implemented the network in six markets globally.

“The main technical challenge in building a 4G infrastructure is laying the fibre, which takes time. It’s the key constraint in how fast you are able to execute,” he said.

DiGi ‘s mobile Internet subscription rate is gaining traction with 176,000 new subscribers in the second quarter of financial year 2012 (2QFY12), as the company continues to market its introductory data plans alongside strong take-up of devices bundled with Internet packages.

In terms of revenue, DiGi’s current market share in the mobile Internet segment is 30%, said Clausen.

“Around two-thirds of our customers now use mobile Internet on a monthly basis. We also notice an increasing take-up of mid-to-low price devices which are bundled with our Internet offerings,” he said.

With the proliferation of smartphones and bundled subscription plans in the Malaysian telco market, Clausen said the company is transitioning itself from voice and messaging to Internet data providers.

In line with most telcos worldwide, DiGi has seen its messaging revenue decrease as users switch to popular texting applications.

Clausen acknowledges that the trend is likely to persist over time as texting applications such as Whats-App and WeChat continue to hog the limelight over traditional messaging services.

“I believe the trend will continue but for us, it should not be a problem. DiGi will continue to provide solutions for our customers needs, especially Internet data,” he said.

Clausen pointed out that the dilution of messaging revenue was cushioned by additional earnings from Internet data.

“Revenue from data for 2QFY13 translates into a 10% growth quarter-on-quarter. That’s one area where we need to drive our business,” he said.

“The quarterly growth (in data revenue) is an indication that we were able to do it in an increasingly profitable way,” he added.

Looking forward, DiGi is actively looking for more collaborative efforts with content providers.

“We already have partnerships with Facebook, WhatsApp and Deezer, a music streaming service. There is room for creativity in how we work with these content providers, as the main purpose is to provide additional value to our customers,” said Clausen.

In a filing with Bursa Malaysia last Friday, DiGi reported a net profit of RM380 million, its highest over the past four quarters and a 17% increase from 2QFY12.

Revenue saw a marginal 4.6% year-on-year increase to RM1.65 billion due to increased contribution from its mobile Internet segment.

This article first appeared in The Edge Financial Daily, on July 22, 2013.