Analyst Teleconference Quarter 3 2006 20 October 2006 Q306 in - - PDF document

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Analyst Teleconference Quarter 3 2006 20 October 2006 Q306 in - - PDF document

Dec 19, 2022 281 likes •538 views

Analyst Teleconference Quarter 3 2006 20 October 2006 Q306 in brief Steady underlying revenue growth Strong EBITDA margins Prepaid growth slowing down as expected Postpaid progressing well Interim dividend paid and 2 nd capital repayment

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SLIDE 1

Quarter 3 2006 Analyst Teleconference

20 October 2006

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SLIDE 2

Q306 in brief

Steady underlying revenue growth Strong EBITDA margins Prepaid growth slowing down as expected Postpaid progressing well Interim dividend paid and 2nd capital repayment approved

2

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SLIDE 3

Q306 key numbers

Q306 Q-on-Q vs Q206 Y-o-Y vs Q305 Customer base 5.6 mil + 3% (5.4 mil) +34% (4.2 mil) (RM904 mil) (RM745 mil) (RM327 mil) (43.9%) (RM143 mil) 19.1 sen (RM410 mil) (45.3%) (RM201 mil) 26.7 sen Revenue RM921 mil +2% +24% EBITDA RM419 mil +2% +28% EBITDA margin 45.5 % +0.2pp +1.6pp PAT RM181 mil

  • 10%

+27% EPS 24.1 sen

3

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SLIDE 4

Competition and tariffs

aggressive promotions to drive

  • n-net and IDD traffic

focus shifted to postpaid/data no major pressure on core tariffs new price plans introduced (at end Q3 and early Q4)

Prepaid registration

intensive industry drive unregistered users still relatively high industry wide 15th Dec deadline remains

DiGi - focus

expand weaker segments acquisition and retention brand building

Industry and DiGi in Q306

4

DiGi - value propositions

Postpaid: “123-plan” Prepaid: “Bonus airtime” to drive acquisition/retention VAS: Promotions (MMS, XMS,

FriendFinder and FunVoice)

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SLIDE 5

Prepaid SIM activations slowed; postpaid sustaining

5126 5018 4704 4442 3880 3525

464 422 382 353 307 241 Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006

+32% Prepaid +51% Postpaid +2% Prepaid +10% Postpaid

150k net additions; total subscribers at 5.6 mil Prepaid momentum clouded by ongoing registration exercise New value propositions driving business and postpaid mass

Custome rs

4279

Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 Prepaid (‘000) Postpaid (‘000) Active Users (‘000)

22.8% 23.9% 24.6% ? 24.8% 25.3%

Subscriber market share 5

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SLIDE 6

AMPU held up by postpaid

AMPU

  • 10% Prepaid
  • 4% Postpaid
  • 7% Blended

Prepaid (mins) Postpaid (mins)

471 439 389 380 392 422

Blended (mins)

Prepaid declined on lower outgoing usage Postpaid driven by effective price plan

  • 3% Prepaid

+8% Postpaid

  • 1% Blended

170 175 169 162 163 162 150 156 152 145 144 140

Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 6

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SLIDE 7

54 54 55 51 50 49 59 58 58 54 54 53

  • 9% Prepaid
  • 14% Postpaid
  • 9% Blended
  • 2% Prepaid
  • 10% Postpaid
  • 2% Blended

ARPU stable

ARPU

128 111 99 96 105 95

Prepaid (RM) Blended (RM)

Prepaid weakened slightly Higher rebates (bonus airtime) to drive retention and prepaid registration Postpaid sustained vis-à-vis last quarter

* (Including one-time adjustment

  • f RM12 mil for postpaid (RM10
  • n postpaid and RM1 blended

ARPU))

Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006 Postpaid (RM) 7

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SLIDE 8

Re ve nue

Steady underlying revenue growth

Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006

? 20.0%

+2% 861 904

22.5% 23.5% 21.1%

Revenue (RM mil)

  • Est. Mobile Revenue Market share (%)

745 686

Higher subscriber base driving revenue Segmentation drive effective in strengthening customer retention Increased brand recognition in non- core segments

24.6%

921 +24% * (Q206 revenue included an one- time adjustment of RM12 mil for postpaid)

Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006

+3% (normalised) 828

8

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SLIDE 9

SMS +6% Non-SMS +7%

Data revenue rebounded

Da ta re ve nue *

25 32 42 79 91 108 109 111 118

Non-SMS (RM mil) SMS (RM mil)

Strong growth in non-SMS revenue Bundled VAS innovations driving higher prepaid GPRS usage Postpaid VAS/data usage on uptrend

43 46 104 122 140 151

16.4% 17.6% 18.0% 18.9% 18.1%

SMS +30% Non-SMS +48%

18.7%

Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006

* (Data revenue restated for all 6 quarters to include monthly fees) 31 154 164

% of mobile revenue 9

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SLIDE 10

E BIT DA

EBITDA improving

+28% +2%

43.2% 43.9% 43.6% 45.3%

EBITDA Margin (%) EBITDA (RM mil)

EBITDA increase in tandem with higher revenue Also lower sales & marketing costs this quarter

45.3%

* (Q206 normalised EBITDA RM398mil) 410 419 390 361 327

Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006

45.5%

297

10

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SLIDE 11

EBITDA margin strengthened

+0.4% (Ops & Maint @ 6.4%)

  • 1.2% (Other expenses @ 10.0%)

+0.1% (Staff costs @ 5.2%) +1.4% (Sales & Marketing @ 11.7%)

  • 1.2% (Traffic charges @ 19.0%)

45.5%

EBITDA margin Q306

E BIT DA ma rg in

+0.7% (Cost of materials @ 2.2%) @ denotes % of revenue in Q306

Gains contributed by: Relatively lower marketing spend post- World Cup hype Partially offset by: Higher IDD traffic cost Higher governance compliance cost

EBITDA margin Q206

45.3% * (Q206 normalised EBITDA margin at 44.6%)

EBITDA margin Q206*

11

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PAT impacted by finalisation of AoUL* Additional accelerated depreciation of RM42mil in Q306 Approximately another RM42mil will be taken up in Q406

* (AoUL - Assessment of Useful Life)

PAT impacted by accelerated depreciation

PAT

(RM mil) Q306 Q206 % chg EBITDA 419.3 409.6 +2.4

  • 25.8
  • 9.2
  • 1.6
  • 2.6

0.0

  • 9.0

+6.9

  • 9.9
  • 9.9

Depreciation & Amortisation (170.1) (135.2) EBIT 249.2 274.4 Net finance income

  • Finance costs
  • Interest income

6.1

(3.9) 10.0

6.2

(3.8) 10.0

PBT 255.3 280.6 Taxation (74.5) (80.0) PAT 180.8 200.6 EPS (sen) 24.1 26.7

12

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SLIDE 13

Ca pe x (RM mil)

Closing in on 90% population coverage

Accelerated coverage; now at 87% nationwide Continuous capacity and quality expansion 38% coverage, 37% capacity

106 333 126 182 117

Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006

215

15.5% 40.2% 14.6% 24.4% 12.9% 23.3%

Capex/Sales (%) 13

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SLIDE 14

Cash flow generation is high

Higher tax paid in Q3 vs Q2 (RM49 mil) Interim dividend paid RM289mil Positive working capital due to higher accruals

F re e c a sh- flow

(RM mil) Q306 Q206 Cash at start 1,103.9 1,412.9 Cash-flow used in financing activities (288.9) (562.5) Net change in cash 34.9 (309.0) 372.8 (11.7) (107.6)

(116.9)

Cash at end 1,138.8 1,103.9 292.7 Cash-flow from operations 372.5 Changes in working capital 155.6 Cash-flow used in investing activities

  • Capex

(204.3)

(214.8)

Operational cash-flow

(EBITDA – Capex)

204.5

14

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SLIDE 15

Underleveraged balance sheet

RM mil Q306 Q206 Capex 214.8 116.9 Capex/Sales (%) 23.3% 12.9% Total borrowings 300.0 300.0 Cash & cash equivalents 1,138.8 1,103.9 Total shareholders’ funds 1,962.8 2,070.9 ROE (%) 9.2% 9.7% ROCE (%) 9.4% 10.0% Current ratio (x) 0.9x 1.0x Net debt/equity (x) net cash net cash Net debt/EBITDA (x) net cash net cash FCF per share (sen) 27.3 sen 39.0 sen Net assets/share (RM) RM2.62 RM2.76

Ke y ra tios

ROE and ROCE lower q-o-q; impacted by accelerated depreciation FCF/share lower

  • n higher capex

spent this quarter

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SLIDE 16

RM1.3bn cash to shareholders

Dividend policy

recurring policy remains at minimum 50% of net earnings interim dividend of 75% declared and paid out on 28 August

2nd capital repayment

cash payment date 27 October current share price indicates 4.8% net yield

Borrowings

no immediate plans to draw down

  • n CP/MTN

AA2 rating reaffirmed by RAM no additional borrowings

Balance sheet initiatives

committed to optimise balance sheet pro-active management of excess cash no target gearing determined

16

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Verbal updates

Regulatory Ownership Management changes

17

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Governance

Fixed assets

remediation initiative completed in Q3 all key assets tagged and reconciled to FAR additional RM84 mil accelerated depreciation and amortization expenses from finalised AoUL for FY2006

Other initiatives

  • ngoing efforts to enhance internal

controls; realigned key assurance functions to increase coverage on end-to-end processes revenue assurance findings; potential positive one-off effect in Q4 progressing well towards SOA 404/SOX compliance by end-2006 year 2 SOA compliance, DiGi to embed SOA requirements as part of day-to-day operations

18

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SLIDE 19

DiGi moving forward

Focus

drive revenue and usage strengthen relative market share; core segments and weaker segments churn and loyalty management

Industry

potential impact from prepaid registration

  • pportunity from mobile number

portability very limited impact from 3G

Competition

intensifying; new players and new brands pressure on core tariffs and margins

2007 guidance (verbal)

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SLIDE 20

thank you see you next quarter

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Prepaid growing; postpaid holding up

Mobile re ve nue s

85 90 Prepaid +25% Postpaid +41% 98 106 546 599 676 700 726 748

Prepaid growth backed by higher subscriber base Postpaid sustained by higher quality customers despite higher rebates given

127 Prepaid +3% Postpaid +0% 817 784 700 640 127 865

Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006

887

Others (RM mil) Prepaid (RM mil) Postpaid (RM mil) 21

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SLIDE 22

Opex breakdown

(RM mil) Q306 Q206 % chg Cost of materials 20.0 26.3 +24.0

  • 8.6

+8.6

+12.1 +5.8

  • 0.8

+4.4 Other expenses

  • USP fund and license fees
  • provision for bad & doubtful debts
  • others

92.4

54.1 5.6 32.7

80.3

50.1 3.8 26.4

  • 15.1
  • 8.0
  • 47.4
  • 23.9
  • 1.4

+0.2pp Traffic charges 175.0 161.2 Sales & Marketing

  • Advertising & promotions
  • Commissions

107.8

47.2 60.6

118.0

53.7 64.3

Staff Costs 48.2 47.8 Operations & Maintenance 58.7 61.4 TOTAL 502.1 495.0 EBITDA margin 45.5% 45.3%

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SLIDE 23

Latest from DiGi Prepaid

NEW BASIC RATES FnF

INTRA LOCAL INTER LOCAL INTRA ADJACENT INTRA NON- ADJACENT INTER ADJACENT INTER NON- ADJACENT FnF NO.S FnF CALLS

0.48 / 0.38 0.15 6 1.20 1.20 1.20 1.20 0.48/0.38 FnF OLD BASIC RATES 0.15

FnF CALLS

6 0.48/0.38

FnF NO.S INTER NON- ADJACENT INTER ADJACENT INTRA NON- ADJACENT INTRA ADJACENT INTER LOCAL INTRA LOCAL

1st in Malaysia - “1 Low Flat rate to anyone anywhere at anytime” No conditions attached – “what you see is what you get” Own the “value” proposition – one rate to over 20 million subscribers DiGi only pack you need – cheaper to call Maxis from DiGi then from Maxis to Maxis. As cheap to call Celcom from DiGi as it is from another Celcom number

23

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Disclaimer

This presentation and the following discussion may contain forward looking statements by DiGi.Com Berhad (“DiGi”) related to financial trends for future periods. Some of the statements contained in this presentation or arising from this discussion which are not of historical facts are statements of future expectations with respect to financial conditions, results of operations and businesses, and related plans and

  • bjectives. Such forward looking statements are based on DiGi’s current views and

assumptions including, but not limited to, prevailing economic and market conditions and currently available information. These statements involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not and, should not be construed, as a representation as to future performance or achievements of DiGi. In particular, such statements should not be regarded as a forecast or projection of future performance of DiGi. It should be noted that the actual performance or achievements of DiGi may vary significantly from such statements.