Market to shrink further or stay flat, says Celcom

KUALA LUMPUR: Celcom Axiata Bhd, which suffered a 23.3% decline in net profit in the first quarter ended March 31, 2017, expects the telco market to continue shrinking or remain flat this year.
“We have said that towards middle of the year we want to stabilise the business. We believe the initiatives put in place five to six months back will make us stronger than the competition, which means regaining market share that we lost over the last three years in the second half of this year,” said its CEO, Michael Kuehner.
“But will that translate to growth? Maybe not, because we believe the market is still shrinking this year or will remain flat, more or less,” he told reporters at a results briefing yesterday.
He said the group is cautiously optimistic about the current situation and the way forward due to the increasingly challenging market environment.
In Q1, Celcom’s total revenue fell 3.3% year-on-year (yoy) to RM1.61 billion while overall data revenue surged 29.8% yoy to RM661 million. Data revenue contributed 41% to the company’s total revenue.
Normalised earnings before interest, tax, depreciation and amortisation fell 13.4% yoy to RM587 million while normalised net profit fell 23.3% yoy to RM269 million.
Postpaid revenue rose 1.2% quarter-on-quarter (qoq) while average revenue per user (Arpu) rose 1.9% qoq to RM81 from RM80. Postpaid subscriber base dipped 0.5%.
Prepaid revenue dropped 6.2% qoq, in line with an overall prepaid market decline of about 6.6%. Arpu fell 3.4% qoq to RM30 from RM31 while subscriber base fell 3.9%.
Celcom’s overall subscriber base decreased to 10.2 million in Q1 from 10.5 million in Q4 of 2016, with contraction primarily from its prepaid segment. The decline was also affected by limited brand visibility and distribution challenges.
Deputy CEO (business operations) Azwan Khan said the drop in subscriber base was partly due to a cleanup exercise whereby 400,000 non-revenue generating customers were purged. “These are customers or inactive numbers that go back as far as eight years,” he said. The cleanup exercise began in Q4 last year.
Celcom has allocated RM1.5 billion for capital expenditure (capex) this year, of which 70% will be used for network expansion, in line with its target to achieve LTE population coverage of 85% by year-end, from 77% as at Q1. Its capex last year was RM1.2 billion.