Maxis ups its value proposition

07 May 2022 - The Star

WITH Malaysia opting for the unique single wholesale network (SWN) for 5G, there have been some concerns over whether this model will work.

The concern is if there would be hiccups in the country’s 5G rollout. However, when a joint statement was issued by all mobile operators in mid-March in support of the SWN model, this led to some optimism that even players like giant mobile operator Maxis Bhd would be in support of the SWN model.

This is despite the fact that the country’s four largest mobile network operators, including Maxis would not own the 5G spectrum as it would be allocated exclusively to Digital Nasional Bhd (DNB), the special-purpose vehicle owned by the Finance Ministry.

To recap, the model works such that the mobile network operators (MNOs) would pay wholesale fee to DNB to enjoy the 5G access.

The government would also cede a 70% stake in DNB, for the MNOs to buy back the equity from the government with the new arrangement.

Together with other MNOs, Maxis has expressed interest to further understand and explore the equity stake offer in DNB and the process moving forward.

So far, only two telcos namely Telekom Malaysia Berhad and YTL Communications Sdn Bhd have inked a service agreement with DNB for the implementation of the 5G network in the country. Other telco operators have yet to sign an agreement with DNB.

Notably, the government has said that MNOs that do not take up its stake by the June 30 deadline would be left out as the focus is on ensuring that the 5G rollout takes place.

So what about Maxis?

According to its chief executive officer Gokhan Ogut, Maxis is in the midst of ironing out details on the implementation of the SWN model, including the proposed shareholding offer.

“We will do everything in our power to help the government’s digital ambitions as connectivity is an important part of it.

“5G is like any other new technology and will be part of our commitment to helping Malaysians to be connected in every possible way, in all situations, at all times, for everyone,” he tells StarBizWeek.

Ogut enthuses that whatever the case, one thing remains firm: that Maxis is gearing up to provide 5G services “as it brings benefits to businesses, customers as well as the government to strengthen the country’s competitiveness in the region.”

Prospects of 5G

So what kind of 5G services is Maxis planning to provide to its customers?

Ogut says that 5G services that it would provide will largely be in the enterprise segment especially in the manufacturing division that encompasses Internet of Things (IoT) and smart manufacturing.

“We have been developing multi-industry use cases in areas such as smart manufacturing, smart surveillance, smart agriculture, smart education, and smart tracking solutions.

“We had earlier announced partnerships with major players for 5G services and solutions, deployment of major 5G use cases and developing platforms for businesses to leverage 5G.

“Maxis will amplify the benefits of 5G to consumers and businesses, through its partnerships,” he adds.

About six months ago, national car maker Proton partnered with Maxis to deploy 5G solutions to power up its plant in Tanjung Malim plant in Perak.

The solutions include smart security systems to track and ensure the security of cars that roll off the production line and an augmented reality (AR) or virtual reality (VR) remote support and maintenance system that enables Proton engineers to communicate with their international partners in real-time.

Another partnership that Maxis entered into last year was with Malaysia Airports Holding Bhd to co-develop a digital transformation roadmap for smart airport operations.On the consumer segment, Ogut says its customers would have better mobile connectivity and AR and VR games would be a much better experience with the 5G network.

“We remain focused on serving the people and the enterprises of Malaysia while playing a key role to support the digital ambitions of the nation,” he adds.

As 5G plays an important role in the IoT segment, Gokhan says the telco operator will continue to work in this segment with companies that have special IoT solutions for their business processes.

He adds that Maxis is working with partners to provide cloud solutions which play a key role in the 5G network as it allows scalability of businesses.

“We will do our part in terms of how 5G can enable solutions to benefit businesses,” Ogut says.

In the past two years, Maxis acquired two cloud solutions companies to build on its capabilities.

In April 2020, Maxis bought a Malaysian-based cloud solutions company, Infrastructure Consulting & Managed Services Sdn Bhd (ICMS) primarily for their talent pool of professionals.

Last year, Maxis acquired Peering One Sdn Bhd that specialises in hybrid and private cloud managing services.

The acquisition of these companies positions Maxis as an end-to-end cloud solutions provider with complete cloud offerings as businesses are now looking to move to the cloud, explains Ogut.

Building these capabilities was part of the telco operator’s to-do list even before the pandemic hit the country, as it announced its vision to be Malaysia’s leading converged solutions provider back in 2019, points out Ogut.

This helped prepare Maxis for the shifts that have taken place throughout the pandemic, as communications, video conferencing and streaming became more prevalent in the last two years.

To achieve all this, Maxis had forked out a total capital expenditure of RM2.43bil for 2020 and 2021, which made up about 15% of service revenues of both years.

Ogut adds that last year, more than one-fifth of Maxis’ service revenue was invested into network and IT capabilities. In the past two years, Maxis built 213 new mobile sites and completed upgrades at more than 8,911 sites throughout the country.

As of the first quarter of this year, Maxis had delivered a total of 12 new sites and upgraded 609 sites.

Ogut believes the group is well positioned to meet the full spectrum of business needs with connectivity and solutions across mobile, fixed, managed services, cloud, IoT and digital solutions.

“These solutions reinforce our commitment to the government’s MyDigital initiative to transform Malaysia into a regional leader in the digital economy,” he says.

For this year, Maxis is expected to focus on three areas namely enterprises, fibre connectivity, and digitalisation, says Ogut.

Ogut adds more Maxis customers are enjoying fibre connectivity, evident in the consistent growth of this segment for Maxis every quarter.

As of the first quarter of this year, Maxis had a total of 615,000 fibre and 4G wireless home broadband connections, up 4.1% quarter-on-quarter.

Ogut says the growth has been due to attractive packages offered by Maxis as well as wider deployment to underserved areas. “We aim to bring affordable, high-speed connectivity to every home and business premise in Malaysia,” he quips.

“We do this through building our own fibre, as well as seeking access from every provider in the market. We have also been accelerating our network coverage in rural areas through partnerships with state-owned infrastructure players,” he explains.

Ogut adds that Maxis continues to expand their enterprise offerings, seeking to deliver a wide range of market-leading technologies over its network. He says there has been “strong underlying growth” in this segment which is expected to accelerate on the back of the Covid-19 recovery and as businesses and the government accelerate their digitalisation journey.

“The opportunities that we wish to capture will be led by strong use cases for IoT, primarily around smart manufacturing, smart buildings and smart security.

“Our digital transformation agenda continues to gain momentum as it enables us to capture new business opportunities, drive new customer behaviours, enable growth in our digital and online presence, and ultimately drive strong value creation outcomes for our customers,” Ogut elaborates.

The group’s enterprise business revenue increased 5.4% to RM388mil, while its consumer segment grew 2.4% to RM1.64bil in the first quarter ended March 31 (1Q22).

This he says was driven by Maxis’ convergence strategy which reaped rewards despite a weakening prepaid market.

However, Ogut says the group still leads the prepaid market share in terms of both subscribers and revenue, attributed to the Hotlink Prepaid Unlimited plan.

“We continue to see migration of high value prepaid subscribers to postpaid,” he adds.

Ogut adds that Maxis would continue to focus on winning in the postpaid market with attractive plans for first-time postpaid customers, constant innovation on easy device ownership and the widest range of devices, best savings and affordability.

“Consumers can look forward to better Internet connectivity, complemented with the introduction of the latest 5G smartphones, which are made affordable with our attractive postpaid plans and now comes with increased gigabytes.

“We also continue to explore new revenue streams with lifestyle content and improved relevancy with our offers, for both Maxis and Hotlink,” he notes.

Moving on from the pandemic

Looking ahead, Ogut remains cautiously optimistic for this year as the country transitions to an endemic phase.

This suggests a gradual recovery in the tourism sector, and in turn a recovery in the roaming revenues across telco operators, he says.

“The pandemic has strongly influenced the outlook for 2022 as it demonstrates growing digitalisation for consumers and businesses, reinforcing the importance of nationwide connectivity.

“There are also dynamic market developments in the telecommunications industry surrounding the 5G space and mega merger,” he adds, referring to the proposed merger between Celcom Axiata Bhd and Bhd..

Overall, Ogut shares that it is business as usual for Maxis, pointing out that it remains confident in its convergence ambitions and growth strategy.

“We are well positioned to capture the myriad opportunities, leveraging our strengths in innovation and market leadership in mobile, network, brand and converged offerings as well as aggressive growth plans for our enterprise and fibre business,” he says.

Earnings wise, Maxis has reported stronger quarterly revenues though profits were marginally down over the last two years.

According to MIDF Research, Maxis net profit of RM298mil for 1Q22 has generally come in line with its and consensus full-year estimates.

The research house says the group’s normalised earnings for the 1Q22 showed a mixed performance quarterly and yearly whereby it grew 3.1% quarter-on-quarter and dropped 10.8% year-on-year to RM298mil.

“The sequential quarterly positive earnings growth was primarily due to better contribution from consumer revenue,” it adds.

Meanwhile, TA Securities Research also notes that Maxis financial performance met with its and consensus full-year estimates at 22.3% and 22.5% respectively.

That said, it expects Maxis to maintain resilient service revenue in the financial year ending Dec 31 (FY22) supported by its convergence strategy with levers of growth from fixed and wireless broadband bundled propositions and the enterprise space.

Another key factor that would support its service revenue is the recovery in mobile service revenue, especially from international roaming and migrant flow, alongside Malaysia’s full reopening of its international borders.

Considering uncertainties on the commercial 5G launch and the potential emergence of Covid-19 variants, TA Securities Research says Maxis has taken prudence and continued to withhold guidance for FY22.

On the dividend front, Maxis declared its first interim dividend of 5 sen for 1Q22, similar to the preceding quarter when it declared a dividend of four sen and a special dividend of one sen.

TA Securities Research opines that Maxis will be able to sustain quarterly dividend payout of five sen as Malaysia’s economic recovery gathers further momentum alongside its transition to endemicity.

“Our dividend payout assumption for FY23 and FY24 is maintained at 20 sen. Thus, this implies forward yields of 5.2% for FY22-FY24,” it says.


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