Quarter 3 2006 Analyst Teleconference 20 October 2006
2 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 approved
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) Revenue RM921 mil +2% (RM904 mil) +24% (RM745 mil) EBITDA RM419 mil +2% (RM410 mil) +28% (RM327 mil) EBITDA margin 45.5 % +0.2pp (45.3%) +1.6pp (43.9%) PAT RM181 mil -10% (RM201 mil) +27% (RM143 mil) EPS 24.1 sen 26.7 sen 19.1 sen
4 Industry and DiGi in Q306 Prepaid registration intensive industry drive unregistered users still relatively high industry wide 15 th Dec deadline remains DiGi - focus expand weaker segments acquisition and retention brand building Competition and tariffs aggressive promotions to drive on-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) DiGi - value propositions Postpaid: 123-plan Prepaid: Bonus airtime to drive acquisition/retention VAS: Promotions (MMS, XMS, FriendFinder and FunVoice)
5 Prepaid SIM activations slowed; postpaid sustaining Customers 150k net additions; total subscribers at 5.6 mil Prepaid momentum clouded by ongoing registration exercise New value propositions driving business and postpaid mass 241 3525 22.8% 307 3880 23.9% 353 4442 24.6% 382 4704 24.8% +32% Prepaid +51% Postpaid +2% Prepaid +10% Postpaid 422 5018 25.3% 464 5126 Q2 Q3 Q4 Q1 Q2 Q3 Q1 2005 2005 Q2 2005 2005 Q3 2005 2005 Q4 2006 2005 Q1 2006 2006 Q2 2006 2006? 4279 Prepaid ( 000) Postpaid ( 000) Active Users ( 000) Subscriber market share
6 AMPU held up by postpaid AMPU Prepaid declined on lower outgoing usage -10% Prepaid -4% Postpaid -7% Blended -3% Prepaid +8% Postpaid -1% Blended 471 439 389 380 392 422 Postpaid driven by effective price plan 170 175 169 162 163 162 150 156 152 145 144 140 Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 Prepaid (mins) Postpaid (mins) Blended (mins)
7 ARPU stable ARPU -9% Prepaid -14% Postpaid -9% Blended -2% Prepaid -10% Postpaid -2% Blended Prepaid weakened slightly 128 111 99 96 105 95 Higher rebates (bonus airtime) to drive retention and prepaid registration 59 58 58 54 54 53 54 54 55 51 50 49 Postpaid sustained vis-à-vis last quarter * (Including one-time adjustment of RM12 mil for postpaid (RM10 on postpaid and RM1 blended ARPU)) Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006 Prepaid (RM) Postpaid (RM) Blended (RM)
8 Steady underlying revenue growth Revenue +24% +3% (normalised) +2% Higher subscriber base driving revenue 745 828 861 904 921 686 Segmentation drive effective in strengthening customer retention Increased brand recognition in noncore segments * (Q206 revenue included an onetime adjustment of RM12 mil for postpaid)? 24.6% 23.5% 22.5% 21.1% 20.0% Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006 Q3 2006 Revenue (RM mil) Est. Mobile Revenue Market share (%)
9 Data revenue rebounded Data revenue* Strong growth in non-sms revenue Bundled VAS innovations driving higher prepaid GPRS usage Postpaid VAS/data usage on uptrend 104 25 16.4% 122 31 17.6% 140 32 18.0% 151 42 18.9% SMS +30% Non-SMS +48% 154 SMS +6% Non-SMS +7% 79 91 108 109 111 118 43 18.1% 164 46 18.7% * (Data revenue restated for all 6 quarters to include monthly fees) Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 SMS (RM mil) Non-SMS (RM mil) % of mobile revenue
10 EBITDA improving EBITDA EBITDA increase in tandem with higher revenue Also lower sales & marketing costs this quarter 297 327 361 390 410 +28% +2% 419 43.2% 43.9% 43.6% 45.3% 45.3% 45.5% * (Q206 normalised EBITDA RM398mil) Q2 Q3 Q4 Q1 Q2* Q3 2005 2005 2005 2006 2006 2006 EBITDA (RM mil) EBITDA Margin (%)
11 EBITDA margin strengthened EBITDA margin Gains contributed by: Relatively lower marketing spend post- World Cup hype -1.2% (Traffic charges @ 19.0%) EBITDA margin Q206* 45.3% EBITDA margin Q206 +0.7% (Cost of materials @ 2.2%) +1.4% (Sales & Marketing @ 11.7%) Partially offset by: Higher IDD traffic cost Higher governance compliance cost -1.2% (Other expenses @ 10.0%) +0.1% (Staff costs @ 5.2%) +0.4% (Ops & Maint @ 6.4%) * (Q206 normalised EBITDA margin at 44.6%) EBITDA margin Q306 @ denotes % of revenue in Q306 45.5%
12 PAT impacted by accelerated depreciation PAT PAT impacted by finalisation of AoUL* Additional accelerated depreciation of RM42mil in Q306 Approximately another RM42mil will be taken up in Q406 (RM mil) Q306 Q206 % chg EBITDA 419.3 409.6 +2.4 Depreciation & Amortisation (170.1) (135.2) -25.8 EBIT 249.2 274.4-9.2 Net finance income - Finance costs - Interest income 6.1 (3.9) 10.0 6.2 (3.8) 10.0-1.6-2.6 0.0 PBT 255.3 280.6-9.0 Taxation (74.5) (80.0) +6.9 PAT 180.8 200.6-9.9 EPS (sen) 24.1 26.7-9.9 * (AoUL - Assessment of Useful Life)
13 Closing in on 90% population coverage Capex (RM mil) Accelerated coverage; now at 87% nationwide 333 215 Continuous capacity and quality expansion 106 182 126 117 38% coverage, 37% capacity 15.5% 24.4% 40.2% 14.6% 12.9% 23.3% Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 Capex/Sales (%)
14 Cash flow generation is high Free cash-flow (RM mil) Q306 Q206 Higher tax paid in Q3 vs Q2 (RM49 mil) Interim dividend paid RM289mil Positive working capital due to higher accruals Cash at start 1,103.9 1,412.9 Cash-flow from operations 372.5 372.8 Changes in working capital 155.6 (11.7) Cash-flow used in investing activities - Capex (204.3) (214.8) (107.6) (116.9) Cash-flow used in financing activities (288.9) (562.5) Net change in cash 34.9 (309.0) Cash at end 1,138.8 1,103.9 Operational cash-flow (EBITDA Capex) 204.5 292.7
15 Underleveraged balance sheet Key ratios ROE and ROCE lower q-o-q; impacted by accelerated depreciation FCF/share lower on higher capex spent this quarter 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
16 RM1.3bn cash to shareholders 2 nd capital repayment cash payment date 27 October current share price indicates 4.8% net yield Borrowings no immediate plans to draw down on CP/MTN AA2 rating reaffirmed by RAM no additional borrowings Dividend policy recurring policy remains at minimum 50% of net earnings interim dividend of 75% declared and paid out on 28 August Balance sheet initiatives committed to optimise balance sheet pro-active management of excess cash no target gearing determined
17 Verbal updates Regulatory Ownership Management changes
18 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 ongoing 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
19 DiGi moving forward Industry Focus potential impact from prepaid registration opportunity from mobile number portability very limited impact from 3G drive revenue and usage strengthen relative market share; core segments and weaker segments churn and loyalty management Competition intensifying; new players and new brands pressure on core tariffs and margins 2007 guidance (verbal)
thank you see you next quarter
21 Prepaid growing; postpaid holding up Mobile revenues Prepaid +25% Postpaid +41% Prepaid +3% Postpaid +0% Prepaid growth backed by higher subscriber base 640 700 784 98 817 106 865 127 887 127 Postpaid sustained by higher quality customers despite higher rebates given 85 90 546 599 676 700 726 748 Q2 Q3 Q4 Q1 Q2 Q3 2005 2005 2005 2006 2006 2006 Prepaid (RM mil) Postpaid (RM mil) Others (RM mil)
22 Opex breakdown (RM mil) Q306 Q206 % chg Cost of materials Traffic charges Sales & Marketing - Advertising & promotions - Commissions Staff Costs 20.0 175.0 107.8 47.2 60.6 48.2 26.3 161.2 118.0 53.7 64.3 47.8 +24.0-8.6 +8.6 +12.1 +5.8-0.8 Operations & Maintenance 58.7 61.4 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 TOTAL 502.1 495.0 EBITDA margin 45.5% 45.3% +4.4-15.1-8.0-47.4-23.9-1.4 +0.2pp
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 6 0.15 OLD 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 0.48/0.38 1.20 1.20 1.20 1.20 6 0.15 1 st 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
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 objectives. 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.