Earnings Concall/ Q4 2013 OPEN Earnings Conference Call Quarter 4, 2013 Karl Erik Broten, CFO 6 Feb 2014 1
Key highlights Operational highlights Financials updates Guidance and outlook Q&A 2
Solid round up and delivered DiGi s promise Q4 2013 benefited from full scale modernised network with strong increase in internet services 3G/HSPA+ coverage has reached over 80% population nationwide with improved quality and stability Had a successful year end Thank You campaign 5.8% revenue growth Finish line to an eventful FY13 Delivered on 2013 financial guidance 4 th and final dividend payment of 7.0 sen per share Total payout for FY13 of 21.3 sen per share 45% EBITDA 34% Ops-CF 2013 Guidance 5% - 7% revenue growth ~1pp lower EBITDA and Ops Cash-Flow margin from 2012 levels (revised) 41% EPS growth 3
Stronger margins from service revenue and efficiencies 6.4% y-o-y revenue growth RM mln 1,733 1,700 1,629 1,647 1,653 1,526 1,553 1,577 1,492 1,476 1.5% 3.0% -1.1% 1.1% 3.4% 0.4% 1.8% 2.8% 1.5% 1.9% q-o-q % Service Revenue Revenue 47% EBITDA margin 32% PAT margin 39% Ops Cash-Flow margin +11.7% +5.7% +122.8% +22.0% +44.7% +27.8% 725 720 747 766 810 246 329 380 449 548 470 529 561 532 680 45% 44% 45% 45% 47% 29% 32% 34% 31% 39% 4
Creating headlines on Internet For All offerings Campaigns and Year End Sales Increased focus on the internet based subscriptions and usage Launched special year end Thank You campaign with amazing deals for smartphones, tablets, modems, calls and internet with DiGi Encouraging internet take-up especially amongst the prepaid subscribers Affordable smartphones and tablets continued to bring positive spin to internet adoption Improved customers experience more customers who would promote DiGi s services 5
Steady rise on internet subscribers Subscriber development +4.8% +1.6% 10,494 10,372 10,548 10,827 10,995 1,671 1,678 1,686 1,696 1,700 8,823 8,694 8,862 9,131 9,295 6,007 6,100 273 262 Prepaid Internet subscriber mix 6,590 247 6,755 6,880 235 226 5,734 5,838 6,343 6,520 6,654 MI Subs Postpaid BB Subs 000 000 Healthy subscriber base with +168K net adds for the quarter; and +501K net adds for FY13 Internet subscribers rose 14.5% y-o-y mainly driven by: internet subscriptions from both new and existing base leveraging on new coverage areas, on ground promotions and incentives Subscriber base remained resilient against intensified competition in the internet and IDD markets Well positioned at the front line in capturing affordable and reliable internet demands 6
Stable ARPU with more than 35% from non-voice Blended ARPU composition 47 47 48 48 48 2 2 2 2 2 6 6 6 5 5 7 8 8 10 10 32 31 32 31 31 RM Maintained healthy ARPU development over a larger subscriber base ARPU uplift from existing subscriber base complemented those from emerging and less affluent coverage areas Voice Internet Messaging VAS ARPU mix 83 82 83 82 83 41 40 42 41 41 RM Solid distribution network and relevant products offerings anchored consistent ARPU development The improved network quality and customer experience further contributed to overall customers satisfaction and ARPU stability Postpaid Prepaid 7
Voice remained resilient amidst stronger internet Minutes of Use ( MOU ) 267 267 267 260 256 Minutes Fairly stable voice usage over a larger subscriber base through periodic usage campaigns Blended MoU Average price per minute ( APPM ) 14 13 13 13 13 sen Effects from data shift well compensated by the growth in internet usage incremental top line revenue from new subscribers Pressure from IDD price competition managed sustainably with APPM remained unchanged at 13 sen. Voice pricing susceptible to next MTR revision effective 1 Jan 2014 Per Min 8
Volumes for year end sales and iphone 5S demands No. of handsets and devices sold 367 000 Relatively lower volumes sold compared to prior quarters, which included SKMM Youth smartphones 95 119 118 90 Current quarter s demand mainly from iphone 5S and year end sales Consequently, smartphone penetration rose to 38.1% (+11.7 pp from Q4 2012) Smartphone and MI penetration 54.6% 56.3% 60.1% 60.2% 60.5% 26.4% 28.5% 30.4% 34.0% 38.1% % of MI subs % of smartphone subs % Mobile internet adoption continued to gain traction among new and existing subscribers With the improved data network experience and greater access to smartphones, MI subscribers consumed more data at much faster pace with higher data quota demands 9
3G/HSPA+ population coverage reached 80.1% 3G/HSPA+ population coverage Substantially closing the 3G/HSPA+ network gap from 67%, a year ago 54% 67% z 80% Full scale modernised network poised for better network quality and speed to cater for growing data demands 2011 2012 2013 DiGi 4G LTE The own built and joint fibre network has positively expanded to > 3,200 KM important backhaul to support the always-on access, high-speed data connectivity experience With network modernisation completed and sizeable 3G/HSPA+ coverage established, LTE expansion will progress faster in 2014 while continuing on quality optimisation Well positioned in delivering Internet For All 10
Another industry collaboration breakthrough DiGi together with Celcom signed fibre collaborative deal with TM on 13 Dec 2013 to secure quick access to fibre infrastructure for future capacity demands covers > 3,000 KM fibre network An important part of the ongoing network collaboration between DiGi and Celcom to roll out > 10,000 KM of fibre network nationwide Capitalising on built - share infrastructure synergies to optimise on costs and avoid infra duplications Enhancing the ability to deliver affordable and high-quality internet connectivity to more Malaysians 11
4.1% service revenue growth against tepid industry growth Revenue composition RM bln Service revenue composition RM bln +5.8% +4.1% +6.4% +1.9% 6.4 6.7 0.5 0.6 +5.7% +1.5% 5.9 6.1 1.8 2.1 1.6 1.6 1.7 1.7 1.7 0.1 1.5 0.2 1.4 0.2 1.5 0.1 1.6 0.1 1.6 5.9 6.1 1.5 1.4 1.5 1.6 1.6 0.5 1.0 0.4 1.0 0.5 1.0 0.6 1.0 0.6 1.0 4.1 4.0 FY 2012 FY 2013 FY 2012 FY 2013 Service Device & Others Voice Data 12
Stronger prepaid revenue amidst intensified competition Service revenue mix 1,492 1,476 1,526 1,553 1,577 425 426 433 434 439 1,067 1,050 1,093 1,119 1,138 Prepaid Postpaid Voice revenue RM mln +5.7% +1.5% RM mln +1.6% +0.0% 1,004 978 1,011 1,020 1,020 219 210 215 213 214 785 768 796 807 806 Prepaid service revenue grew 6.7% y-o-y and 1.7% q-o-q +17.7% data revenue y-o-y +2.7% voice revenue y-o-y Postpaid service revenue grew 3.3% y-o-y and 1.2% q-o-q +9.2% data revenue y-o-y -2.3% voice revenue y-o-y FY13 service revenue strengthened +5.2% to RM4.4 bln for prepaid +1.4% to RM1.7 bln for postpaid Relatively stable q-o-q voice revenue though higher use of data services Prepaid Postpaid 13
Improved data speed fuelled internet growth Data revenue mix +14.1% +4.5% 488 498 515 533 557 53 50 50 51 51 193 183 172 162 158 242 265 293 320 348 Internet Messaging VAS MI penetration rate RM mln For FY13, data revenue grew 14.2% while internet revenue grew 47.5%, % more than cushioned the lower revenue from messaging and VAS Internet revenue continued to surge 8.7% q-o-q and 43.8% y-o-y supported by improved data speed and usage rising mobile internet subscriptions; and higher smartphone penetration to 38.1% 67% 68% 69% 68% 72% 52% 54% 58% 59% 58% The continuous drive on internet related campaigns and offers has spurred MI penetration rate to 72% for postpaid. Postpaid Prepaid Prepaid MI penetration registered a 1pp dip to 58% mainly due to dilutive effect from larger prepaid subscriber base 14
Cost continued to trend efficiently Total cost trend 906 936 908 934 935 400 417 415 420 421 506 519 493 514 514 COGS Opex Opex (% of revenue) RM mln +3.2% +0.1% 24.6% 25.3% 25.1% 24.7% 24.3% 7.5% 7.4% 7.8% 7.6% 7.7% 3.1% 3.6% 3.7% 3.4% 3.2% 4.5% 5.0% 4.9% 4.9% 4.4% 5.7% 5.8% 5.7% 6.1% 6.0% 3.8% 3.5% 3.0% 2.7% 3.0% % Total cost kept constant whilst delivering higher service revenue and benefiting from post network modernisation efficiencies Full year opex to revenue has improved to 24.9%, from 25.5%, a year ago Attributed to strong cost management discipline to counter rising cost of operations on larger network footprints; and inflationary effects Now, in a better position to benefit from the established operational efficiencies as well as synergies from on-going strategic industry partnerships Others USO O&M Staff Cost Sales & Mktg 15
Margins uplifted in the final quarter EBITDA % PAT % 1,000 500 - CF margin Capex % 1,000 800 600 400 200 - EBITDA and PAT margins 45% 44% 45% 45% 47% 15% 20% 23% 26% 32% 725 720 747 766 810 246 329 380 Capex and Ops Cash-Flow margins 29% 32% 34% 31% 39% 16% 12% 11% 14% 7% 255 191 186 234 130 470 529 561 532 680 OpsCF 449 EBITDA PAT Capex RM mln 548 RM mln 60.0% 40.0% 20.0% 0.0% EBITDA margin and PAT margin rose to 47% and 32% respectively as a flow through from lower device subsidies, improved OPEX to revenue discontinuation of accelerated depreciation Continued to take advantage on last mile tax incentive to bring effective tax to 20% for the full year resulting in 41.5% stronger PAT for FY13 Capex spent for the final quarter was relatively lower, bringing the overall full year capex to revenue ratio of 11% and Ops CF margin at 34%. 16
FY13 EPS improved by 41.3% Payout Ratio 15.0 10.0 5.0 EPS and DPS 80% 90% 98% 99% 99% 7.1 4.2 4.9 5.8 3.2-2.5 3.8 4.8 5.7 7.0 Q412 12.0* Q113 Q213 Q313 Q413 DPS EPS Balance sheet sen RM mln Total Assets 4,014 3,809 3,923 3,788 3,752 Total Equity 261 396 480 556 661 20000% 0% -20000% -40000% -60000% -80000% -100000% EPS increased 22.4% q-o-q to 7.1 sen contributing to higher FY13 EPS to 21.9 sen (FY12: 15.5 sen) Interest-bearing debt ended 21.2% lower compared to previous quarter mainly due to settlement made Retained strong balance sheet with net debt/ebitda < 0.3x The Board has declared its 4th and final dividend of 7.0 sen per share (net) equivalent to RM544 million, payable to shareholders on 7 March 2014 Interestbearing debts Cash & cash equivalents 1,080 928 927 951 749 709 579 761 550 411 Total dividend payout of 21.3sen, equivalent 4.63% yield on average share price of RM4.60 17
2014 ambition and priorities Aims to deliver 4 6% Revenue growth Sustain EBITDA margin Momentum in Q4 provided a good start leading to FY14 uptrend to continue although growth may not be as strong Priorities on delivering Internet For All, driving greater customer focus and solid revenue growth Higher investment on sustainable competitive network and platforms to strategically capture growth opportunities expand LTE and 3G/HSPA+ network develop more extensive fibre network Capex to revenue ratio slightly up while maintain healthy Ops Cash-Flow margin 18
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. 19
Thank you See you next quarter! 20
Appendix 21
Full year financial performance 6,361 6,733 5,891 6,132 +5.8% +4.1% +3.9% +41.5% +3.3% 2,929 3,043 1,206 1,706 2,229 2,302 Revenue Service Revenue EBITDA PAT Ops Cash-Flow 2012 2013
Key operating performance KPIs (RM mln) Q413 Q313 Q213 Q113 Q412 Q312 Q212 Q112 Q411 Q-o-Q Y-o-Y Subscriber base 10,995 10,827 10,548 10,372 10,494 10,304 10,229 9,936 9,920 2% 5% Revenue 1,733 1,700 1,653 1,647 1,629 1,583 1,580 1,569 1,545 2% 6% EBITDA 810 766 747 720 725 715 752 737 728 6% 12% EBITDA margins 47% 45% 45% 44% 44% 45% 48% 47% 47% 1.7pp 2.3pp Depreciation & Amortisation (122) (221) (247) (288) (361) (307) (332) (330) (337) -45% -66% EBIT 688 545 500 432 364 408 420 407 390 26% 89% Net finance (costs)/income (5) (6) (6) (8) (4) (2) (1) (1) (1) -17% 25% Profit Before Tax 683 539 494 424 360 406 419 406 389 27% 90% Taxation 135 90 114 95 114 91 95 85 5 50% 18% Profit After Tax 548 449 380 329 246 315 324 321 394 22% 123% *EPS (sen) 7.1 5.8 4.9 4.2 3.2 4.1 4.2 4.1 5.1 22% 122% Prepaid ARPU 41 41 42 40 41 41 41 41 42 0% 0% Postpaid ARPU 83 82 83 82 83 82 85 85 86 1% 0% Blended ARPU 48 48 48 47 47 48 48 49 50 0% 2% 23
Revenue composition (RM mln) Q413 Q313 Q213 Q113 Q412 Q312 Q212 Q112 Q411 Q-o-Q Y-o-Y REVENUE 1,733 1,700 1,653 1,647 1,629 1,583 1,580 1,569 1,545 2% 6% Service Revenue 1,577 1,553 1,526 1,476 1,492 1,470 1,470 1,459 1,468 2% 6% Voice revenue 1,020 1,020 1,011 978 1,004 1,010 1,025 1,011 1,023 0% 2% Data revenue 557 533 515 498 488 460 445 448 445 5% 14% Internet 348 320 293 265 242 210 191 188 181 9% 44% Messaging 158 162 172 183 193 194 195 200 204-2% -18% VAS 51 51 50 50 53 56 59 60 60 0% -4% Device and other revenue 156 147 127 171 137 113 110 110 77 6% 14% Prepaid Revenue 1,138 1,119 1,093 1,050 1,067 1,050 1,034 1,032 1,045 2% 7% Voice revenue 806 807 796 768 785 792 792 785 797 0% 3% Data revenue 332 312 297 282 282 258 242 247 248 6% 18% Postpaid Revenue 439 434 433 426 425 420 436 427 423 1% 3% Voice revenue 214 213 215 210 219 218 233 226 226 0% -2% Data revenue 225 221 218 216 206 202 203 201 197 2% 9% 24
Reported COGS and OPEX (RM mln) Q413 Q313 Q213 Q113 Q412 Q312 Q212 Q112 Q411 Q-o-Q Y-o-Y COGS 514 514 493 519 506 447 442 435 408 0% 2% Cost of materials 151 144 139 182 157 106 105 117 83 5% -4% Traffic charges 363 370 354 337 349 341 337 318 325-2% 4% OPEX 421 420 415 417 400 426 396 403 416 0% 5% Sales & marketing 133 130 129 122 122 134 125 124 134 2% 9% Staff costs 57 57 61 60 51 61 61 59 68 0% 12% Operations & maintenance 76 84 81 83 74 81 58 82 78-10% 3% Other expenses 155 149 145 152 153 150 152 138 136 4% 1% USP fund and license fees 104 103 95 96 92 93 96 86 79 1% 13% Credit loss allowances 7 7 7 6 8 10 8 11 15 0% -13% Others 44 39 43 50 53 47 48 41 42 13% -17% TOTAL 935 934 908 936 906 873 838 838 824 0% 3% 25
Reported Cash-Flow (RM mil) Q413 Q313 Q213 Q113 Q412 Q312 Q212 Q112 Q411 Q-o-Q Y-o-Y Cash at start 550 761 579 709 1,453 1,517 1,518 1,098 987-28% -62% Cash-flow from operations 826 616 651 543 542 477 682 637 532 34% 52% Changes in working capital (197) (248) 9 (142) (110) 55 (59) 47 163-21% 79% Cash-flow used in investing activities (126) (227) (180) (186) (243) (137) (165) (108) (296) -44% -48% Capex (130) (234) (186) (191) (255) (150) (177) (118) (309) -44% -49% Cash-flow used in financing activities (642) (352) (298) (346) (933) (459) (459) (156) (288) 82% -31% Net change in cash (139) (211) 182 (130) (744) (64) (1) 420 111-34% -81% Cash at end 411 550 761 579 709 1,453 1,517 1,518 1,098-25% -42% Operational cash-flow (EBITDA Capex) 680 532 561 529 470 565 575 619 419 28% 45% Cash-flow margin 39% 31% 34% 32% 29% 36% 36% 39% 27% 8% 10% 26