Wednesday, October 6, 2010

MAXIS Bhd

Maxis Bhd is Malaysia’s leading telecommunications provider with 12.7 million mobile subscriptions as of March 31, 2010. Founded in 1995, it was listed in 2002 as Maxis Communications Bhd. In 2007, the company was privatised and delisted. In November 2009, Maxis Bhd, consisting of only the Malaysian operations, was relisted. It has been the country’s No 1 mobile player since 2000. 

In the following e-mail interview, Maxis CEO Sandip Das fields questions on the telco’s business, strategies and growth outlook.

TEFD: What are the group’s competitive strengths and advantages?
Sandip:
The first is market leadership and effective branding. Maxis is the leading mobile operator in Malaysia in both the prepaid and postpaid segments with 12.3 million aggregate subscriptions and a blended market share of around 41% as at Dec 31, 2009. We are also the leader in terms of market share across every segment of its business, including postpaid, prepaid, corporate and SME businesses as well as data services. Our Maxis brand and Hotlink brands are two of the most recognised and valuable brands in Malaysia.

The second is high network quality and customer service. Maxis is built around high network quality and ubiquitous coverage across Malaysia through more than 6,000 base station sites as at Dec 31 last year. The Maxis network has particular strengths in the areas of 2G and 3G voice and data services. Our extensive network coverage and high network quality have been sustained through investments year-on-year in network coverage and capacity enhancements.

The third is a strong and effective distribution network. Maxis’ extensive network comprises over 21,000 points of sale (excluding internet access points), of which over 12,000 are physical retail locations across Malaysia, to complement its segmentation strategy.
Sandip Das, CEO, Maxis Bhd
Sandip Das, CEO, Maxis Bhd

We are also well-placed to capitalise on fast-growing broadband and data opportunities. As over 50% of Malaysia’s population is estimated to be under 25 years of age, a large proportion of whom comprises regular Internet users, we believe the Malaysian market is poised for significant growth in broadband and mobile data services, and Maxis is well-positioned to capture this opportunity.

For the year ended Dec 31, 2009, over 34% of Maxis’ mobile revenues originated from non-voice services, making us a leader in the provision of mobile data services in Malaysia and one of the highest in the region. To support our non-voice and mobile broadband business, we have created a strong product development engine to deliver smart applications across mass market phones as well as sophisticated high-end devices.

In addition, we have built a powerful ecosystem of partnership with content providers (including Astro, Yahoo and Friendster) and device manufacturers (including Apple and RIM) which is expected to support the delivery of the next generation of broadband and data products and services to its customers. 

The fifth is an experienced management team. We believe we have an experienced key management team drawn from global and local talent that provides a balanced blend of international expertise and local knowledge.

Sixth is cash flow generation, financial discipline and corporate governance. Maxis’ robust financial position reflects its sound financial discipline and corporate governance practices. We have demonstrated a track record of relatively high and consistent margins. Together with our prudent investment policies, this has resulted in strong and stable cashflows.

What have been the achievements of the group in the past four years (since 2006)?
Continued subscriber growth (41% of market share in 2009) and No 1 position in postpaid and prepaid markets; continued revenue growth with highest-ever revenue of RM8.6 billion in 2009; regionally acclaimed non-voice revenue contribution of 34.4%; ranked among the five most valuable brands in Malaysian business; and strong Ebitda of RM4.3 billion with 50.4% Ebitda margin, which is significantly above other competitive companies.

What has been the company’s strategy for expansion? How have these strategies turned out?
Maxis believes that its extensive customer base, stronghold in the high-value segments, high-quality network and services, effective distribution, recognised brand equity and resulting strong cash flows generation will allow it to consolidate its position as the market leader.

How is the group positioning itself within the industry?

Maxis is the industry leader. We believe that our strong customer base, proven capability to innovate, high-quality network and services, effective distribution, recognised brand equity and resulting strong cashflow generation will allow it to continue to lead the mobile market. We will strengthen our position by extending leadership into providing integrated services and broadband access to household, corporate and SME segments.

Did the financial crisis in late 2008/2009 have any impact on the company? What about the turmoil in Europe?
The Malaysian telecommunications industry remains resilient despite the challenging global economic climate. In 2009, the overall growth of the mobile industry was satisfactory and mobile subscriber penetration crossed 100%. Competition in the mobile industry, however, intensified with the entry of a number of MVNOs and WiMAX players, all coinciding with the establishment of mobile number portability which was introduced in 2008.

There was marginal impact on the economy in the first two quarters and this improved in the remaining quarters. However, the economy was slower in 2009 compared with 2008.

Tell us about your plans for the future, both short-term and long-term. What are Maxis’ plans to compete in the increasingly globalised environment?
As the largest telecommunications operator in Malaysia, we will continue to grow our mobile business, as well as develop new life services that are delivered through multiple access points, including fixed and mobile broadband. Our growth strategy is consistent with the government’s initiative to drive broadband penetration to over 50% of households by the end of this year, and more generally to use the telecommunications sector as one of the strategic vehicles for driving economic growth and development of rural areas.

Mobile growth

Although mobile SIM penetration in Malaysia has exceeded 100%, we believe that significant future growth opportunities still remain, for example, in less penetrated regions of East Malaysia, the East Coast of Peninsular Malaysia, and in the youth segment. In a number of other markets, SIM penetration continues to grow well over 100%. We believe that Malaysia’s demographic profile provides opportunities for growth both in terms of subscribers and adoption of new data services.

The Malaysian population is already Internet-centric, with 16.9 million reported Internet users as at Dec 31, 2009.  Over the last three years, these users have increasingly extended their Internet access to mobile devices and to wireless and fixed line broadband subscriptions. Penetration rates of Maxis’ customer base for key advanced data services are high. Falling prices of 3G phones and increasing data usage have also served to boost Maxis 3G penetration.

Integrated communications growth
The government has stated its target to take broadband penetration in the country to 50% by end of 2010. As part of this initiative, it has entered into a private-public partnership with Telekom Malaysia to launch a national HSBB programme. The commission has stated that it will ensure other providers, including Maxis, will be able to access the HSBB network on reasonable terms and conditions and on an equitable and non-discriminatory basis. We expect that customers will increasingly seek multiple applications and services, requiring higher bandwidth and differentiated content for their homes and businesses.

Partnerships and international
The telecommunications industry is a vital one for the economy and Maxis works to establish partnerships with local and international companies so that we can bring new innovations to the Malaysian market — near field communication being a leading example.

Whilst Bursa-listed Maxis Bhd purely operates in Malaysia, it does offer mobile roaming services to visitors to Malaysia. Maxis links to the Bridge Mobility group (including SingTel and AIS), enable us to ensure excellence in customer experience through value-added services (such as concierge) to these customers.

Our industry is fundamentally very international, and links to sister companies in India, Sri Lanka and Indonesia ensure that there is awareness of the latest trends, opportunities and challenges.
This article appeared on the Live it! page, The Edge Financial Daily, October 5, 2010.

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