Digi eyes postpaid growth through prepaid conversion

KUALA LUMPUR: To mitigate the expected flattish year-on-year service revenue growth this year, Digi.Com Bhd is looking to grow its postpaid subscriber base through prepaid conversion.

Speaking after the group’s annual general meeting yesterday, Digi chief financial officer Inger Gloersen Folkeson explained that the flattish service revenue growth expected this year was mainly due to a 33% decline in the interconnect rate, compared to the previous year’s rate.

Essentially, the interconnect rate is transacted when a Digi customer receives a call from another service provider, and that service provider will have to pay Digi an interconnect rate fee.

The interconnect rate currently stands at 1.96 sen per minute, a dip from 2018’s rate of 2.92 sen per minute.

“We will continue to drive service revenue growth through prepaid to postpaid conversion.

“We are also continuously improving our processes and revamping the technology operating model and sales marketing processes as we improve on our operational efficiencies to drive down costs,” Folkeson said.

As of March 31, 2019, Digi had 11.3 million subscribers.

Postpaid subscribers make up 25% of Digi’s customer base.

For 2019, Digi has allocated a capital expenditure of an estimated 11% to 12% of its capex-to-service revenue ratio, earmarked for network capacity and improvement as well as coverage improvement and modernisation.

The capex guidance does not include spectrum payments.

In 2018, Digi spent RM685mil on capex, which represented 11.6% of its capex-to-service revenue ratio.

Digi registered an 11.6% decrease in net profit to RM341.5mil for the first quarter of the financial year ending December 31, 2019, as compared to the corresponding quarter last year.

This was mainly attributed to a decline in prepaid service revenue.

During the quarter, Digi saw an increase of 50,000 postpaid subscribers to 2.9 million while prepaid subscribers dropped by about 450,000 to 8.4 million.

This was reflected in the segments’ respective revenues whereby postpaid grew 13.5% year-on-year (y-o-y) to RM671mil while the prepaid segment registered a fall of 13.7% over the previous corresponding quarter.

According to CGS-CIMB, Digi’s prepaid subscription acquisition momentum was impacted by its channel strategy change.

Digi had revamped its commission structure in early March to incentivise dealers for the acquisition of internet-centric subscription or sale of data passes and drive prepaid-to-postpaid conversions, while moving dealers away from pure reload sales, which is now increasingly done via the MyDigi app.

“We believe this is a positive move over the longer term, though there may still be some lingering negative effects in the second quarter of FY19,” the research house said in a recent report.

Source: TheStar