Financials

Financial Report For The Quarter Ended 31 December 2018

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Condensed Consolidated Statements Of Profit Or Loss

Condensed Consolidated Statements Of Profit Or Loss

Condensed Consolidated Statements Of Financial Position

Condensed Consolidated Statements Of Financial Position

Analysis Of Performance

Notes

  1. The comparative results were restated due to the adoption of MFRS 15.
  2. Service revenue is defined as Group revenue excluding device, hubbing revenues and network income.
  3. Defined as profit before finance income, finance costs, tax, depreciation, amortisation and allowance for write down of identified network costs.
  4. Charge out of SA renewal costs prepaid for license period.

Performance of the current quarter against the preceding quarter (4th Quarter 2018 versus 3rd Quarter 2018)

For the quarter ended 31 December 2018, service revenue grew by 1.0% to RM2,048 million from RM2,027 million.

Postpaid service revenue grew by 2.8% to RM1,053 million (Q3'18: RM1,053 025 million) on account of higher RGS base. Postpaid RGS grew by 80k, contributed by the growth in the MaxisONE Plan subscriber base. The growth in Postpaid was primarily driven by the strong demand for our innovative device and value-accretive propositions. Our Hotlink Postpaid Flex and our MaxisONE Share offerings continued to attract entry level Postpaid subscribers, as well as those migrating from Prepaid to Postpaid. Postpaid ARPU was stable at RM94 for the quarter.

Prepaid service revenue remained stable at RM845 million (Q3'18: RM851 million). Prepaid RGS slightly declined by 29k to 6.61 million subscribers. We continue SIM consolidation and migration from Prepaid to Postpaid. The Hotlink Red Prepaid pack continued to show positive traction, attracting high mobile internet users, as we enhanced our use of data analytics to create value for our customers. Our mobile internet revenue continued to grow, contributing to 61.1% of Prepaid revenue for the quarter. Prepaid ARPU was stable at RM42 per month.

Demand for data continued to grow across all customer segments and the Group ended the quarter with 7.6 million 4G LTE device owner (Q3'18: 7.2 million). Blended smartphone penetration stood at 85% against 84% in the previous quater and blended data usage increased to an average 10.9GB (Q3'18: 10.7GB). The Group's superior 4G LTE network, at 93% population coverage on a comparable peer basis with unmatched speed and video experience, remains a key differentiator for digital lifestyle seekers. The Group achieved a high touch point net promoter (HTP-NP) score of +53.

Normalised EBITDA decreased by 26.6% to RM768 million with a 37.5% normalised EBITDA margin on service revenue for Q4'18, against RM1,047 million and 51.7% respectively in the previous quarter Q3'18 impact by one-offs of approximately RM250 million. The Group launched its Fibrenation programme to gain the first mover advantage in Home Fibre business, which includes repricing and migration initiatives, new modems, marketing campaigns and additional resources to support the high volumes of subscriptions. Additionally, the Group invested the necessary resources in Enterprise segment to accelerate initiatives which are critical in setting the right foundation for growth in future years. As part of our on-going network improvement effort to maintain a high level of customer experience, network expenses also increased for the quarter. The Group also invested into a multiyear productivity programme to optimize its operating model and cost structure.

Consequently, the Group reported a lower normalised profit of RM259 million compared to RM518 million in the preceding quarter.

Capex for the current quarter increased to RM524 million (Q3'18: RM195 million) largely due to Capex phasing as we continued to invest in network capacity to support our strong data traffic growth, investment in Home Fibre and Enterprise growth.

Free cash flow decreased to RM217 million (Q3'18:RM600 million) mainly as a result of the Capex spend.

Performance of the current quarter against the preceding year corresponding quarter (4th Quarter 2018 versus 4th Quarter 2017)

Service revenue for Q4'18 of RM2,048 million was 0.6% higher than Q4'17 of RM2,036 million mainly due to the 10% growth in Postpaid RGS plus Home Fibre RGS, offsetting the 6% decline in Prepaid RGS.

Postpaid service revenue grew by 6.0% to RM1,053 million (Q4'18) compared to RM994 million (Q3'17). The growth was supported by the solid subscription base increase of 282k more postpaid RGS to 3,135k (Q4'17:2,853k) as we continued to offer innovative device and shared line propositions. Hotlink Postpaid Flex and MaxisONE Share continued to be strong catalysts driving incremental port-ins of entry-level Postpaid subscribers. Postpaid ARPU moderated marginally to RM94 (Q4'17: RM96) against a larger subscription base that has now firmly exceeded 3 million subscribers.

Prepaid service revenue declined 6.4% to RM845 million (Q4'18) from RM903 million (Q4'17) on the back of a lower subscription base which was impacted by the continued SIM consolidation, migration from Prepaid to Postpaid and price competition. Mobile internet revenue remained high at 61.1% of Prepaid revenue which contributed to the stable and high ARPU of RM42. This was supported by our enhanced and expanded use of data analytics for segmental and personalised offerings, which attracted high data users.

Data consumption continued to increase with blended data usage almost doubling from a monthly average for the quarter of 6.7GB (Q4'17) a year ago to 10.9GB (Q4'18). The Group continued to lead the market in terms of quality and best digital experience. As mentioned above, the Group maintained our high touch point net promoter score of +53 compared to +53 (Q4'17).

Normalised EBITDA (Q4'18) declined 26.6% to RM768 million with a margin on service revenue of 37.5% against RM1,046 million (Q4'17) and 51.4% respectively impacted by increased costs which include one-offs of approximately RM250 million mentioned earlier.

Consequently, normalised profit for the quarter declined to RM259 million (Q4'17: RM519 million)

Capex for the current quarter was 37.2% higher at RM524 million (Q4'17: RM382 million) mainly due to additional investment for network capacity to support our strong data traffic growth, investment in Home Fibre and Enterprise growth.

STATEMENT OF FINANCIAL POSITION

Notes

  1. Debt includes derivative financial instruments designated for hedging relationship on borrowings but excludes vendor financing.

The increase in total assets was mainly due to capex investments.

The net earnings for the financial year under review, after a total 20 sen dividend distribution increases the equity of the Group to above RM7 billion mark. Net debt-to-EBITDA increased from 1.63x as at 31 December 2017 to 1.86x as at 31 December 2018 on the back of lower EBITDA.

PROSPECTS FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2019

The market is expected to remain competitive and Maxis continues to focus on maintaining its strong leadership position by leveraging on its strong 4G Network and expanding its presence in the Fixed Broadband market in both Consumer and Enterprise.

In the mobiles market we will focus on building upon our core offerings and in the Consumer and Enterprise segments with innovative new solutions and services. In the Fixed Broadband market we will focus on executing new access agreements with access providers, migrating our existing base to new price points and higher speeds and providing new innovative offerings to both Consumer and Enterprise customers and increased bundling.

Notwithstanding the above actions and strong fundamentals in our core mobile business, there are a few key items impacting the Group in year 2019:

  • the impact of changes to a major wholesale network sharing agreement;
  • dilution in Fibre ARPU from the new competitive priced plans and the cost of customer migration initiative coupled with increase in cost to serve; and
  • increase in cost of business from Sales & Service Tax introduction.

After incorporating the effects above, and the implementation of MFRS 16 as disclosed in Note 1, our guidance for the financial year ending 31 December 2019 is:

  • service revenue and EBITDA to decline by low single digit and mid-single digit respectively;
  • core network capital expenditure to be around RM1 billion plus capex supporting new growth opportunities in Broadband and Enterprise business (around RM1 billion over 3 years); and
  • operating free cash flow at similar level to year 2018.

In view of the change in regulatory environment and market opportunities, the Group is implementing a significant change in strategic direction building on its strong mobile base to deliver its internal annual service revenue target in excess of RM10 billion by year 2023. The Group's vision is to be Malaysia's leading converged communications and digital services organization; achieved through maintaining its leadership in core consumer mobile, taking advantage of its 1st mover position in Fibre and offering differentiated and customised solutions to Enterprise Business segments.

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