Financials

Financial Report For The Quarter Ended 31 March 2019

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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. Service revenue is defined as Group revenue excluding device, hubbing revenue and network income
  2. Defined as profit before finance income, finance costs, tax, depreciation, amortisation and allowance for write down of identified network costs
  3. Charge out of SA renewal costs prepaid for license period.
  4. * Less than 1%.

Notes

  1. * Less than 1%.

Performance of the current quarter against the preceding quarter (1st Quarter 2019 versus 4th Quarter 2018)

For the quarter ended 31 March 2019, service revenue decreased by 4.9% to RM1,947 million from RM2,048 million. This decrease was largely driven by two factors namely reduced ARPU in both Postpaid and Prepaid, due to the new lower Mobile Termination Rates ("MTR") Reducing MTR based revenue; and termination of a network sharing agreement. Service revenu, excliding wholesale revenue, was RM1,876 million in Q1'19 versus RM1,930 million in Q4'18.

Postpaid service revenue decreased by 5.0% to RM1,000 million (Q4'18: RM1,053 million) on account of a higher RGS base being offset by a lower ARPU; and termination of a network sharing agreement ending in December with limited roll over in to 2019. The Postpaid RGS grew by 126k, a 4.0% increase to 3,261k (Q4'18: 3,135k) contributed mainly by growth in the MaxisONE Plan subscriber base. Our Hotlink Postpaid Flex and MaxisONE Share offering continued to attract entry level Postpaid subscribers, as well as those migrating from Prepaid to Postpaid. Postpaid ARPU decreased to RM88 (Q4'18: RM94) for the quarter as a result of decreasing MTR and seasonality of roaming. Postpaid smartphone penetration stood at 88% (4Q'18: 87%) and data usage remained consistent at 12.2GB (Q4'18: 12.2GB).

Prepaid service revenue declined by 5.7% to RM797 million (Q4'18: RM845 million). Prepaid RGS slightly declined by 143k, a 2.2% reduction to 6,467k (Q4'18: 6,610k) subscribers. We continue to see 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. Prepaid ARPU declined 4.8% from RM42 to RM40 per month. Similar to Postpaid, the decline in ARPU was a result of reduced MTR and seasonality in IDD call patterns. Prepaid smartphone penetration stood at 84% against 83% in the previous quarter and data usage increased to 11.5GB (Q4'18: 10.4GB).

The Group retained its network superiority in 4G LTE, delivering download speed of more than 5 Mbps 91% of the time in key market centres on a comparable peer basis, and achieving 93% population coverage. Both these factors are key differentiators for digital lifestyle seekers. The Group maintained a high touch point net promoter score ("TP-NPS") of +55 (Q4'18: +53).

Normalised EBITDA increased by 24.1% to RM953 million with a normalised EBITDA margin on service revenue of 48.9% (Q4'18: RM768 million, normalised EBITDA margin on service revenue of 37.5%), noting that Q4'18 had been impacted by one-offs of approximately RM250 million. The Group continues its efforts with the FibreNation campaign, investing the necessary capacity and capability in resources for the Enterprise segment, which are critical in creating the foundation for growth in future years.

The Group reported a higher normalised profit of RM404 million, up 56.0% compared to RM259 million in the preceding quarter. Capex for the current quarter was RM127 million (Q4'18: RM524 million), largely due to normal phasing of capex as the first quarter is focused on planning and tendering for the ongoing continued investment in network capacity to support our planned data traffic growth, investment in Home Fibre and Enterprise growth. Free cash flow increased to RM264 million (Q4'18: RM217 million) mainly as a result of the lower capex spend in the current quarter.

Performance of the current quarter/year-to-date ("YTD") against the preceding year corresponding quarter/YTD (1st Quarter/YTD 2019 versus 1st Quarter/YTD 2018)

Service revenue for Q1 9 of RM1,947 million was 1.7% lower than RM1,980 million recorded in Q 18. This was largely contributed by the decline in Prepaid RGS, overall reduction in ARPU, and termination of a network sharing agreement, offset by the growth in Postpaid RGS and Home Fibre RGS. Service revenue, excluding wholesale revenue was RM1,876 million in Q1'19, a slight increase of 1% compared to RM1,860 million in Q1'18.

Postpaid service revenue grew by 1.5% to RM1,000 million compared to RM985 million in Q1 8. The growth was supported by the solid increase in subscriber base of 349k to 3,261k (Q1 8: 2,912k). Hotlink Postpaid Flex and MaxisONE Share continue to be strong catalysts driving incremental port-ins of entry-level Postpaid subscribers. Postpaid ARPU decreased to RM88 (Q1 8: RM92), largely due to the change in the MTR and ARPU dilution from Hotlink Postpaid Flex offerings.

Prepaid service revenue declined by 6.1% to RM797 million from RM849 million on the back of a lower subscription base which was impacted by the continued SIM consolidation, migration from Prepaid to Postpaid, and reduced MTR. Subscribers decreased by 319k from 6,786k at Q1'18 to 6,467k at Q1'19. Mobile internet revenue contributed to the stable underlying ARPU of RM40 per month. 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 data usage increasing in both Postpaid and Prepaid. Postpaid monthly average data usage for the quarter was 12.2GB, an increase from 9.9GB a year ago. Prepaid monthly average data usage for the quarter was 11.5GB, a significant increase from 6.7GB a year ago, and catching up with Postpaid data usage. This reflects the competitive nature of the mobile business and the bundling of more data and more value.

The Group continued to lead the market in terms of quality and best digital experience. The Group maintained our TP-NPS of +55 (Q1'18: +54), showing our commitment to deliver unmatched personalised experience.

Normalised EBITDA declined 6.6% to RM953 million from RM1,020 million in Q1'18. The EBITDA margin on service revenue was 48.9% for Q1'19, compared with 51.5% in Q1'18. The rebasing of the EBITDA is due to factors including the termination of a network sharing agreement, continued investment in FibreNation and mobilisation of the Enterprise business growth opportunities.

Consequently, normalised profit for Q1'19 declined 20.8% to RM404 million (Q1 8: RM510 million). This is in line with the revenue and cost drivers discussed in previous sections.

Capex for the current quarter was higher at RM127 million (Q 18: RM107 million), mainly due to incremental investment for Home Fibre and Enterprise growth. Free cash flow for the current quarter was RM264 million, compared to RM165 million in Q1 8 due to improved working capital management.

Statement Of Financial Position

Notes

  1. Debt includes derivative financial instruments designated for hedging relationship on borrowings but excludes payables under deferred payment scheme.

The increase in total assets was mainly due to the recognition of right-of-use assets, arising from the adoption of MFRS 16. This has caused a corresponding increase in debt which includes lease liabilities. Total equity of the Group remained stable. Net debt-to-EBITDA increased from 1.86x as at 31 December 2018 to 2.23x as at 31 March 2019 as a result of increase in lease liabilities as explained above.

Prospects For The Financial Year Ending 31 December 2019

Our guidance remains unchanged for the full year ending 31 December 2019.

The market is expected to remain competitive and Maxis continues to focus on maintaining its positon as Malaysia's leading converged communications and digital services company, 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.

Our priorities remain to execute our growth strategy whilst maintaining leadership in the core mobile business.

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

  • the impact of changes to a major wholesale network sharing agreement in the Q1'19 and Q2'19;
  • 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 remains unchanged:

  • 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 (excluding upfront spectrum fee assignment) at a 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 first mover position in Fibre and offering differentiated and customised solutions to Enterprise Business segments.