Condensed Consolidated Statements Of Profit Or Loss
Audited Condensed Consolidated Statements Of Financial Position
- Includes telecommunications licenses with allocated spectrum rights and goodwill of RM10,707 million and RM219 million respectively, arising from acquisition of subsidiaries.
- * Less than RM1 million.
Analysis Of Performance
- Service revenue is defined as Group revenue excluding device and network income.
- Defined as profit before finance income, finance costs, tax, depreciation, amortisation and allowance for write down of identified network costs.
- Charge out of SA renewal costs prepaid for license period.
- The comparative information of Postpaid has been restated to exclude non-phone based subscriptions
- * Less than 1%.
Performance of the current quarter against the preceding quarter (Q4'19 vs Q3'19)
For the quarter ended 31 December 2019, service revenue increased by 2.7% that is RM52 million to RM1,992 million from RM1,940 million for quarter ended 30 September 2019. Service revenue, excluding wholesale revenue, increased by 3.0% to RM1,978 million in Q4'19 compared to Q3'19 of RM1,920 million.
Postpaid service revenue for Q4'19 increased by 1.0%, that is by RM10 million to RM989 million compared to Q3'19 of RM979 million on account of a higher RGS base. The Postpaid RGS for Q4'19 grew by 140k, a 4.3% increase to 3,372k compared to Q3'19 of 3,232k contributed mainly by growth in MaxisONE Plan and Hotlink Postpaid Flex 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 was stable at RM90 for Q4'19. Postpaid data usage grew slightly by 2.0% to 15.4GB (Q3'19: 15.1GB).
Prepaid service revenue for Q4'19 decreased by 1.4% that is RM11 million to RM783 million (Q3'19: RM794 million). Prepaid RGS declined by 101k, a 1.6% reduction to 6,227k (Q3'19: 6,328k) subscribers. We continue to see SIM consolidation and migration from Prepaid to Postpaid. Both the Hotlink Red and Superrr Prepaid pack showed positive traction, attracting high mobile internet users, as we enhanced our use of data analytics to create value for our customers. Prepaid ARPU for Q4'19 remained stable, increasing slightly by 2.4% at RM42 per month (Q3'19 : RM41). Prepaid data usage decreased by 3.3% to 14.7GB (Q3'19 : 15.2GB), in line with the successful strategy to migrate high mobile internet users to postpaid.
The Group retained its network superiority in 4G LTE, delivering download speed of more than 5 Mbps for 91.6% 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.
Normalised EBITDA for Q4'19 decreased by 6.2% that is RM60 million to RM904 million with a normalised EBITDA margin on service revenue of 45.4% (Q3'19: RM964 million, and a normalised EBITDA margin on service revenue of 49.7%).
The Group reported for Q4'19 a normalised profit of RM 344 million, a decrease of 4.7% that is RM17 million compared to RM361 million in the preceding quarter. Capex for the current quarter was RM577 million (Q3'19: RM242 million), due to normal phasing of capex for the ongoing continued investment in network capacity to support our planned data traffic growth, investment in Home Fibre and Enterprise growth.
Operating free cash flow for Q4'19 decreased by 31.8% or RM339 million to RM727 million (Q3'19: RM1,066 million) due to high regulatory payments offsetting cash flow gains from our productivity and working capital programs Fuel4Growth.
Performance of the current quarter against the preceding year corresponding quarter (Q4'19 vs Q4'18)
Service revenue for Q4'19 of RM1,992 million was 2.7% lower, that is lower by RM56 million, compared year-on-year ("YoY") than RM2,048 million recorded in Q4'18. This was largely contributed by the termination of a network sharing agreement, decline in Prepaid RGS offset by the growth in Postpaid and Home Fibre subscribers. Service revenue, excluding wholesale revenue was RM1,978 million in Q4'19, an increase of RM48 million, 2.5% compared to RM1,930 million in Q4'18, showing the underlying core mobile business plus new areas of fibre and enterprise are delivering growth and so are doing well.
Postpaid service revenue for Q4'19 decreased by RM64 million, 6.1% to RM989 million compared to RM1,053 million in Q4'18 mainly due to the termination of a network sharing agreement which ended in December 2018 with limited rollover and final completion in September 2019. Postpaid ARPU at Q4'19 decreased to RM90 (Q4'18: RM96), largely due to the change in the Mobile Termination Rates ("MTR") and ARPU dilution from Hotlink Postpaid Flex offerings. ARPU decrease was offset by a strong 14.7% increase in subscriber base of 432k to 3,372k (Q4'18: 2,940k). Hotlink Postpaid Flex and MaxisONE Share continue to be strong catalysts driving incremental port-ins of entry-level Postpaid subscribers.
Prepaid service revenue declined YoY by RM62 million, 7.3% to RM783 million from RM845 million on the back of a lower subscription base which was due to continued SIM consolidation, successful migration from Prepaid to Postpaid, and reduced MTR. Subscribers decreased by 5.8% that is 383k from 6,610k at Q4'18 to 6,227k at Q4'19. Mobile internet revenue contributed to the stable underlying ARPU of RM42 per month. This was supported by our enhanced and expanded use of data analytics for segmental and personalised offerings.
Data consumption continued to increase YoY in Postpaid and Prepaid by 30% and 41% respectively, with both stabilising at around 15GB per month data usage at the end of Q4'19 (Q4'18: Postpaid 12.2GB, Postpaid 10.4GB). This reflects the competitive nature of the mobile business and the bundling of more data and more value.
Normalised EBITDA for Q4'19 increased by 17.8% that is RM136 million to RM904 million from RM768 million in Q4'18. The normalised EBITDA margin on service revenue was 45.4% for Q4'19, compared with 37.5% in Q4'18. These statistics are driven by the strength of our core mobile business, coupled by the growth in fibre and enterprise businesses and delivery of our Fuel4Growth savings. Q4'18 normalised EBITDA was low as there were additional costs associated with Group's Fibrebation mobilization and launch, accelerated investments in Enterprise's resources and network improvement efforts.
Normalised profit for Q4'19 increased by 32.8% that is RM85 million to RM344 million (Q4'18: RM259 million). Like, normalised EBITDA, this was due to both strength of our busines in Q4'19 as well as a lower profit due to additional cost in Q4'18 as mentioned above.
Capex for the current quarter was higher at RM577 million (Q4'18: RM528 million), mainly due to incremental investment for 5G readiness, Home Fibre and Enterprise business growth.
Operating free cash flow for the current quarter was lower by 26.0%, at RM727 million, compared to RM983 million in Q4'18 due to unexpected adverse timing of Universal Service Provision payments.
Statement Of Financial Position
- 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 and higher receivables from the Maxis Zerolution device programme. MFRS 16 adoption 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 2.24x as at 31 December 2019 mainly due to the increase in lease liabilities as explained above.
Prospects For The Financial Year Ending 31 December 2019
Our guidance is as follows for the full year ending 31 December 2020 (FY'20)
The market is expected to remain competitive and Maxis continues to focus on its long term ambition being Malaysia's leading converged solutions company, leveraging on its strong 4G/LTE Network and expanding its presence in the Fixed Broadband market in both Consumer and Enterprise, together with expansion of business solution offerings.
In the mobile market we will focus on building upon our core offerings in the Consumer and Enterprise segments with innovative new products, services and business solutions. The Group entered into a strategic partnership with Measat Broadcast Network System Sdn. Bhd. ("Astro") for cross-selling Maxis Fibre and Astro TV and the early results in FY'19 are encouraging for FY'20. In the Fixed Broadband market we will focus on executing our established access agreements with access providers, providing new innovative solutions to both Consumer and Enterprise customers and increased packing of value adding services.
Our priorities remain to execute our growth strategy and preparing our network for 5G whilst maintaining leadership in the core mobile business and leveraging our network leadership in 4G/LTE which can support all of the current consumer services and our enterprise solution offerings in access, managed services, cloud services and narrowband Internet of things.
Notwithstanding the above actions and strong fundamentals in our core mobile business, there are a few key items impacting the Group's performance in FY'20:
- The regulated change in the MTR from 1 January 2020 will adversely affect Prepaid and Postpaid ARPU; and
- Increasing depreciation due to increased capital expenditure in FY'19.
After incorporating the effects above, our guidance for FY'20 is as follows:
- service revenue and EBITDA to be flat to a low single digit increase;
- 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, 2019 to 2021) and
- operating free cash flow (excluding upfront spectrum assignment fee) at a similar level to FY'19.
The Group is implementing its 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 company; 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 both Consumer and Enterprise Business segment.
Although we are in active engagement with MCMC on the 5G consortium proposal, the process is at a preliminary stage. Therefore, we have not factored this into our FY'20 guidance at this juncture. Similarly, any impact from the Covid-19 coronavirus outbreak on our performance is too preliminary to determine.