DIGI.COM BHD

UOB Kay Hian is expecting good customer service to drive future earnings for Digi.Com Bhd.

“As management steers the company forward, priorities will include driving core service revenue (by monetising data growth) and delivering cost efficiencies.

“The competition remains intense in the prepaid segment due to market-wide SIM consolidation, shrinking addressable market of migrant workers and pre-to-postpaid migration.”

Along the way, UOB Kay Hian said Digi has moved away from its irrational IDD price war and is focusing on capitalising prepaid Internet revenue, which had surged 21% year-on-year to RM405mil (or 47% of prepaid revenue) in the second quarter of 2018.

With network improvements, the research house said Digi aims to drive its postpaid revenue by offering easy entry plans to drive pre-to-postpaid conversions.

“Importantly, the company is increasing plan upgrades via subscriptions for high-value plans. This upselling effort is enabled with the introduction of the ‘Borderless Roaming’ proposition.

“For postpaid plans above RM110 per month, subscribers are entitled to free roaming internet and calls (5GB of internet + 60 minutes roaming voice call + 60 minutes IDD voice call) across 10 countries.”

UOB Kay Hian also said Digi recently engaged a managed service provider (MSP) to establish data-centric network geared towards good customer experience.

“This third-party outsourcing effort will help to optimise Digi’s cost structure. A MSP is a company that remotely manages a customer’s IT infrastructure and / or end-user systems. Other Telenor-led telcos have also employed similar network operating model.

“The intention is to increase speed-to-market and optimise the network to ensure good customer experience. This will provide upselling opportunities in postpaid, prepaid and enterprise businesses,” it said.

The research house has projected a modest three-year net profit compounded annual growth rate of 5% from 2018 to 2020.