Celcom playing catch-up

New CEO Idham says networks have been modernised to better monetise its assets

KUALA LUMPUR: Celcom Axiata Bhd, which is one of the pillars for Axiata Bhd, has fixed its network issues and is working on plans to improve profitability.

The first few days of Idham Nawawi as chief executive officer of Celcom Axiata was tough. The company encountered issues with its network.

Since taking the hot seat on Sept 1, Idham has put in place several measures to rework the cost structure, monetise the network better and work towards sustainable profit growth.

Celcom Axiata is using data analytics to segmentise future offerings to customers so that the focus is sharper. It also wants to reach out to new areas with wireless and fibre connectivity.

All this is possible because the core network has been modernised – something it did late in the day and is now trying to catch up with competition. Celcom has been losing market share because of network issues and its complex offerings.

“In 2016, our revenue engine and distribution networks were not working and products were not selling well. We had too many price and product bundles. There were issues with customer service, and all this was happening when the market growth was stagnant,” Idham said.

“We are behind competition in terms of profitability, so we need to work on sustainable profit growth,” he said.

He recalled his first few days on the job when the network was hit by voice outages and other issues. Although unavoidable, it reflected the severity of the network issues.

The irony of it was that when the competitors were modernising their networks, Celcom was riding on its “past glory of 31 quarters of profit.”

“We have modernised our network and will continue to optimise it. There is better interaction now with customers and our download speeds have improved tremendously, with a better distribution network in place,” he told StarBiz.

Idham said with a modern network, Celcom is able to ride on the digital wave, not just for internal processes to save cost, but also to push new products and to work with corporate clients to offer digital solutions.

It is working with several organisations to implement IoT (Internet of things).

Celcom is investing about RM1.3bil to RM1.4bil this year in capital expenditure. Next year, the capex requirement is believed to be lower at RM1bil for network upgrades and to widen its wireless reach.

“Celcom, during the recent Axiata Group analyst briefing, shared its ambitions on cost optimisation with an aim to save about RM900mil and increase its EBITDA by 25% over the next three years through investing in new network and digitalisation initiatives. The strategies are set to drive structural changes in costs as well as generate further savings to Axiata,” Kenanga Research wrote in a note.

Celcom reported RM203mil in net profit for the third quarter ended Sept 30 compared with Maxis Bhd’s RM513mil and Digi.Com Bhd’s RM392mil, while EBITDA (earnings before interest, tax, depreciation and amortisation) was RM554mil, RM725mil and RM1.047bil respectively.

UOB Kay Hian Research said Celcom’s 3Q18 core profit improved 31% quarter-on-quarter to RM205mil. Celcom defended its 3Q18 service revenue at RM1.674bil and this brought 9M18 service revenue to almost RM5bil, translating to 2% year-on-year top-line growth.

The brokerage said this was driven largely by growth in the prepaid revenue segment despite continuously high customer churn. As Celcom continues to focus on high-value customers, 9M18 postpaid average revenue per user improved by RM5 to RM88/month.

The brokerage said although topline had held up, one-off internal employee restructuring costs and higher depreciation charges had normalised EBITDA declining 11% to RM554mil compared with a year ago.

Idham said it was also about “rejuvenating Celcom from being a mobile-centric player to an new organisation that is digital and data-driven” and for that it needed to build on new set of competencies.

He expected opportunities in the age of IoT, artificial intelligence, robotics but it was about optimising and leveraging on digital technologies to offer solutions to the customers.

The celco had resolved its age-old billing woes with a new single system. Idham has also flattened the hierarchy structure to be more focused and effective. He planned to retain and make all its 3,000 employees accountable.

“We want to build on core competencies, retain and strengthen the middle management and be more effective and accountable,” he said.