Managing Maxis through the crisis
CEO Gokhan Ogut taps on past experience to weather the storm
FROM Covid-19 to political uncertainties to flip-flop decisions on spectrum allocations, Gokhan Ogut takes it all in his stride. Being Turkish helps, he quips. “Jokes aside, whether it’s a change in the economy or whether things are getting better or getting worse – I’m quite used to changes.
“I find the experience that I have helpful in managing crises and change,” he says.
Such is the philosophy of the CEO of Maxis Bhd, the leading telecommunications company in the country.
Ogut joined Maxis in 2018 as the chief operating officer and was made CEO last May, making him Maxis’ fifth head since 1998. Maxis’ three CEOS prior to Ogut were also expatriates. Ogut was a management consultant based in Istanbul for two years prior to joining Maxis. Before that he spent seven years with Vodafone Turkey, rising to the country head position in 2013.
Ogut comes to the helm of Maxis at a time it is riddled with market uncertainties and challenges, largely posed by the Covid-19 pandemic.
So far, Ogut seems to have things under control.
Maxis performed resiliently for the second quarter ended June 30, 2020, reporting a net profit of Rm343mil, which was a mere 13% lower than a year ago.
As suspected, telcos benefited from the movement control order (MCO) as consumers consumed more data. Maxis said that its customers consumed an average of 21.1GB of data per month during the second quarter, 54% higher than a year ago.
But Covid-19 does pose challenges. Consumers and businesses could cut back on spending, which could erode Maxis’ earnings.
Notably, Bloomberg data shows that more than half of analysts covering the stock have a sell call on Maxis. Competitor Digi.com Bhd is in the same boat, with only 8% of analysts calling the stock a buy.
So, why are analysts generally not too excited about the space?
The capital-intensive nature of the sector along with saturation and changing consumer behaviour due to technological changes are some of the reasons.
Publicinvest Research, which has an “underperform” call on Maxis, notes that the telco’s return on capital employed has been declining over the years.
“Given its ongoing investment into the enterprise and broadband business as well as support given to the National Fiberisation and Connectivity Plan (NFCP) and 5G projects, we expect the group’s return to remain low in the near to medium term,” the research house recently pointed out.
Maxis, though, has embarked on a five-year transformation plan that entails changes to the company’s culture, reaching more markets through diversifying channels and becoming the top “converged” telco through partnerships.
Ogut explains that his joining Maxis in 2018 had to do with this: “In 2011, Maxis entered into fixed and fibre. But the growth of anything other than mobile has always been limited. So we have decided that for a growth strategy, Maxis needs to diversify. That is why I came in because of my experience with mobile companies, but also mobile companies that transformed themselves into converged operators.”
He cites the example of Vodafone, a company that was known as a mobile player 10 years ago, but which today has become the biggest fixed line (broadband) company in Europe.
Ogut’s goal is to steer Maxis to be the leading converged solutions provider.
“We will continue to build on our forte to be the best network in 4G, 5G and fibre.
“But for solutions, we believe there are people or companies that are better suited than us.
“Instead of trying to match all these different companies in different areas, we believe in partnerships.
“Solutions are the core business of our global technology players and that is something we are not competing with them for.
“Meanwhile our strength is that we are here in Malaysia and are close to the customers.
“Essentially, we are selling these solutions on top of our converged network, which is a critical component,” says Ogut.
Maxis’ transformational plan also comes with a target to achieve a service revenue of Rm10bil by 2023.
In 2019, Maxis registered a service revenue of Rm7.8bil.
Given the setbacks brought forth by the pandemic, Ogut has since taken back his guidance of a single-digit growth in service revenue and Ebitda this year.
“Whether Maxis will be able to achieve the Rm10bil service revenue target earlier or later than 2023, I am unable to say.
“We have no control over external factors, but what I can say is that we are committed to that target.
“Post-covid-19, our strategy is to double down on fibre, convergence, consumers, enterprise, digitalisation, overall customer experience and operations, as well as our culture and branding,” he says.
Ogut says the Covid-19 pandemic has not altered any of Maxis’ main strategies. Instead it seems to have unearthed certain products and solutions which grew in prominence as a result of the MCO.
One example is facilitating remote working.
Another is the RM35 monthly pass for unlimited Internet access to cater to prepaid customers who were unable to top up on a weekly
“Post-covid-19, our strategy is to double down on fibre, convergence, consumers, enterprise, digitalisation, overall customer experience and operations, as well as our culture and branding.” Gokhan Ogut
basis due to store closures.
The MCO has also accelerated the group’s online retail business, where Maxis works with an average of 200 merchants on its apps.
As at the second quarter of financial year 2020 (FY20), the Hotlink app achieved an adoption rate of 73%, while the Maxis app saw a 58% adoption rate, as compared to 59% and 43% respectively at the same period last year.
Maxis’ transformation under Ogut has led the company to bring in new talent and make a few small acquisitions.
One acquisition was that of a local start-up of 17 people who were involved in Microsoft’s cloud computing business.
This is an example of how Maxis is building its enterprise business. Maxis was also recently identified as a technology solutions provider (TSP) by Malaysia Digital Economy Corp (MDEC) for the Rm500mil SME digitalisation grant under Budget 2020.
In the statement announcing that deal, Maxis said: “As a TSP, Maxis is the first telco to deliver digital marketing and cloud point of sales solutions bundled with connectivity for SMES”.
Becoming a fibre company
Ogut says that Maxis is increasingly becoming a converged player, not just a mobile company anymore.
“I want you to think of Maxis as the company that gives you connectivity. It doesn’t matter mobile or whatever, and gives you solutions that make your life easy.
“We have 411,000 fibre customers. We had 180,000 plus back in the first quarter of 2018. What does that mean?
“In a country of eight million homes and about two million fibre subscribers, that means we have 20% of the subscribers.
“That means we are becoming a sizeable fibre company.
“A lot of our fibre customers know us as a fibre provider, different from a mobile company,” explains Ogut.
On the issue of fibre, Ogut concurs that it is important for the industry to share data on each infrastructure assets, a move which is being led by the regulator, the Malaysian Communications and Multimedia Commission (MCMC).
“It’s not any one company which can do this for the country. Everybody needs to share.
“The country needs to know what kind of telecommunication assets are in the field, so we can identify gaps and fill them.
“When it comes to fixed assets, it needs to be as easily accessible. If a company wants to build more, they need to look at the database and see where the fibre is and is not, and they decide who builds that fibre there.
“This is the case in Portugal and Spain where they have amazing databases which I’ve also used myself,” says Ogut.
“I know Europe because I used to work in Turkey. In Europe, many countries have databases. If you look at countries that have achieved high fibre penetration, like Portugal and Spain, they were able to build this.
“For example, if you look at the UK, in terms of fibre, they are not doing so well, they don’t have it (the database).
“It really facilitates and makes it easy to have fibre investments because you can see where you need it.”
On Maxis’ plans to be the number one converged player, Ogut says he is going after every single individual, home and company in Malaysia.
“We offer customers an unmatched personalised experience, driven by our usage of artificial intelligence and data analytics. This technology enables us to go personal, because of that power of data.”