Sustainability & National Contribution Report 2016

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Key Highlights

  • Extremely challenging year due to internal and external issues

  • Strong data traffic growth of 105%

  • 4G covering 76% of the population

About Celcom

Celcom is Malaysia’s premier and most experienced mobile telecommunications company with the widest coverage in the nation. It provides both prepaid and postpaid mobile services to close to 11 million subscribers. Celcom is also growing its position in content and Value Added Services (VAS), enterprise solutions, bulk wholesale services, digital services and machine-to-machine (M2M) solutions, in line with evolving technologies and changing consumer behaviour in Malaysia.

Celcom has the widest network in Malaysia, covering 95% and 90% of the population with its 2G and 3G networks respectively. With close to 4,800 4G LTE sites, Celcom continues to invest in network coverage, capacity and performance to maintain its technology leadership and position as the country’s best mobile service provider whilst looking to drive differentiation based on a superior network and exceptional mobile data and Internet experience.

Celcom is also a pioneer of industry leading wholesale partnerships which include Mobile Virtual Network Operators (MVNOs) as well as domestic and international roaming. Celcom currently has six MVNO partners that provide additional channels to the market, covering niche segments with strong growth potential. Celcom views MVNOs as an important alternative channel for servicing niche consumer segments and continuously evaluates new MVNO partnerships.

Celcom’s long standing partnerships with local and global operators have resulted in a broad Internet network coverage with roaming services in 197 countries via 462 network partners. As part of the Axiata Group, its customers also enjoy great rates and consistent experience whilst roaming.

Celcom puts high emphasis on Customer Experience in all its products and services. This is reflected in Celcom winning awards for best telco, customer experience, brands and other corporate accolades.

Business Review 2016

2016 was characterised by an intensely competitive telco sector and an overall decline in the market. Business and consumer confidence in Malaysia reflected a declining trend in 2016, resulting in lower overall expenditure on telecommunications services. Despite these trying market conditions, Celcom managed to stabilise its core business in the second half of the year.

The second half of 2016 saw Quarter on Quarter (QoQ) improvements in service revenue, while Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) improved more than 10% in the fourth quarter of 2016. The organisational refresh strategy that was introduced in Celcom in the last quarter helped accelerate recovery in some key areas.

The new management team rolled out a turnaround plan after identifying key challenges, which included sales and distribution channels, products, regulatory and network. This covered a revamp of Celcom’s postpaid product, contributing to strong postpaid subscriber and revenue growth in 2016. Data and smartphone penetration within Celcom’s base grew substantially throughout the year. Active smartphone penetration rose from 59% in the fourth quarter of 2015 to 64.4% in the corresponding period in 2016, while the data subscriber ratio rose from 54.4% to 61.9% of total subscribers during the year, which resulted in significant growth in data traffic of 105%.

The product portfolio revamp included relaunching new Content Providers and VAS on a new Application Programme Interface (API) platform, a highly competitive roaming product and a new offering targeting Overseas Foreign Workers (OFW). These initiatives have aided in further accelerating Celcom’s turnaround.

Initiatives focused on improving customer experience and digital channels included the migration of bluecube.com.my to celcom. com.my and the launch of a new Xpax App, making it easier for customers to purchase and use Celcom’s services. The remodelling and restructuring of Blue Cube began in earnest in 2016, and will continue through 2017 to deliver a superior experience to Celcom customers.

Last year the Company took aggressive steps to improve its mobile network quality and experience for its customers. As part of its’ network modernisation initiatives, the roll out of the Klang Valley RAN Swap was initiated by upgrading the 4G network to keep pace with the increasing demands of smartphone users. The reallocation of bandwidth impacted the roll out process for the Klang Valley Swap, due to the need to simultaneously undertake spectrum refarming. These efforts, which are set to continue into 2017, have significantly improved quality and data download speeds, from approximately 19Mbps to 23Mbps. The aggressive roll out of 4G LTE-enabled base transceiver stations (BTS) nationwide, have resulted in significant improvements in Celcom’s coverage, with 76% of the population covered by 4G and 90% covered by 3G respectively.

These sustained efforts have had positive impacts on the Company. In a survey initiated by Celcom and conducted by an independent external party, Nielsen Corporation, Celcom was ranked number one in Net Promoter Score amongst the big three operators in Malaysia, while complaint resolution performance has either met or exceeded statutory requirements laid down by the Malaysian Communications and Multimedia Commission.

Financial Performance

2016 saw Celcom gaining traction in stabilising its market share with improvements in QoQ revenue and EBITDA. Celcom also demonstrated early signs of stabilisation with an improved quarter with QoQ growth in service revenue, normalized EBITDA and normalised Profits After Tax and Minority Interests (PATAMI) of 1.4%, 10.9% and 1.8% respectively.

Positive take-up on enhanced postpaid offerings such as First Gold 80 and First Platinum, delivered higher postpaid Average Revenue Per User (ARPU) of 4.1% and subscriber growth of 3.2% QoQ. Data revenue continues to be a key driver for Celcom, increasing by 10.0% in 2016 driven by mobile Internet revenue growth of 19.0%. Data revenue accounted for 34.1% of total revenue.

  • Revenue

    -10%

    • 7.3


      2015

    • 6.6


      2016

    RM Billion

  • EBITDA & EBITDA Margin (%)

    -18%1

    • 3.1

      41.8%

      2015

    • 2.5

      38.2%

      2016

    RM Billion

  • PAT

    -29%2

    • 1.7


      2015

    • 1.2


      2016

    RM Billion

  • Subscribers

    -14%

    • 12.2


      2015

    • 10.6


      2016

    Million

  • Blended ARPU

    • 43


      2015

    • 41


      2016

    RM

  • Blended MoU (Per Sub Per Month)

    • 191


      2015

    • 192


      2016

    Minutes of use/sub/month


Outlook for 2017

While Celcom’s performance in the second half of 2016 has been encouraging, the telecommunications sector will continue to be highly competitive in 2017, with limited opportunities for growth. Other challenges include spectrum refarming, along with the entry of new players. Data traffic is expected to continue its strong growth trajectory, offsetting continued decline in voice traffic and associated revenues. Increased penetration of smart devices and LTE enabled phones will underpin further growth in data revenue.

Celcom will continue its focus on delivering an industry leading customer experience in 2017, supported by superior mobile data service quality. Digitalisation of Celcom’s core business and channels, including digitalising the value chain and engagement with dealer and distributor partners, is another strategic focus area. The Company will continue enhancing self-care apps for the prepaid and postpaid segments to provide customers greater convenience and revamp online care channels.

Technology is the key enabler in supporting the ever increasing demand for data traffic. Enhancements to Celcom’s IT systems will be supported by increased rate of Cloud adoption, thus improving agility and optimizing cost in IT operations. Celcom will continue to aggressively invest in 4G LTE networks to deliver the best video and data quality experience. Investments are targeted to deliver both capacity and coverage improvements, and include an increase in fiberisation of backhaul to base station sites.

The Company will continue focusing on product innovation, with the aim of generating new revenue streams in adjacent markets, such as the Internet of Things (IoT), payment services and an enhanced service portfolio for Enterprise customers. Celcom will also enhance its Data Science and Advanced Analytics capabilities, thus building firm foundations to become a Digital Champion, offering a personalised customer experience and leading data and video experience quality.

Footnote

1 & 2 Normalisation excludes holding company charge, impact of edotco disposal, ESCAPE, Celcom Planet, Employee Wish Plan and Sukuk interest.