Week in Review: Broadband powers an incumbent telco past voice, finally

February 25, 2017

WHILE one telco in Malaysia is beginning to reap the fruits of its broadband strategy, another is now beginning the journey to regain ground by going back to basics in the hope of recapturing lost market share.

I’m talking about fixed line incumbent Telekom Malaysia Bhd (TM) and mobile network operator Celcom Axiata, both of whom announced their full year earnings this week.

Of course in this digital age, no telco in their right mind will want to be associated with fixed line communications because back in the era before mobile networks and fibre optics, you could only get a phone line through a fixed copper line.

It’s ironic when you think about it, because today, more and more of TM’s fixed lines are fibre optic based which carry high speed data. You could actually still call TM a fixed line operator but we know it’s not cool, and that’s why TM describes itself as Malaysia’s Convergence Champion. And before that, it was Malaysia’s Broadband Champion.

But tag lines aside, thanks to its experience with VoIP (Voice over Internet Protocol) from the 2000-2003 period, TM already knew that the internet was going to eventually gobble up its cash cow – voice. That was the push for it to get into the high speed broadband game with their Unifi service launched in 2010.

And it’s beginning to see the benefits of that push, almost seven years later with its internet business surpassing the group’s voice business in revenue with US$825 million (RM3.67 billion) versus US$749 million (RM3.33 billion) in 2016. You can expect TM’s internet business revenue to keep outpacing its voice business.

With the increasing digital push of the past few years I actually thought TM would have long crossed 1 million Unifi customers but as of end 2016 it still had not. Its Unifi service had 949,000 customers by end 2016 which represents a 42.6% take up rate versus the footprint of 2.23 million ports nationwide.

It has to be a cost and competition issue that prevents adoption from crossing the 50% mark at the least for surely everyone recognizes the value of a high speed broadband service. It’s whether they can stomach the cost of the service that determines their adoption.

And just to be clear, customer number is not the same as user numbers which TM will actually have no visibility of. For instance, in my home, while I am a single Unifi customer, there are four of us users.

Incidentally, while TM does not break down where its voice revenue is coming from I would be really curious to know from which customer segments is it raking in its RM3.33 billion from. One obvious segment would be the public sector, I think.

While its voice revenue is dropping by the year, it’s still a big market and I wonder if the mobile operators, especially the big three of Celcom, Digi, Maxis have their eyes on this?

Well maybe Celcom Axiata Bhd, with its parent company, Axiata Group Bhd, vowing to be aggressive this year in winning back certain segments of the market it lost over the past few years. Interesting that in laying the groundwork for winning back customers, Celcom is going back to basics by investing a big portion of its US$315 million (RM1.4 billion) capex investment in improving its network quality and coverage.

Axiata was candid too in assessing its network coverage weakness, admitting that in some areas, it was behind both Maxis and Digi, its main competitors. Whatever it does to win back customers, expect the consumer to benefit.

One interesting data point from Axiata was the hunger of data from Celcom’s user base. Data consumption doubled in 2016 with average data consumption per user of 3.1GB a month versus 1.5GB in 2015. What was eye popping was the Q4 2016 consumption which saw 3.9GB data usage a month.

With most data users, switching to their home wifi networks to save their data caps, the very high usage by Celcom customers suggests that they don’t have broadband at home, have very low broadband or spend most of their time away from home.

Speaking of which, here’s wishing you a restful weekend spent leisurely at home and have a productive weekend after.

 

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