This article first appeared in The Edge Malaysia Weekly on April 16, 2018 - April 22, 2018

IN 2017, Celcom Axiata Bhd’s revenue and profit grew for the first time in more than three years, a sign that 12 months after implementing its turnaround plan, the mobile service provider is delivering on its promises.

But the unit of listed telecommunications giant Axiata Group Bhd is not resting on its laurels as it is determined to make 2018 even better.

Market conditions will not make it easy for Celcom, or any other mobile service provider, to gain ground in a mature market like Malaysia where profit margins are shrinking and new competitors continue to emerge. However, CEO and executive director Klaus Michael Kuehner expects the company to continue to perform well.

This is good news for Axiata as Celcom is its largest business unit, accounting for about a third of its revenue.

“Last year was very good in terms of the progress of our transformation journey and we cleaned up many key functional areas and revenue-generating components,” the 65-year-old German national tells The Edge.

“But we are not where we want to be in all areas. There are still some areas where we need to improve. One of them is our network performance.”

Kuehner notes that Celcom and rival Maxis Bhd are currently tied for first place in terms of high-definition video streaming in more than 21 cities in Malaysia.

“However, our ambition is not to be joint No 1 but to be the best. Specifically, we want to give our customers the best video experience when using our network,” he says.

Celcom is targeting to increase its 4G and 4G LTE-A population coverage to 92% and 80% respectively by the end of this year from 87% and 74% as at Dec 31, 2017.

The company has also “cleaned up” its product portfolio. “We made sure our products are simple and transparent to our customers,” Kuehner says, citing as an example Celcom’s Xpax prepaid offering called No Kelentong that was introduced in December 2016.

“From our point of view, we are clear that we will not fight a price war. Our products will be the best in value and overall customer experience, but not necessarily the cheapest,” he explains.

“So while we have gained some ground, I would not claim to have turned around the company. We have reached a certain stability and have cleaned up some of the revenue drivers of the company, but we are not in a position to say we have done everything.

“But now that we have arrested the decline in our market share, our focus will be on improving our bottom line.”

Kuehner expects the company to grow by a “low single-digit” percentage this year. Celcom’s mobile service revenue grew 2.5% quarter on quarter to RM1.56 billion in the fourth quarter of 2017 (4Q2017).

“Certainly, we see growth to be stronger in 2018. We are still in stabilisation mode and will continue to focus on cost optimisation and return-to-growth strategies, and strengthening our value discipline as the telco that offers awesome customer experience,” Kuehner says.

Celcom is now in second place in the mobile service revenue market, commanding 30.4% of it. It is behind market leader Maxis (40.1%) but slightly ahead of DiGi.Com Bhd (29.5%).

“Definitely, we have an ambition to become a stronger No 2. But any growth that you want to generate in a mature market is going to be very difficult. First of all, you have to get loyalty completely under control and then offer products and services that motivate people to spend a little bit more,” says Kuehner.

Celcom also recorded higher average revenue per user (ARPU) for both postpaid and prepaid last year, which Kuehner attributes to the company’s strategy of focusing on customer value and not so much on price.

Celcom’s ARPU for postpaid grew RM3 quarter on quarter to RM87 in 4Q2017 while that for prepaid rose RM1 to RM34.

“We expect ARPU to remain stable, if not further improved, this year,” says Kuehner, who joined Celcom in September 2016 after the company had posted poor performances for a period of time. He undertook a revival plan, which included restructuring the company to focus on customer experience and digital channels.

Celcom recently revealed its financial performance for the full year ended Dec 31, 2017, posting an 8.5% year-on-year rise in net profit and 2.9% increase in earnings before interest, tax, depreciation and amortisation.

However, its subscriber number has continued to drop consistently, from 12.2 million in 2015 and 10.6 million in 2016 to 9.5 million last year.

Asked whether it expects to regain pole position as the largest mobile company in the country by subscribers, Kuehner says that is not his immediate focus.

“To me, the number of subscribers is relevant but it is not our key performance indicator. Our key KPIs are our transactional net promoter score (tNPS), which measures the experience we deliver to our customers, and revenue, specifically mobile service revenue.

“We saw improvements in our tNPS, rising to 68 points in retail in 4QFY2017 from 66 points in 3QFY2014 and 58 points in 3QFY2016. Further improvements into 1QFY2018 are already visible, partly contributed by the new look and feel of Celcom Bluecube shops,” he adds.

Like last year, Celcom will spend up to RM1.3 billion on capital expenditure in 2018, the majority of which will be utilised to improve its network quality and coverage, and digitalisation.

“We want to be top-notch in terms of digital experience. But we are conscious of not taking away the human element if needed. We recognise that improvements in our tNPS in retail were driven by the good performance of our retail staff. We will not go away from human interface as long as our customers look forward to it,” Kuehner points out.

According to him, Yoodo is a service that is pushing Celcom to the forefront of the digital revolution.

“The target group is frequent e-commerce users who also use their credit card for purchases on the internet. Our internal study estimates that this market is about five million people.

“The response to Yoodo has been positive because there is no other product like it in the market. But it is too early to talk about numbers. Here, the target for Yoodo’s digital team, which is independent of Celcom, is to double the tNPS of Celcom.”

When asked to comment on Axiata president and group CEO Tan Sri Jamaludin Ibrahim quashing any hope of a remerger between the group and Telekom Malaysia Bhd in February, Kuehner says it was not a setback for Celcom.

“If you are referring to the capacity and capability that will boost Celcom in the mobile industry, I think we are all geared at a consistent pace to heighten the network quality and delivering an awesome customer experience.

“Whatever we need to achieve and how to achieve it in 2018 have been laid out strategically. So, whether or not the merger happens, we will remain steady on our track as one of Malaysia’s leading mobile telecommunications providers.”

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