KUALA LUMPUR: Mobile phone operators got off to a slow start in the first quarter of this year, with both Maxis Bhd and DiGi.Com Bhd posting a decline in net profit despite improvement at the revenue level.

Maxis, the country’s largest mobile phone operator, saw its net profit drop 15.3% to RM410 million or 5.5 sen a share for the three months ended March (1QFY15) compared with RM484 million or 6.4 sen a share a year ago, mainly due to higher expenses.

Revenue, however, improved 1.4% to RM2.15 billion from RM2.12 billion in 1QFY14. With this, earnings before interest, taxes, depreciation, and amortisation (Ebitda) margin declined to 48.7% from 50.6%.

Its rival, DiGi — the third largest mobile provider in the country — also saw its net profit for 1QFY15 drop slightly by 1.2% to RM479.22 million or 6.16 sen per share from RM485.16 million or 6.24 sen per share a year ago, mainly due to higher depreciation charges and foreign exchange loss.

Revenue rose 4.3% to RM1.79 billion compared with RM1.72 billion in 1QFY14, while Ebitda margin for 1QFY15 came in at 43%, two points lower from 45% a year ago.

Nevertheless, both telcos declared dividends for the quarter under review, with Maxis (fundamental:1.15; valuation: 1.1) announcing a first interim dividend of five sen per share and DiGi (fundamental: 1.55; valuation 2.1) a 6.1 sen dividend. Maxis’ dividend is payable on June 26, while DiGi’s is payable on June 5.

In a statement yesterday, Maxis said that for the first time since 2010, the telco bucked the trend of a traditionally slow first quarter to deliver a service revenue of RM2.13 billion, up 4.4% from RM2.04 billion in 1QFY14. The quarter also saw Maxis adding 328,000 new revenue generating subscriptions (RGS), bringing its total RGS base to 12 million.

With its network modernisation and 4G LTE expansion delivering tangible improvements in customer experience and driving data usage, Maxis now has nine million mobile Internet users and its blended smartphone penetration stood at 57% in 1QFY15.

Maxis’ subscriber base for 1QFY15 grew by 10% to 12.2 million from 11.08 million a year ago. As at 1QFY15, Maxis has a postpaid subscriber base of 2.82 million, 3% higher than the 2.75 million achieved the same time last year.

For the prepaid segment, Maxis saw its subscribers grow by 15% to 8.99 million from 7.82 million in 1QFY14. Wireless broadband subscriptions, however, contracted by 25% to 377,000 from 505,000 a year ago.

“It’s a solid turnaround story for our prepaid segment. We now have four consecutive quarters of growth in revenue and subscribers. We are also seeing a positive transition in our postpaid segment,” Maxis chief excutive officer Morten Lundal said in the statement. “We had a revenue impact after we took steps to avoid any chance of bill shocks with Maxis, and we furthermore had seasonal roaming revenue in 4QFY14, so we’re comfortable with marginal net decline.”

Lundal said the MaxisOne plan is also doing well for the group.

“One thing’s for certain, Malaysians love data. We are seeing an average of 1.4GB monthly consumption by postpaid customers and 1GB by prepaid customers. Our data traffic is projected to grow over five times in the next three years,” he said.

Lundal noted that Maxis will continue with high capital expenditure for 2015 at above RM1.1 billion to complete its network modernisation, drive 4G LTE expansion, as well as to further improve capacity and quality.

“Maxis already leads the 4G LTE population coverage in the country, approaching 39% of the population and covering key market centres and state capitals,” he said.

The improved subscriber numbers, however, have not necessarily been converted to higher average revenue per user (Arpu).

Maxis’ Arpu for the postpaid segment stood at RM96 in 1QFY15, RM2 lower than in 1QFY14, while Arpu for prepaid dropped 5% to RM38 against RM40 a year ago.

Only Maxis’ wireless broadband Arpu saw expansion, growing 3% to RM70 in 1QFY15 from RM68 a year ago. All in all, blended Arpu for Maxis contracted 4% to RM53 from RM55 in 1QFY14.

Meanwhile, DiGi also registered a slightly higher service revenue of RM1.59 billion in 1QFY15, compared with RM1.55 billion a year ago.

“Service revenue growth for the quarter under review was undermined by competition and price adjustments, although well-supported by higher usage from Internet alongside a larger subscriber base,” DiGi said in a filing with Bursa Malaysia yesterday.

DiGi, too, strengthened its subscriber base to 11.7 million users. In this regard, it scored strongly in the postpaid segment and reached 1.76 million subscribers in 1QFY15 compared with 1.69 million subscribers a year ago. Its prepaid subscribers stood at 9.93 million in 1QFY15, from 9.2 million in 1QFY14.

DiGi attributed the positive showing to improvement in its high-speed data network performance and coverage, coupled with easy access to a wide range of affordable smartphone bundles.

For DiGi, Arpu growth year-on-year (y-o-y) for the postpaid segment remained flat at RM81 in 1QFY15. Arpu for the prepaid segment declined RM2 y-o-y to RM39 for the quarter under review. Blended Arpu was also flat at RM46, RM1 lower than the same quarter of last year.

Maxis shares closed 0.28% lower at RM7.13 yesterday, with a market capitalisation of RM53.53 billion. DiGi’s share price ended down 0.96% to RM6.19 with a market cap of RM48.13 billion.

This article first appeared in The Edge Financial Daily, on April 28, 2015.