Maxis ... Jun11

Increased gearing has started to take a toll on Maxis Bhd’s earnings as the telco giant moves to gear up its capital structure.

For 1QFY11 ended March 31, Maxis’ total borrowings rose to RM5.6 billion from RM4.9 billion previously, with its debt-to-equity ratio at 0.65 times.

Due mainly to higher net finance costs from additional borrowings, net profit for 1QFY11 declined 2.35% year-on-year (y-o-y) to RM539 million from RM552 million in the previous corresponding quarter.

On its current gearing, the group could still gear up to 1.4 to 1.5 times (debt-to-equity ratio) if needed. It needs to invest more capex (capital expenditure) to get bigger future revenue.
Other than earnings, Maxis’ group revenue also declined marginally by 0.9% y-o-y to RM2.13 billion from RM2.15 billion due to reduction in voice, interconnect and international gateway services revenue.

Maxis was scaling down its low margin international gateway services business. The segment contributed about RM400 million of revenue last year.

Maxis saw strong growth momentum in non-voice revenue. During the quarter, non-voice contribution to the total mobile revenue jumped to 42.1% from 34.8% for 1QFY10. Non-voice revenue grew 22% y-o-y to RM857 million from RM704 million.

While total revenue was sluggish during the quarter, Maxis’ Ebitda margin rose to 51.1% from 50.3% in the previous corresponding quarter.

With the voice market becoming increasingly saturated, strong cost optimisation was essential to offset pressure on margins.

Y-o-y average revenue per user fell to RM49 from RM52 previously.

Maxis crossed the 14.1 million total subscription in the first quarter 2011, of which 3.3 million were postpaid and wireless broadband subscription while prepaid subscription was 10.8 million. Total subscription numbers were 12.7 million and 14 million for 1QFY10 and 4QFY10 respectively.

During the quarter, Maxis also applied stricter subscription definition for reporting purposes. Postpaid, including wireless broadband, subscription base excludes subscriptions that have been barred for more than 50 days prior to the reporting date while prepaid subscription base excludes subscriptions that do not have any revenue contribution for more than 50 days prior to the reporting date.

Based on the new definition, Maxis subscription base for 1QFY11 was 12.7 million, instead of 14.1 million.

The agreement between Maxis and Telekom Malaysia Bhd for the former to have access to the latter’s high-speed broadband network would enable it to reduce capex to about RM1.3 billion in 2011 from the RM1.5 billion planned earlier. Maxis’ capex in 2010 was RM1.4 billion.