DIGI ... Oct12

It will be moving more aggressively to capture the large screen date segment of the telcos market, which is about providing broadband connectivity to laptops and PCs.

It is almost ready to provide long-term evolution (LTE) speeds on its network and has already upgraded 80% of its sites across Malaysia to cope with the increased bandwidth speeds. Part of its network modernisation was to put in place a network that is actually capable to cope with LTE type of services.

LTE, also known as 4G, which is the next generation after 3G technology, offered higher speeds and would be the next growth driver for DiGi.com, given its appeal to the younger generation. LTE could also boost the customers' adoption of smartphones and tablets as the newer devices would usually require the use of modernised networks to cope with today's technological advances.

The expected high take-up rates would compensate for the anticipated decrease in voice revenues moving forward. Moving forward, especially with LTE, data will be the main growth driver. LTE gives a better opportunity for us to serve larger screens in a more cost-effective way at price points that the customer is willing to pay.

A case in point was the launch of Apple's iPhone 5, which is equipped with the LTE type of technology and will require an upgraded LTE network to make full use of its potential. DiGi was hoping to launch the LTE-ready iPhone 5 by the fourth quarter of 2012. The launch will happen the way it used to happen with the past iPhone launches, with a very coordinated fashion across the Malaysian market with all the main three telcos.

In the past, the telco had prioritized the small to mid screen market, staying away from the large screen segment because it consumed more network resources. However, its three year nationwide network transformation is halfway to completion. The new modernized network, which is LTE equipped, will give the company leverage to seriously pursue the large screen market.

LTE technology, or more widely known as 4G technology, rides on the 2600 MHz spectrum that provides higher speed and capacity compared with 3G.

The MCMC had named nine companies as recipients of the 2.6GHz spectrum band, which the telcos will utilise to provide LTE services. These companies are DiGi, Celcom Axiata Bhd, Maxis Bhd and U Mobile; and four WiMAX players: Asiaspace Sdn Bhd, Packet One Networks Sdn Bhd, REDTone International Bhd and YTL Communications Bhd. In June 2011, the regulator called for a re-submission from the players. A final decision on the award and allocation was supposed to have been announced in August 2011.

The MCMC is due to finalize the allocation of the 2600 MHz spectrum by end of 2012 and DIGI is waiting for the spectrum allocation as it is ready to launch LTE services.

DIGI – a 49% associate of the Norway based Telenor Group – will have the advantage of riding its parent’s LTE experience.

The company had allocated capex of rm700 million to rm750 million for 2012 and estimates capex to hover a similar guidance for 2013.

Meanwhile over the near-term, it is not going into fixed-lined broadband business. It will focus on growing its mobile business and has no immediate plans to go into the fixed-line broadband services.

Currently, there are only a few players offering high-speed fixed-line broadband services in the country and they include Telekom Malaysia Bhd, Maxis Bhd and Packet One Networks Sdn Bhd. Celcom Axiata Bhd, the country's second largest mobile operator, has voiced its interests to offer such services in the near-term.

It is understandable why mobile operators are interested in offering fixed-line broadband services - it can help to boost the operators' revenue stream and retain the customers through the offering of more services in bundled packages.

About half of DiGi's customer base are active data users. (What this means is that the customers use data services at least once a month). On top of that, about 24 per cent of its customers are using a smartphone.

The growth in the smartphone user base, driven mainly by the increasing number of available models as well as lower prices, is critical to DiGi's future revenue growth - as in most cases, smartphone users spend more each month.