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Nikkei Markets

Maxis' quarterly net profit jumps on fiber business

Forecasts muted service revenue growth; flags challenges to revenue per user

Analysts said Malaysia's Maxis' full-year performance in 2019 was broadly in line with their expectations.   © Reuters

KUALA LUMPUR (Nikkei Markets) - Malaysian wireless carrier Maxis said Thursday its net profit rose 33.5% in the fourth quarter from a year earlier thanks to growth in fiber and enterprise businesses but flagged few challenges to its prospective earnings in 2020.

Net profit for the three months ended December totaled 355 million ringgit ($84.92 million) compared with 266 million ringgit in the same quarter a year earlier, the company said in an exchange filing. Quarterly revenue gained 5.9% year-on-year to 2.59 billion ringgit from 2.45 billion ringgit.

The latest result beat some of the company's own guidance, helping shares of Maxis to reverse earlier losses and rack up nearly 2% intraday gains in Kuala Lumpur trading. The shares ended 0.6% higher at 5.40 ringgit apiece, while the benchmark FTSE Bursa Malaysia KLCI closed 0.1% higher.

Analysts said Maxis' full-year performance in 2019 was broadly in line with their expectations.

"While the 3G radio access network wholesale arrangement with U Mobile contributed in FY19, progressive revenue decline from the contract which had lapsed in June 2019 will no longer significantly impact the group's forward earnings," said AmInvestment Bank's Analyst Alex Goh.

Maxis' lease of its 3G radio access network to U Mobile generated more than a hundred million of ringgit in revenue annually. The network sharing agreement, signed in 2011, was terminated ahead of its 10-year service in 2018 before it was extended until June last year.

Malaysia's mobile telecom sector is dominated by Maxis, DiGi.Com, and Axiata Group's unit Celcom with each commanding about a third of the total subscribers in a country of 32 million people. The unlisted U Mobile jostles with other smaller players for the remaining market share.

Last month, rival Digi.Com reported a 9.2% decline in fourth quarter net profit hurt by higher network investments and increased depreciation costs. The company also warned that its revenue and operating earnings could fall further this year.

On its part, Maxis has been ramping up the so-called convergence strategy that involves offering bundles of multiple services such as fixed home fiber, television and wireless broadband on top of mobile telecommunications.

"We are accelerating 5G and ready to deploy as soon as spectrum is made available," Maxis Chief Executive Gokhan Ogut said in a statement.

Net profit for the full 2019 declined 15% to 1.52 billion ringgit from 1.78 billion ringgit, while earnings before interest, tax, depreciation and amortization, or EBITDA, slipped 2% to 3.73 billion ringgit. Revenue for the year dipped 1.3% to 9.31 billion ringgit from 9.19 billion ringgit.

For this year, Maxis said it expects service revenue and EBITDA to be "flat to a low single digit increase." Maxis' service revenue --which excludes sale of devices, hubbing revenue and network income-declined 3% to 7.8 billion ringgit.

The company flagged that regulated change in the mobile termination rate will "adversely affect" average revenue per user, and it expects to book higher depreciation this year due to increased capital expenditure in 2019.

Maxis also said it would work to secure current and future cash flows this year and aims to conserve operating free cash flow, which excludes upfront spectrum fees, at a similar level to that of the last year.

--Jason Ng

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