Friday May 14, 2010


DiGi expects some pressure on earnings

By LEONG HUNG YEE

hungyee@thestar.com.my





CEO: Higher handset subsidies to impact EBITDA margin



KUALA LUMPUR: DiGi.Com Bhd's earnings before interest, tax, depreciation and amortisation (EBITDA) margin for 2010 may face some pressure due to its higher level of handset subsidies.



Chief executive officer Johan Dennelind said the handset subsidies, which were given out to customers to capture data traffic growth, was expected to have some impact on its EBITDA margin.



“We had a strong first quarter with EBIDTA margin of about 45%. We expect this to go to last year's level mainly due to handset subsidies,” he said after the company's AGM which lasted for two hours yesterday.



Last year, the telco achieved an EBITDA margin of 43.3%. For the first quarter, it achieved a net profit of RM278.2mil, or 35.80 sen per share on revenue of RM1.29bil.





Johan Dennelind (right) and DiGi CFO Stefan Carlsson at a press conference after the AGM



He said the subsidies were coming more into play as DiGi drove smartphones sales not just for the iPhone but also other phones such as the Android.



Dennelind, in its CEO review, said while its EBITDA margin would continue to be under some pressure but it targeted to improve the margin with further cost optimisation measures.



“We are confident of achieving an absolute operating cash flow higher than that of 2009. Operational efficiency will continue to be an important focus area to ensure we remain competitive,” said the outgoing CEO.



Overall, Dennelind said DiGi was optimistic of its growth. “The industry is still growing. Industry-wise, we anticipate revenue growth to be around 5% this year but DiGi aims to grow its revenue above this level.”



He said the group was in a great position in terms of capital management. He said its yield over the last five to six years was “superior”. He added that the accumulated dividend payout over the last five years was some RM6bil and its shareholders were very happy with the fact.



Dennelind said DiGi would “not compromise” on dividend and was looking to maintain its dividend policy of distributing a minimum 80% of annual net profit to shareholders.





On the sales of its iPhone, he said the takeup rate was “very encouraging”, but he did provide any numbers.



He said DiGi continued to see intense competition, its new business model being attacked and the rise of Internet usage. “There are many (challenges) but we rather see it as opportunities.”



On its 3G network coverage, he said the group was playing catch up. DiGi's 3G network currently covers some 30% of populated areas. By year-end the coverage will be about 50%.


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