Saturday May 20, 2006
Competition affecting DiGi profits, says CEO
KUALA LUMPUR: DiGi.Com Bhd said network expansion and competition from rivals is eroding its profitability.
“We are seeing pressured margins because of our heavy expansion and competition,” chief executive officer Morten Lundal told reporters yesterday.
The company was spending as much as RM850mil this year to broaden network coverage to 90% from 80%, Lundal said. He also reiterated a forecast that profit after tax this year would rise at least 20%. Net income last year jumped 48%.
Lundal, who ruled out expansion abroad, is spending more to attract customers with new services and improve network coverage after the company in March failed to win a licence to offer high-speed wireless services in Malaysia. Digi’s two larger rivals, Maxis Communications Bhd. and Telekom Malaysia Bhd, have units overseas to offset increased competition at home.
DiGi has had “exceptional growth in the last three quarters, and a slowdown is expected. You can’t grow at that pace forever. And the Malaysian market is pretty saturated with a penetration rate of over 70%, so anybody that can have a handphone has a handphone,” CIMB-Principal Asset Management chief investment officer Raymond Tang said.
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Morten Lundal |
DiGi, 61%-owned by Norway’s state-run phone company, Telenor ASA, reported first-quarter profit tripled to RM184.7mil after it cut costs and signed up more users for its data services. The profit growth is the highest since the third quarter of 2003. Sales rose 38% to RM861.3mil.
DiGi signed up 292,000 subscribers in the quarter ended March 31, raising its user base to 5.1 million. – Bloomberg
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