Good afternoon, everybody. Very happy to have all of you here today. This is the second quarter of FY 2021 earnings call for Digi. It's our pleasure, we have almost the entire Digi management team with us. You can see we have Albern, our CEO. Inger, our CFO, Praveen and Eugene, both our CMO and CBO, as well as Kesavan and Joachim, our CTO and CCAO. We are also joined by a special individual today, who is Otto, our new CFO. Hi, Otto, who's currently in quarantine in Malaysia. That said, this is Inger's final Digi presentation, so let's make it a very sweet one before we release her for some summer fun. Okay? Just a couple of house rules. You are all muted by default. If you wish to ask questions later, kindly unmute yourself.
If you're joining through your mobile here, you can also reach out to me via WhatsApp. I can address your questions shortly. Without any further delay, let me invite Albern to kickstart the presentation. Hi, Albern, over to you, please.
Hi, Christine. Hi, good afternoon. Okay. Hi, everyone. Good afternoon. Welcome to Digi's Q2 2021 announcement and financial numbers. I hope everybody is doing well and safe, both in Malaysia and abroad. It is continuing to be a challenging time for us here in Malaysia with COVID. Let's continue to observe SOPs and try and help ensure we get out of this safe. Let's go through this afternoon's presentation. Next slide, please. We will cover a couple items. As I mentioned, the highlights from second quarter 2021. Today, I'll be joined by a few members of the management team that will take us through the presentation. Inger and Kesavan will walk you through some of the points as well. We will run through the financial review and come up at the end with strategic updates. Next slide. Let me start off with the first two slides.
Giving you a little bit of the overall context of second quarter. First of all, in my introduction, I talked about the impact of COVID continues to challenge both us and the market. Hence, I want to talk a little bit about the support that we continue to provide, both consumers through the government-led initiatives, particularly keeping consumers connected. There's a variety of items that we are providing, including special plans for students, the Prihatin package, which we will talk about later, and also that we continue to extend the productivity and education 1 GB program. We delivered revenue growth in this quarter, with a stabilized EBITDA momentum coming from better execution, coming from Q1 when we shared where we had made some changes to the product offering going into Q2. We'll talk a little bit more about that as well. Lastly, it's about modernization of the network.
We had sustained number one position on network consistency, continued to provide good network experience for the customers. The changes in traffic pattern shifts or location of traffic usage shift has caused our customers to raise some requests for us to review coverage in some areas. We have done so accordingly. Kesavan will talk a little bit more about that. Next slide. Some financial numbers, then performance numbers, then Inger will go through a little bit more details, as always. Let me start off with giving you a service revenue update and the total revenue. Service revenue grew 1.7% year-on-year. The total revenue was at 11.4% year-over-year. This also was driven by higher ARPU, both on a prepaid at MYR 34, which is an increase of MYR 5 year-on-year, and a blended ARPU that took us to MYR 43.
Both of these driven by data and internet plan take-ups, the switching strategy that we looked at for both postpaid and prepaid, and introducing affordable plans for the market given the period that we are in. B2B revenue also took a strong growth, with the 1.9% year-on-year. As you know, we've talked about this before, our focus areas, and it's good to see that we were able to serve our customers and also grow our base during this period of time. As I mentioned, besides the ARPU improvement, there's a postpaid subs improvement as well, 153,000 subs was added in this quarter. On EBITDA, declined a -3.5% year-on-year. A normalized figure would have taken us to flat EBITDA. A profit after tax was -2.8% year-over-year. If a normalized version was applied, it would be at 4.4%.
Inger will cover a little bit more of these details, so I don't steal any limelight from her when she covers it later. Subs, I've touched on, and maybe the last point here, which is important, is to show that the usage with the new affordable plans have also then taken average usage of a customer to 21.4 gigs. Next slide. I'll hand over to Kesavan.
Yeah. Good afternoon, all. Let me just give you a view of where we are with our network. We have to now maintain our network stability and consistency. I'll cover this in three areas. One is talking about growing our coverage and network capacity, JENDELA, which is supporting the government's initiative to meet our digital society ambition. In terms of how we are increasing our spectrum efficiency through 3G sunset and moving the spectrum into 4G. Let me start with the first pillar. On 4G, LTE, and LTE-A, we have now covered about 92% and 75% respectively on the pop coverage. We have actually been able to expand our fiber footprint to about 10,000 km today. We have also been able to sustain our number one position on consistency in network and also download speeds.
When it comes to Opensignal, we've been rated number one with reference to video experience and also group video calling. During this time, we have also recorded a much higher data consumption, which is 8.7% quarter-on-quarter, and also 18.3% growth year-on-year. On the JENDELA front, in the year 2020, we met our ambitions that were set with new sites and also upgrades. You will see a 99% there. The 1% was due to some delays from the state-backed companies in delivering their sites, we have now put them on hand. For 2021, we have a very tight ambition with a lot of sites to be done. Glad to say as of first half of 2021, we have met our targets and we are at 42% and 62% respectively.
Over and above our own build sites, we also have the USP Clawback, which gives us about 79 new sites, 1,373 upgrade sites, and another 1,100 km of fiber to be built. We are on track. We have this till the year 2022 to complete, so we are progressing on that and we are on track. With reference to increasing spectrum efficiency, we are on track with 4G integrations into existing 3G sites. We are continuing with that. There's no let-up, and we are very focused to meet the target for end of the year.
At the same time, in preparation for the 3G shutdown, we have now instituted a 3G shutdown pilot in Port Dickson, which is ongoing, more to understand what are the implications, what do we need to do from the customer front, how do we work together with business to drive this, and also what do we need to do technology and also take feedback from the customers so that it will help us prepare towards the shutdown of 3G network at the end of this year. On 5G, we are continuing to work with many different verticals, be it with the ports or with the banking system, to try use cases that we are learning and we are getting and also working together with Telenor, with the experience that they have behind them on the 5G, so that we can launch some use cases when the 5G network is ready.
That's all I have on the network side. Passing it on. Thank you.
Hi. Good afternoon. I will cover the status on the consumer business. In the last quarter, across the three main segments of our business. The postpaid segment, we have continued to progress. We've seen higher take-up in our mid-level plan since we relaunched in the beginning of this year. Our ambition has been to drive more sales in the MYR 60 ARPU plans and above. We've done well there. We've seen positive response towards our service add-on contracts. As we've mentioned in the previous quarter, we have also now introduced a way to contract customers beyond just a device, and this is using services, and it has been a very good response so far. With the recent introduction of the Jaringan Prihatin program, we're also seeing strong demand in the entry-level plan.
At MYR 40, together with a phone bundled together, very good demand in that area. Moving on to prepaid, we continue to focus on our high-speed internet passes, ranging from MYR 30 -MYR 35, MYR 45 a month. That remains our main focus. We've seen a growth in our Malaysian subscriber base, both quarter-over-quarter and year-over-year, 2.2% quarter-over-quarter and 5.2% year-over-year. Our prepaid ARPU has also shown growth both quarter-over-quarter and year-over-year. This is driven again by a lot more of the focus towards the internet subscription passes that we're driving at the moment. Similarly, with Jaringan Prihatin, we're also seeing very strong demand here, for both the smartphone bundles that we provide as part of the program, as well as the SIM-based offers on prepaid. I'll cover that after this as well.
With the fiber business, our mission continues to be the same, which is to continue to cross-sell fiber to our existing postpaid base, existing Digi customers. We continue to maintain a very good entry-level price point on fiber, our current promotions are targeted at the mid-level ARPU, which is about MYR 130 and above, in addition to your postpaid accounts. That's a quick status of our consumer business for Q2. A quick overview of Jaringan Prihatin, which is a government program that kickstarted on the 5th of May. It has now been extended to 31st of August 2021, Digi is one of the operators providing services for this program. In summary, there are 8 million Malaysian citizens in the B40 segment that are eligible for the government subsidy, ranging from MYR 180-MYR 300 in subsidies.
About 6 million of these citizens are eligible for MYR 180 subsidy, which they can use to subsidize their monthly internet plans or a device. 2 million citizens are eligible for a MYR 300 subsidy on a brand-new phone. We are actively participating. Today, we provide very strong offers across prepaid and postpaid, and we're seeing steady demand for this. We believe that it will also contribute towards our revenues this year. That's it on Jaringan Prihatin. I'll move now to Eugene, who will cover B2B.
Thanks, Praveen. On the B2B side, Digi Business has continued to maintain a consistent growth trajectory, despite challenges from the lockdowns related to COVID. Team will continue to focus on execution of our game plan, specifically in three areas. First, we will continue to support our SME customers in their digitalization journey via the PENJANA bundle, both in enabling them to have a digital front end as well as to digitalize their operations, whether in the mid or at the back office. Second, to continue to strengthen the Digi Business product portfolio, both on connectivity and digital. In connectivity, the idea is basically to extend where we are strong in mobile into the non-mobile products as well, including cloud PABX, you can see on this picture, and also dedicated internet access. On the digital side, we leverage partnership.
For example, Touch 'n Go for payments, Cisco for cybersecurity, Facebook for e-commerce marketplaces. Finally, I think on the large enterprise side, our approach is to be very targeted in terms of the industry sectors that we are approaching. Specifically in financial services, in ports, in oil and gas, and also in smart manufacturing. This has proven to work well for us in that we've seen in the last three to four months, the large enterprises deal book has expanded significantly, with some very exciting deals that we have signed recently, for example, with PETRONAS and CIMB. We are also excited to have launched a 5G smart port trial, with Westports, one of the largest container port in Malaysia. It is live today, and it will be a showcase of how 5G, together with digital, will enable a significant step up in terms of business productivity.
Moving forward, we will stay true to our ambition that is disclosed in the Digi Integrated Annual Report, 33% revenue growth by 2023. Right? We will continue to enhance our product and our value proposition beyond connectivity. For example, in edge cloud, in managed services and IoT. Thank you. This is for B2B. Next, I pass on to Joachim.
Thank you, Eugene, and good afternoon, everyone. I'll just spend a minute talking to you about some of our responsible business focus in quarter two of this year. This has been, of course, for Malaysia and for many communities around us as well, a trying quarter with rising COVID cases, and a lot of business closure that has come along with it, with students and individuals needing to work from and be productive from home. First focus was on really health, safety, and environment. As our business is classified as an essential service, we need to keep our services running and our retail running. We have worked quite hard on focusing on how we can enable our workforce to continue working safely, and unencumbered during the extended EMCO periods as well.
We have now also put in very strict monitoring processes so that we can keep customers and our frontliners safe, both our retail frontliners and our technology frontliners as well, at our premises or at our partner premises who work alongside with us. We've also now gone on a very active awareness drive to encourage as many Digizens as possible to be vaccinated, and have looked at some alternatives over and above the national vaccination program to support our frontliners here. As Albern mentioned before as well, with extended lockdowns, we see a lot of learning and productivity from home. The network team is continuing to prioritize our data traffic for essential locations, particularly the vaccine distribution centers and hospitals. We are also focusing a lot of efforts in maintaining high stability and quality of network at all times.
As Kesavan mentioned before, we are now seeing traffic usage up to about more than 21 GBs per user per month. As more and more people work and learn from home, stable networks, consistent experience, super important at these times. Future Skills continues to be our focus. These are part of some of our core programs that we've done for many years. We've extended our partnership with UNICEF to collaborate on projects to reduce inequalities and to build child's rights in the digital age and future skills in schools as well. This is done in collaboration with both UNICEF, MDEC and with the Ministry of Education in Malaysia. Finally, this quarter, as we have done every year for several years now, we've had a Responsible Business Summit just last week.
This is an annual organization-wide initiative linked to employee KPIs on learning and development to attend and to upskill themselves on across the range of topics on responsible business, to anchor our commitment, to drive internalization on our staff, and to build competency. These are topics ranging from privacy, diversity, anti-corruption, cybersecurity, and others. In prior years, we were able to, of course, welcome a lot of physical participation from SME partners and other business partners in this. We believe we have a shared aspiration of raising ESG awareness and focus among the Malaysian community, and take a leading position among Malaysian corporates to do this as well. This will continue to be a focus for us to just build our own competency on this and spread awareness and leadership within the community. I will now pass it on to Inger for the next portion. Thank you.
Thank you, Joachim. Now I will go into the second quarter results. On the subs and revenue, ARPU side, we have delivered good growth in the data users this time around. The postpaid is continuously growing. In terms of users, we had a net add of 95,000 quarter-on-quarter, and also over 150,000 year-on-year, which shows that we have now stabilized our acquisition, and we have also seen a lower churn rate coming together with that. On the prepaid side, we definitely see a growth in our Malaysian database, 2% quarter-on-quarter and 5% year-on-year. There's been, of course, driven a lot by the favorable responses that we see in terms of the Prihatin initiative that Praveen was covering earlier. We were early out with very good offerings in the market, and despite the lockdown, we see great take-up on this.
We do continue to scale back on the rotational migrant subs. It doesn't mean that we are not offering to the migrants. We are very attractive to the migrants, more now in the retail distribution segment. As you can see, the slowdown year-over-year on subs is now only a reduction of 33,000 quarter-over-quarter. On the ARPU side, we have stabilized the ARPU at MYR 43. It is higher by MYR 3 year-over-year, very much driven by the acceleration of internet adoption, on the prepaid side, where, as Albern mentioned, we have MYR 5 on the prepaid increase year-over-year, MYR 1 quarter-over-quarter. On the postpaid side, there is a slight reduction of MYR 1, partially due to the lower roaming ARPU that we see.
We see also that it is due to also very good offerings that we are giving in the market that also retains our customers and impacts the lower churn. On the gigabyte per user, we are again at the highest ever, now at 21.4 gig. It's a 19% increase year-on-year, it's a healthy growth that we welcome. We have also continued to optimize our network in order to deliver very good customer experience on this. Despite the increase, we have sustained the most consistent network in the market. Moving on to the next area, which is on the revenue side. Our total revenue year-on-year has increased by 11.4% and 4.4% quarter-on-quarter, primarily driven by the internet and digital revenue that rose 7%.
We have a higher share of this, reaching now 76% of our total revenue compared to 72% last year. The service revenue that we have has increased 1.7% year-on-year, mainly driven by the areas where we want to grow, such as data revenue, and also that has been driving the prepaid revenue up by 2.6% year-on-year. The postpaid revenue continues to see some pressure due to the customer spend and the market slowdown due to the lockdown in this quarter. We also see, as I said, that the acquisition is still healthy, and we are trying to rightsize our customers into the right packages to meet also the share of wallet, which is under pressure in the market right now. On the device revenue side, it actually had a significant increase of 78% year-on-year.
This is if we exclude a non-recurring adjustment that we did this quarter of MYR 37 million, which is linked to the device revenue. It's a device liability we had in our books that we have reduced this quarter after reviewing the need of this liability in our book based on the usage. If you look at the total revenue normalized, it's an 8.9%, if you exclude this non-recurring impact. Quarter-on-quarter is similar, that we also have quite a good increase on devices and others. MYR 37 million, as I said, is also driven by this non-recurring impact. Both postpaid and prepaid revenue are improving quarter-on-quarter, which is good to see. We have some software gaming activities on MYR 6 million quarter-on-quarter. I move into the higher cost. I mentioned earlier the MYR 37 device revenue liability.
In fact, this has an equal reversal on the COGS side. It actually is an increase of our COGS. It will zero ise on both gross profit and EBITDA. You will see here that year-on-year and quarter-on-quarter, our COGS are also higher. This is again a non-recurring effect. If you look at the total COGS, it is a 52% increase, but also driven by over 300,000 devices sold in this quarter compared to slightly over 90,000 in the same quarter last year. It is driven by the Prihatin initiative as well as our PhoneFreedom 365 drive on ground. On the OpEx side, there is also an increase year-on-year due to the non-recurring benefits we had last year, which we also reported to the market. Last year we had MYR 25 million of non-recurring cost benefits.
This year we have a cost adjustment on the negative side of MYR 1 million. In total year-over-year, it's a MYR 26 million impact on the OpEx. On a normalized view, it would have been an underlying OpEx increase of only 1.3%. This is due to the higher sales operation maintenance as well, alongside our better collection process. Because what we see is that these unprecedented times makes people really want to pay their bills. In fact, so far this year, we have achieved a much lower PFDD ratio compared to earlier years. Same half last year, we were at a 2.6% PFDD ratio, and first half this year, we are at the 1.9% PFDD ratio. Very good collection, but also very good payers out there. Of course, we need to monitor this very closely given the current economic situation.
We believe that the measures we have put in place are enabling us to do that. On the other OpEx things that I want to mention on a quarter-to-quarter basis, you see also that it is down due to good focus on cost management, both in sales and marketing and O&M and staff cost aspects. I think this is on a quarter-on-quarter basis, we also had a slight increase in PFDD due to quarter one being exceptionally low. The trend we see on OpEx here is a good one on the underlying perspective. Let's move to the EBITDA. Our EBITDA has in fact stabilized. As I mentioned earlier, the margin on EBITDA will be impacted by the non-recurring effect on the total revenue because the denominator will be higher.
The margin is at 45.9% reported, but on a normalized view, it's at 47.1%, which is pretty similar to the previous quarter. We do see that the absolute EBITDA is quite stabilized quarter-on-quarter. Actually, in fact, we see that we have an increase to MYR 744. Moving to the profit after tax. We are also stabilizing the PAT margin at 17.3%. We have a normalized view there as well at 17.8%, which is showing also good traction as well. Last quarter, if you look at the quarterly view, we had fair value loss in Q1 due to the interest rate swaps that we do. This quarter-on-quarter, we had a gain again. Overall, the evaluation of these interest rate swap programs that we started on in 2016 has a gain. We will continue to monitor this and drive this.
On the normalized PAT, it is a +4.4%, and the reported was a -2.8%. I will move on to the CapEx side. This quarter, we recognized MYR 196 million in CapEx, whereof MYR 2 million were the asset retirement obligation. It's at 12.1% of the total revenue, and it was 15.5% in the same quarter last year. As Albern will probably come back when we reach the guiding, we have decided to do a little bit different CapEx profile this year due to the 3G shutdown. The guiding is still towards the 14%-15% CapEx total revenue for the year, as most of the rollout will be in the second half of the year, and we are running as planned. On the operational cash flow, we have a healthy margin still at 33.8%, and it is MYR 547 million this quarter.
My final slide is showing the shareholder return. Our dividend per share is MYR 0.036 per share. It was actually 100% dividend payout this quarter, and it is a total of MYR 280 million in dividend. On the total assets, we have still around MYR 8 billion of assets, whereof 19% is current assets and 81% is non-current assets. We continue to prioritize an efficient asset management. The composition of borrowings remains quite stable. We have finance leases enlarged a little bit due to the MFRS 16 and inclusion of more sites. We also have Sharia-compliant as our conventional debt is at only 5.5%, which is well below the 33% requirement. Our net debt over EBITDA is only at 1.6 times at this point. I'll move into the guiding.
For the first half of this year, we have delivered a -1% service revenue growth or decline in fact. Given the unprecedented times that there is a continuous lockdown in Malaysia and record high numbers, we believe that from a year-on-year perspective, we will sustain our guiding on the low single-digit decline. We are initiating a lot of game plans and initiatives to go to the positive side, these external factors are still challenging, especially also with the continuous border closure and impact also on the roaming revenue side. We see good traction on the areas where we can grow, which is positive. On the EBITDA side, so far this year to date, it's a -3%, which is in line with our guidance on medium single-digit decline.
I would also like to remind you that in the second half of 2020, we also had some non-recurring effects, especially in Q3. We believe that this will impact the year-on-year as well on the EBITDA guiding, and we sustain our guiding as per previous medium to single-digit decline. As I explained earlier, the CapEx to total revenue ratio we sustain, although it's at an average of 11.1% so far this year. It is because we have skewed a lot of the investments to the later part of this year due to the 3G sunset program. We are committed to maintain business as usual during this unprecedented time. We are focusing on building and delivering on our priorities and building our robust financials and organizational agility. We have a trusted brand, and we drive the responsible business standards.
At the same time, we are committed to have full focus on our business, although we are at the side also having the proposed merger discussions and completions of that. With that, I actually leave the word to Albern for him to say a few words on the status on the merger process. Albern, please.
Thank you very much. Just a couple of last slides before we go into Q&A, everyone. Let me just touch a little bit about the merger discussions and the announcement that went out on the proposed merger. Digi, as you know, signed a conditional share purchase agreement on the proposed merger. We talked about the structure before. Let me just recap that. The company structure post-merger will be an equal ownership between Telenor of 33.1%, Axiata 33.1%, and then the Digi minority shareholders at 33.8. That will form the merged company. Some key selling points, of course, this will create the top 5% stock in terms of value, equity value at approximately MYR 50 billion. It is about digitizing Malaysia in the future in terms of connectivity.
There is a significant amount of synergies and growth opportunities along which will give a big platform for talent to be developed further within the country. Next steps. That was maybe to recap what we had announced. The next steps is to keep everybody updated so that we take your questions up front here. It is basically the regulatory filing to the relevant authorities is in process, subject to the approvals from all these parties, including non-interested shareholders. The expected completion date is within the second quarter of 2022. Next slide, please. Let me summarize Q2, as well as just a little bit on going forward. Inger gave you guidance for the rest of the year.
Today's key takeaways for us, there will be continuous expectation and for us to deliver, make sure that society and connectivity is prioritized to make sure that customers can stay connected during this period of recovery as we move into the various phases that the government's announced. Also, for keeping our employees and our customers safe when they interact within our stores and helping them online as much as possible. The network is going to be critical for us to do this, and therefore, maintaining a stable network and keeping our leading position in some of the key areas around consistency and quality is going to be key. Financial performance, we've always known to focus a lot on that, and we want to keep that resilience on financial performance going forward. We're committed in improving returns through growth and dividends to our shareholders.
I want to just have one slide now before the Q&A to also just recap an announcement that went out. Of course, you know that Inger is finishing up her tenure as CFO of Digi. She will be leaving Digi at the end of the month as CFO. This will be her last quarter announcement and quarter results sharing as CFO. I just wanted to thank Inger on behalf of Digi and also for you all to have a chance to say farewell to Inger in this instance. Just want to thank Inger for a great job that she's done throughout the whole period with Digi and also the engagements with all of you and shareholders of Digi. Inger, thank you so much for the almost three years of support that you've done with us and a fantastic job you've done as CFO. I also want to welcome Otto.
I will give both of you a little bit of a few words, both of you, when I'm done, Inger, Otto. I want to welcome Otto, who is currently in quarantine in Malaysia. He is assuming his role and he's spending his 14 days in quarantine, and hopefully he's well and comes out safely. Otto comes with a tremendous amount of experience and has joined Digi as CFO, taking over from Inger. Welcome, Otto, to the Digi team as well. Inger, Otto, maybe in that order, just a few quick words from you to everyone. Thank you. Then we can move to Q&A quickly. Thank you.
Yeah. Thank you so much, Albern, and I will just say very quickly thank you to everyone who's listening in, and thanks for always listening to our earnings call and also asking us very good and challenging questions. Thanks for all the separate sessions I've had with many of you. It's always been a good learning experience for me and also quite a lot of fun. I wish you all the best. I will definitely follow Digi from the outside and wish this company all the best in everything they embark on. It's a fantastic company to be part of, and I'm very proud of what we have achieved so far. I will follow you and see the great things you will achieve going forward. All the best.
Otto, a few words from you.
Hello, everybody. I'm very proud to join Digi, and I'm starting very well in the quarantine. Nice hotel. A little bit about myself. I've been 13 years with Telenor. Last position was CFO of Telenor in Denmark, then I spent 8 years as head of group M&A in Norway, overseeing all transactions worldwide. Before that, I have had many different roles and CFO roles in other companies. I'm very happy to join and look forward to talking to you going forward in the quarters to come.
Great. Thank you so much for the solid presentation. We are going to allocate the rest of the time today for Q&A sessions. We already have a couple of attendees here. Let's take the first from Isaac, followed by Foong and Alex, and then I want to address some questions online as well. Over to you, Isaac, please.
Hi. Good afternoon. Thank you everyone for the opportunity. I have two questions, please. First is, can we get some color on the Jaringan Prihatin from either the like, where are we seeing the demand? Is it more on the postpaid and the prepaid? More importantly, can you share with us some color whether you see an increased consumptions of datas or telco services, or was it just a replacement? I mean, when the money was channeled to the user, do they come in and buy more things or it just replaced what they wanted to spend anyway? That's question number one. Question number two is that now that the Digital Nasional Berhad has been formed and there have been discussions, can you share with us some of your CapEx outlook beyond this year?
Either be the number or be your priority when it comes to your CapEx next year and onwards. Thank you very much. Just before I get off, all the best, Inger, for your next endeavor.
Thank you.
Praveen, you want to take question one, and then, Inger, maybe question two.
Thank you for the question. The question was with regards to where the demand is coming from, prepaid or postpaid. I think what we can see is it's following a little bit of the current mix in the country and also what you see in our own base. The ratio of prepaid to postpaid doesn't differ from what the market numbers are already like. We believe the prepaid number will probably be in the range of about 70%+, following the market trends. On the second part of that first question, the people who are coming in, where are they spending the money? There's a very clear requirement that the subsidy is used on monthly data plans. Monthly data plans.
That's where we believe we can get more customers to also stay connected on those monthly plans, which with Digi, it starts from MYR 30 and above, they can get it subsidized by MYR 15. Plus, there will be a segment of users that will now get a chance to move from occasional data passes every week. Now they can upgrade to the monthly pass. It is unlikely that this money can go to be used on other things. It is all intended for internet, or they get it as a subsidy for a new smartphone with an internet connection.
Thank you.
Yeah. Maybe I can start and, Kesavan, you can fill in. Thank you for your question. I think we never guide on CapEx this early for the next year. Of course, this is still very early days also for DNB and setup there. There are, as you know, ongoing tenders out there. We are still in the midst of also setting the strategy and the CapEx needs for next year. Maybe, Kesavan, you can give some flavor on other modernization initiatives we will be doing.
No further comments, Inger. I think we covered the DNB next year CapEx. Thank you.
Okay, thank you.
Okay, thank you.
Thank you. Thank you so much. We actually have questions online already, but let me give the way to Foong first. Foong, you are up.
Yeah. Hi, good afternoon, guys. Thank you so much for the opportunity to ask some questions. Three questions from me. Firstly, I wanted to go back to the question on the Prihatin plan. Just to clarify a little bit more there. The additional SIM cards that you sell under the Prihatin program, are these just basically your existing customers that have maybe left their original plan and just moved over to these new SIM cards because of the subsidies from the government? Are these new subscribers that are contributing incremental revenue for Digi? Related to that, can you also perhaps comment a little bit on the profitability of the Prihatin plans? Because I note that there are quite a fair bit of free data that's given in there. I wanted to understand a bit more on the profitability side as well. That's question number one.
Number two, with regards to the MCO and the EMCO in the Klang Valley as well as in two other areas in the country. Any updates on the impact on revenue so far? Have you seen any signs of deterioration perhaps in collection from postpaid subscribers? Do we expect potentially some increase in the PFDD going into the third quarter? My last question regarding staff costs was down Q &Q again. Is that just basically timing or are we starting to see the cost benefits of some of the business model shifts that we have been implementing? Yep. Those are my three questions. Thank you.
Hi, Foong. I'll take the first question. Firstly, to clarify, we don't have a brand new Prihatin plans. All our current in-market offers are applicable for the government subsidy. The only qualifying criteria is the customer has to pick one of the monthly internet plans that we have on prepaid or postpaid. On postpaid, that starts from the MYR 40 plan and above. In prepaid, it starts from our MYR 30 plan and above. They don't move to a different product altogether. That's just to clarify the baseline. Have they left their existing SIMs and their existing plans to move to this? They're still on the same plans. However, a number of customers will have to upgrade to the monthly plan in order to qualify for the subsidy. That's how it works. With regards to the profitability, the question on profitability.
What we have today is our current in-market offers will qualify for the Prihatin offer. The government is providing a subsidy of MYR 180 for the customers that choose to take a SIM plan. In return, the telcos, including Digi, have a standard offer across the industry, which is we provide an additional 2 gigs per day, valid for 1 hour every day. That's a standard of offer across the industry, that is provided across all the Prihatin plans. Yep. That's to answer the first question. I hand it back to Inger.
Me? Yes. Okay. The second question was around the collection, now that we have EMCO and MCO, and if we see some signs, especially on the postpaid subs. Of course, we are monitoring this very closely. I think what we managed to do after the first year of the launch of our PhoneFreedom 365 in 2018, was really making sure that we acquire quality subscribers using credit scoring facilities and making sure that we have a very solid customer base. Of course, we see that every citizen in Malaysia is impacted right now, but we don't see any critical signs on collection as of now on the mass side. On the business side, I think we need to be a little bit more careful and make sure that we monitor very closely their ability to sustain in business.
That's maybe an area of focus that we really focus on right now. As I mentioned on bad debt, we are definitely best in the industry. On the third question, which was a question around why our staff cost was down quarter-on-quarter. We haven't done any changes in the staff cost as such. It's primarily driven by some timing, linked to some bonus finalization and some USP claims that came in. There are not really any changes to the underlying staff cost.
Understood. Thank you so much, everyone. I just want to take this opportunity to wish Inger all the best for the future.
Thank you, Foong. Take care.
Yeah. Take care, and welcome to board too.
Thank you, Foong. Before I pass the mic to Alex, I want to address one question from Hong Leong. His question is: Why the merger is not entirely based on share swap but involve part e-cash. Inger, can you please address this, please?
Yes, I can. Okay. The key reason is that the two shareholders, Axiata and Telenor, had agreed on an equal share ownership of 33.1% each. When we are issuing new shares to acquire Celcom, there is an issuance that would result in a 36% ownership of Axiata in the merged co. To do the share equalization to reach the 33.1%, there is a cash payment, in addition from Digi to Axiata, and furthermore, a small cash equalization between Telenor and Axiata as well of MYR 300 million. MYR 1.7 billion from Digi to Axiata, MYR 0.3 billion from Telenor to Axiata. If we hadn't done that, we wouldn't have reached that similar shareholdings. I hope that answered your question.
Yeah, I think that's good. Thanks, Inger. Alex, you are up. Alex from AmBank. Thank you.
Okay. Thanks, Christine. I've got three questions. One is regarding your prepaid segment, which has dropped for your subscribers, you have dropped by about more than 300,000 this quarter. I'm just wondering, when do you expect some sort of stabilization to these numbers? I understand the impact from the migrant workers, in looking at some of the other operators, some of them have actually shown some growth over the past two-three quarters. I'm just wondering, what is the dynamics that's affecting you? When is that going to change? When is the expectation that at least these numbers will level off? That is my first question. My second question is regarding your CapEx, which is 11%, when your guidance is higher for this year. Is that being impacted by the MCO and the COVID-19?
Is there a potential that this year also you may actually miss that target? Also, if you're able to spend in the second half of this year, where will you be targeting this expenditure? Is it more on the urban areas as compared to the JENDELA's target to the remote areas and suburban areas? Yes. My third question is because the 5G rollout is expected by December this year, will your CapEx also be focused somewhere around that area where the 5G rollout is going to come up on stream? I'm just wondering, which area in the client value will you be targeting for the 5G rollout?
Thank you for your question, Alex. I think, Praveen, you want to take the first one?
Yeah. Thanks for your question. I think it's with regards to the prepaid segment and our subscriber numbers. As I mentioned earlier, we're seeing positive traction on our Malaysian subscriber growth on the data subscribers. That's our key focus. 2.2% growth quarter-on-quarter, and 5.2% year-on-year. I think that's crucial. We've also mentioned in several of our calls, the point on the migrant segment, that's very clear. We cannot gross from new customers entering the country. There's no such thing at the moment. We have competitive offers at the moment. There's the other part here on the emphasis on rotational SIMs, where we have clearly not focused in that part of the business. The main focus is Malaysian customers, Malaysian internet users at the moment. We believe that is the main focus for now. If there's anything else to add on, Inger?
No, I think.
I'll switch back.
This is fine. I think you can see also in the ARPU impact of some of our peers, that our strategy is actually very sustaining. We are focusing on where we see that there is retention and also quality in our subscribers. Okay. A second question I will start, and then maybe Kesavan can chip in. We always set out a plan for the year. So far, we are delivering according to our plan. There's no delays as such. This was part of our plan to deliver according to JENDELA and also the 3G shutdown, which is part of the JENDELA project. As long as I have seen the rollout in Kesavan's team, they always manage to deliver according to their plan. I have full confidence in that, and I don't see a big impact from the lockdown. Kesavan, maybe you want to comment?
Yeah, thank you, Inger. As mentioned in my presentation, we are on track in delivering our each year target. We have done well in our first half, and we will continue to do that in the second half. Your question on where the CapEx will be spent. Well, our CapEx, BAU CapEx will be spent in JENDELA in the urban and suburban area. Whereas the JENDELA spend on the rural areas and remote areas will be funded by the JENDELA program under USP Fund. It's two separate CapEx. That's how we will focus. As Inger mentioned, we are always on track in our delivery. Thank you.
I believe the next question was on the 5G rollout, Kesavan. Do you want to address that as well?
Yeah. On 5G, DNB- wise, the CapEx will be spent by them. We will have some little CapEx to be spent to upgrade some of our systems. With reference to where we will be, in KV. As you know, DNB is rolling out in Putrajaya, Cyberjaya, and in Kuala Lumpur, Klang Valley area. We are working this through with the marketing team to see how we get into that game at this point in time. Anything from you, Albern, on this?
Yeah, no, thanks, Kesavan and Inger. Alex, I think it's a good question. Again, it's very early days, as Inger pointed out earlier in her response. We need to just understand that it's also very early days for 5G. While 5G is important for future growth, FWA, B2B, and so on, majority of consumers, at least for this period and going into next year, will still be on 4G, and majority of the consumers will still have connectivity on 4G. We take it step by step, and since it's very early days, we will come back and update you as we go along in the next quarters. I think Kesavan and Inger's answers were really strong. Thank you.
Thank you, Alex.
Thanks, Albern, and also thanks very much, Inger, and hope all the best for you.
Thank you so much.
Also welcome, Otto. Yeah.
Thanks, Alex.
Thank you, Alex. Before I pass the Q&A queue to Ranjan and also Jim, can we quickly have a follow-up question from the earlier merger question? Why can't Axiata and Telenor have higher shareholdings to exhibit stronger commitment to the merged entity? Why fix it at 33.1% each? Thank you. Inger?
Yeah. I think maybe this question I can't answer because it's our shareholders and another shareholder's decision, which we have not been a part of. Please, I think Telenor has their quarterly reporting next week. You can try there. Thank you.
We can send that question up for you-
Yes.
-to Telenor.
We can send it to Telenor as well and get back to you.
Thank you. Now over to you, Ranjan, from JP Morgan.
Ranjan, you might be on mute.
Ranjan? Let me find him and unmute him. No. Okay, it's okay.
He might have dropped off.
Over to Jim. Yeah, he dropped off. Jim from Kenanga, please. Jim? Hang on. Let me just pin. You are unmute, Eddie, but we can't hear you. I think he's having some connection issue.
Maybe just post your question on the chat then.
Yeah, you can write your questions on the chat.
While waiting for the two gentlemen to be back, we have another question on service revenue growth, that we are keeping to a low single-digit decline of service revenue. Is it because the extended and stricter lockdown is posing a risk for a return to service revenue growth in the second half? Sharing some colors, please, Albern and Inger.
Inger, you have it. Yeah.
Where is the question typed, Christine? I cannot see it.
Okay. Let me repeat the question again.
Yep.
Yeah. He's actually addressing why is that Digi is keeping a low single-digit decline for service revenue. Is it because there is a stricter lockdown posing a risk to our returns in service revenue in the second half of the year?
Yeah. Okay. Yes. I think if you compare to last year as well, there was a slight recovery in Q3 last year. The society opened up slightly. We see that there is a risk to the rest of the half year due to the continuous high numbers of cases and impact on the economy. However, we do see very positive impact on the government-led initiatives as well. We keep leveraging that. Absolutely. The guiding still stands due to especially the impact on the postpaid side. The prepaid is having good traction.
Okay. Thank you. Let me try to bring Jim back. Jim, are you there?
He's got a question posted. He put a question up.
Great. Yeah. Okay. On the B2B front, when do you foresee 5G use cases to start meaningfully contributing to your revenue? The first question can be addressed by Eugene or Kesavan. Second question, are we looking at some time between FY 2023 and FY 2024 when 5G is up and running, hopefully? Once we have figured that out, what are the type of use cases for each industry, for example? Perhaps we can have some insight from Eugene and Kesavan.
Eugene, you want to take the first part?
Yeah. We have started some of the 5G trial cases. For example, just now I mentioned the ones that we have at the container ports. Right. Based on the understanding, I think when we start rolling out 5G, whether it is from the end of this year or the beginning of next year, I think we will focus a lot of the rollout use cases on enterprise customers. We will see the revenue and also the opportunities start to build from 2022 onwards. Right, in terms of when it will contribute meaningfully to the revenue, I don't think I have an answer at this point in time. Right? Have we figured out the use cases for each industry? I think, based on what we see now, in parts, I think some of the use cases are related to where AI comes together with digital imaging.
What you're doing is you are allowing digital images, and you're using AI to recognize these images so that you can react based on that. Removing the need for people to actually do that and to be there and looking at the thing specifically. We've seen some of these use cases. We have also started to see other use cases that is a bit related to remote control. For example, if there are environment where it could be not as safe for people to be there, I think what they can do is they can remove the people from the actual environment and then put them to control the equipment or the machinery in a safer operation center. Kesavan, I don't know if you want to add to some of that.
I think, Eugene, you covered that well. Just coming back a little bit on the question, are we looking at some time, 2023, 2024? I think we need to look at 5G very differently. One is the mass rollout that DNB will be doing, whereas we'd also be looking, as Eugene mentioned, based on specific use cases, which may be related to a specific area and more towards a private network kind of a setup. At this point in time, we are working through the use cases, and then we will engage DNB, whether it's in 2022, 2023, or 2024. That's dependent on the use cases that we want to go with and the opportunities that we will decide to embark on. Thank you.
Thank you both. There is a follow-up from Jim, which I can address here. Jim, he asked, "Is there a reason why B2B revenue not disclosed at this moment?" Yes, unfortunately, we are not disclosing B2B or also enterprise contribution. We will do that in a much later time. Thank you. Now over to Usman. Usman, we are taking final questions from you to complete our Q&A sessions.
Great. Thank you for the opportunity. Again, best wishes to Inger for the time. My question was just on the prepaid versus postpaid dynamic. It is interesting that you seem more optimistic on the prepaid revenue trend development versus postpaid. In postpaid, you are highlighting the risk of optimization, whereas in prepaid, I would have thought that the risk of optimization is higher because of, let us say, macro conditions. If you could maybe just uncouple that for me. How is it that you have a higher kind of confidence on the prepaid side and the postpaid side going forward? Thank you.
Yes, I can start, and Praveen, you can come in as well. What we see in both mass and business is due to the uncertainties right now, people are not so willing to commit on a long-term basis. That's one. The second is also acquisition is more challenging when we have lockdown and some of our stores and dealers are closed. Especially how we drive device sales is very much through our channels. We are moving rapidly into digital channels. We have very good traction there. We, especially on the B2B segment, also use digital channels. Praveen, maybe you can share a little bit on that. Just finally on the prepaid side, it is definitely having a positive impact, the government-led initiatives to people's wallets on a month-on-month basis. That's why we see a very good traction there.
Usman, thanks for the question. I think we're equally optimistic on both prepaid and postpaid. That remains the case. Earlier, we've also mentioned that we've had a specific focus in the prepaid area to focus on quality subscriber growth, lesser focus on rotational SIM users, and that has also aided indirectly in terms of the ARPU levels on prepaid. The key narrative on prepaid is focus on the internet subscriber growth on high-end passes, and that's really where we will stay. It doesn't remove our focus on postpaid. I think the key challenge for us on postpaid is, of course, what Inger mentioned on the channels, the shops. There's some correlation with the lockdown. Also we are monitoring collections day by day. That's a key part of the postpaid business. Thank you.
Yeah. Of course, the border closures still impact postpaid especially. As soon as those open again, I think we will see a good upside.
Yeah. I think, Usman, it's a dynamic approach. I think what Praveen and Inger just described, it's a dynamic approach to prepaid and postpaid. We focus on both, and you almost use the different levers at different periods of time. I think that flexibility and agility is really what I measured a team on for prepaid and postpaid. They execute on the ground is much more targeted. Very good question, Usman, and thanks a lot for the response.
Thank you, Usman.
Thanks, Usman.
All the best.
Yep. Christine, that's the last question, and that comes to the end of our session. I just want to thank everybody for taking the time this afternoon to be with us. Thank you for all the support in the first half of the year as well to us. Again, thank you for the support shown to Inger, and please welcome Otto and hope all of you engage Otto through Christine in due course. I also just want to wish our Muslim friends Selamat Hari Raya Haji coming up next week. To everyone else, please continue to stay safe and best of luck. Thank you very much, everyone. Take care.
Thank you. Take care. All the best.