Earnings Call: Q2 2020

Jul 14, 2020

Good morning. Good afternoon, ladies and gentlemen. Welcome to the conference call. Christine, please go ahead. Thank you. Hi, ladies and gentlemen. Good afternoon. Welcome to the Q2 of 2020 financial results for digi.comberhat. Without much further ado, let me just give a quick introduction to the management that present together with us today. On the call, we have CEO, Alvin. We also have CFO, Inger. We have Lo and Yu Jin, CMO and CBO respectively. Last but not least, we also have Chief Technology Officer, the CTO, Keesa Wang and as well as Chief Corporate Affairs Officer, Joe Kim. Without further ado, I would like to pass the mic to Alvin to start. Thank you. Thank you, Christine, and thank you, Jeffrey, as well for setting up the call. Good afternoon, good morning to everyone. Thank you for taking the call on our Q2 2020 Performance and update on all of you. Let me get started by just giving a couple of quick updates And there are a couple of slides that we will go through. So let's take the next quick slide. And we will cover today Two messages from me and some business highlights. And then I will also cover with Inger, a financial review. We will take some quick updates and we will look at the outlook and guidance before we end the session with question and answers. On this slide, I just would like to talk and get a start with David Nourgiver, a overview of how the business has been in Q2. As all of you know, Globally, Q2 has the peak of the COVID-nineteen challenges that we have globally. In the second quarter, There was a lot of external factors and headwinds that we had, particularly because of COVID, we've seen the shots of Malaysia, The government had made an announcement to lock down from the 18th March and there is different control orders until the 9th June. We were well prepared for this prior to MCO and I was actually quite happy to see that DG had actually made it ready to mention a BGP plan well before March 18. In fact, a week before 2018, we were already practicing remote support from the office And we have all our backup centers and network centers, and the dining centers all ready to go. And we have most of the employees already rotated between the weeks. So for us, it was not an issue in terms of moving into a PCP operation and remote work, And we will talk about that in the latest night as well. However, due to the lockdown, retail across all touch points, but also retail in general After we close, NCO does close the customers during the period of time to prioritize safety of our customers and employees. So we support the government's initiative For the MCO and also the lockdown period. This also then brought, of course, closure of our borders and this affecting the ongoing revenues And we have been able, both tourists and foreign workers in and out of the country. Now during this period of time, as most of you would have seen in the In the media, there was a lot of requirement a lot of need for helping the government and Malaysian in the state. First of all, our commitment was to provide a network that customers could use and stay connected to their loved ones. This is our priority and we focus on ensuring quality of the Good afternoon. Good system and work across the nation. And it was also not easy during the lockdown to maintain and that's why especially when you have certain opportunities in certain areas that you get The team did a really good job. A lot of appreciation out to the team that supported our customers during this period Given the challenges, but also in the past of your help. As you know, we also supported an industry wide initiative as part of the stimulus plan from the government With the free 1 gig data for every day during the MCA period and that was Thanks for the extended and that also helps customers stay connected. Besides consumers, the consumer segment, we also supported SMEs The various digitization efforts. Now we have come past June 10, that's when the laser started to open up many, many different Sector slowly, but certainly moving in the direction. We see positive recovery post MCO. And what we want to talk about today in the later part Slides also what's now after Q2, how do we actually drive operational momentum that we actually built initiatives in our digital touch points. We are able to serve our customers Just here remotely. But we also want to focus on customer experience and how we actually manage the traffic during this period. And then you want to talk about how we actually manage to provide personalization for our customers and we see growth now coming from our Malaysian base. This is the next slide. On this slide, it's a little bit of giving you a feeling of the resilience and agility that we Good afternoon. The Q2. I'll break it down within the 4 areas of our strategy that we have in the company, which is also connected customers to what matters most. I will start with our employees for a change and actually talk about how we have Expedited digital capabilities in working remotely and working from home extremely effectively during this period of time. As I mentioned earlier, we grew well prepared ahead of this lockdown and this helped us stay close to collaborate with, But also execute on our Q2 net book and our Q2 plan. We engaged employees very, very early. In fact, I just had one right before This is an amazing question. And we continue to operate currently with high So please, in our retail stores, all the numbers have opened up. We continue to ensure that we have BCP clients in place And strict SOPs. And this is to keep up with the 0 infections that we've managed to have today. Our retail outlets just very briefly Absolutely open and our employees are given the safety guidelines and the safety protection here required to keep both themselves and our customers safe during this action. Then I'll switch a little bit to what we did for the community. I touched on the 1 gig, so I won't talk about that again. But We also did a donation guide to GDRN, which is in support of the firm liners. And we as a member of our CIBP for good boost index, We also came out well in this call that I just reviewed in June. On the financials, which Inder will go through, I want to pick up a couple of things, So, which is the key highlights and here on growth, monthly data usage per user increased by 50% during the period. Remember most people had to move away from office, going to the residential areas, residential homes, work from home and data utilization was higher in this period of time. Internet and digital revenue increased by 8% year over year. First day subscribers grew 4% in the period. And we also, as you've seen yesterday, we signed a wholesale agreement on fiber with CN Global, which we will speak about later. On the digital side and efficiency side, we're very proud that during this quarter, while we had little bit beyond our control on due to COVID-nineteen impact, We put our focus on ensuring that this company delivers efficiency and a strong network for our customers to continue to use it While we get back to you, Norman. My BG, which has been extremely a powerful tool that we've used for many Times and main quarters reported, continued to give the upsell traction of $16,700,000 We saw cost of goods reduction of 7% year on year, OpEx improvement of 7% year on year and our EBITDA margin stood at 53%. Moving to the next slide. Now I spoke a little bit about the network. And when it comes to Can we move on to the next line? Thank you. So on the network, Basically, if I look at what I started talking about prioritizing, never experienced while maintaining high quality, You could see that the data usage patterns had a shift of on a post MCO due to the 1 gig and a pre MCO period. You could see that the initial We could see a huge increase of 18% to 29% during the period's time. And then as the control room All the change in terms of how much flexibility came back to the people, we saw that traffic then, since that to almost Turning towards the pre NCO level. What we also saw was on 4 gs and downward speeds During the period of time when we first entered an IPO, you could see that, that was of course the experience that we had expected. We sustained the number one position on consistency and throughput with minimum reservation during the period of time. And the current downward speed, that's the The MCO level, as you can see here on Group 25 and Group 26, which we're happy to report as well. And the team has done a good job in terms of rebalancing Between residential areas and then people now start to go back as economic sectors open up, you will see that shift in traffic patterns. So a lot of the investments that we have to do during the spare time on the network was focused on upgrading the quality in pockets and areas where we needed to go in and boot up A little bit of the network capacity and the quality. As I said, the deployment, I'm happy to report that sorry, stay on the slide, please. Yes. Happy to report that we in spite of a lockdown, we still focus on we managed to do a bit of network rollout And the backlog experienced in April May. And the network coverage, network coverage shifting, which is at 9% year on year improvement And I believe the sites in the first half of the year has got carried on. Fiber, we've also to deliver from Q1 an additional 120 cropluses of onshore fiber Hi, David. We can move on. Now as we now move into a new way of work And while we actually looked at our base, what I also wanted to highlight today is, as we transition, we are seeing a little bit of shift In consumer behavior, and this is between our customers being able to use digital capability and digital channels. And we were very fortunate that we had done this in the past. And for us, it was now That we have done this in the past and for us it was now allowing customers now to experience it fully. And for cutting service, steady sales, Outbound calls, you could also see that increasing quarter in quarter. There was much more success in conversion In the second half quarter twenty twenty via the telesales. And there's a little bit of more upsell that customers did themselves, which I talked about in the MyDG Transaction. There was an improvement as we opened up the stores. Naturally, in June, you could There is much more customers now walking into our stores. Also because of the steps that they've taken to protect the health of And Ted, for the well-being of our consumers and retail staff, there is much more confidence in them walking into our stores and seeking out or signing up for things that we need. This quarter, we also looked at our product strategy and our portfolio and we've also made some changes to that, Which I will highlight and we can also take more in the Q and A session, where we now focus on our base management and our retention strategies around quality acquisition, Segment focused with best value in my mind. DG has always had the position of innovation at best value, which is extremely valuable in a period Like this, when you pass something like COVID-nineteen and how we are going to be covered in these days. We have launched Digital prepaid MAX, which is an entry level prepaid plan, which has bite sized data plans in it at high speed. And so there's no steep cap on this offering. We've also then looked at rewarding our customers with additional quotas or privileges In the box of surprises, for example, in 90 June, we are focused on acquisition mechanism because of the limited Touch points initially coming from Q2 that was available to be open and moving into June. We're now making sure that the customers that require Our credit worthy and eligible and we're making sure that the quality of our acquisition is maintained. And basically, all of this goes around ensuring that our customers have the Experience across the channels to make sure that they get the best 12 months. Now, innovatively, we also have one One additional BGP product, which is Digiapati, this was partnered by AXA ASEAN and we have launched this not very long ago. And this was also bundled with COVID-nineteen insurance. And this was actually and received a pickup from this as Now look for different solutions that we see are currently innovation around EVA and 90 gs Bugzilla continues to lead in the industry. We can take the next slide. I'll just cover one last slide on B2B asset hunting for the consumer bit Before I hand it over to the financial, I want to start maybe with the right side where a little storytelling around how We have ourselves been able to adapt to this change very dramatically, but also very quickly to Support our customers that have needed to change their business model and there are new ways to serve their customers. And just one example is because the coffee now moving into Our premise outlet using a Novaltra, and we were able to do this with DG solutions very quickly for them. We also see then another example with Stenco Hydraulics Enterprise, where digital bundles then allowed them To quickly expand the business, upselling to our existing customers also continue across these are just examples that we talked about. Now during the lockdown and even till now, the borders are basically closed and therefore, reduction in roaming revenues will be seen Throughout our financial update, as you could just however, the lower acquisition being sprayed in B2B was also moving to the MCO and not able to move out there and Just the customers. However, this has seen steady recovery and that's why we have focused going through the second half of the year post the reopening, post MTO. And profit profit B2B revenues grew at 4% year on year and for the first half of the year grew at 5.5% sorry, 5%. Now business continues to grow. And as I told you in the last quarter, D2B's business is a huge Opportunity for us on the SME space and we do that in 2 methods. 1 is to create interesting new plans and go out there and So that these digital bundles are able to help SMEs digitize themselves. You'll see a couple of examples on the slide. And this also then helped us to continue to grow our customer pipeline by 5%. I'll stop here and hand over to Inga with the financials and then I'll hand back on And the update going forward. Inga, please. Thank you, Alwyn. I will go through the financial review for the Q2 in 2020. And we will start by talking about the softer performance on our service revenue Amid the COVID-nineteen headwinds that we have seen coming from the lower business activities, particularly on the first Part of this quarter during the MCO when the stores were closed. So Digit's total service revenue moderated to EUR 1,317,000,000 this quarter. We did see a recovery in our Samantais Station in June despite the competitive Internet offers in the market and also after the industry wide free 1 gigabyte The data offering shifted 9th June. We have also seen recovery in our voice revenue in June as the businesses reopened Despite the lower voice revenue that we saw in the beginning of the quarter as people were using more free Call options during the close down. We also saw lower roaming revenues of minus 64% Year on year and 53% quarter on quarter due to the cold borders and both less inbound and outbound travel. On the postpaid revenue, it is down by 1% year on year and 3% quarter on quarter, down to EUR 639,000,000. This has been driven also by cautious acquisition in this quarter, and we have a full focus on ensuring quality subscribers now To manage our collection risk, what we see is that our Phone Freedom 365 sales in June were back to normal, But the first part of the quarter was impacted by a lower device bundling and contracting and renewal activities due to the movement control order. Further, the Internet and digital revenue increased by 8% year on year, but it was a decline by 2% quarter Strong quarter to €953,000,000 We do see a strong good demand for our gaming activities, subscription management services and Demise Digital Solutions for B2B. And our underlying performance was driven by Internet and digital adoption and also By the growth that we see in our Malaysian segment, which increased by 3% year on year. If you take out the interconnect, Our service revenue year on year is at minus 5%. Then I would like to go into our subscriber mix alongside our growing Internet adoption for this quarter. As you see, the subscriber base moderated year on year and quarter on quarter. It's stemming from the reduction of non active users that we've had in our network and Of course, hampered by the physical store closures that lead to lower inbound subscription in this quarter, involuntary churn And continued SIM consolidation, whereby customers tend to remove a I'll end the phone and go over to the primary SIM. We have cushioned the gross adds By recovery in the Malaysian base by 3% quarter on quarter, which is offsetting the decline that we have seen in the migration segment Due to the migrants segment being challenged in this quarter, Our blended ARPU is the same at ringgit on the back of growing postpaid and Internet subscriptions year on year. RPFEL ARPU was stable at ringgit, resilient against aggressive Internet pricing and offers in the market. And we continue to offer them personalized offer, meeting the customer sentiment and need. Our postpaid ARPU stood at 68, down by 2 ringgit year on year. And this is driven by the lower interconnect due to also the lower interconnect rates Also impacting positively on our costs and also the lower roaming ARPU. Our monthly data usage Per user grew 24% this quarter quarter on quarter and 58% year on year from 14.5 Mega gigabytes per customer last quarter to 18 gigabytes this quarter. And the higher data quota utilization for remote working and online learning was driving this anchored on key initiatives for us To keep the customers connected. And if you look at the subscriber development, our postpaid was Up 3.6% year on year despite the lower volume quarter on quarter due to the lower acquisitions that we saw The 1st 2 months of the quarter, which is coupled with the silent subs churn that I mentioned earlier, strategic committed to regain these Acquisitions, we gained the acquisition momentum and expand our market position through continued Targeted based management and also meetings and the customers' need for connectivity. Moving to the cost It's Saeed. We have seen cost improvement in this quarter through our disciplined way of work. So to cushion the top line challenges due to the COVID-nineteen headwind. We have seen a Quarter on quarter decline on our cost of COGS of 20%. There is a 3% year on year increase Due to a nonrecurring traffic cost benefit last year of €34,000,000 excluding that, our COGS would have been down by minus 7%. And we do see higher traffic charges also coming from stronger demand for bandwidth and digital products and services in this quarter. And finally, we also see that we have been able to cushion this by also lower regulated interconnect rates. And it's also due to the lower Interconnect rate and is also due to the lower device volume due to lower device sales this quarter. Our OpEx is down by minus 7% year on year and 10% quarter on quarter, down to EUR 369,000,000 Due to the letter on ground activities during MCO and also reprioritization of critical spend and acceleration of operational efficiency initiatives We have taken out based on this lockdown learning. The optimization is coming primarily from sales and marketing costs, which is Which is completely offsetting the net rate expansion that also will drive our OpEx steadily. I will come back to more information also on the provision for doubtful debt that we see in this quarter of €20,000,000 and only 3.1 percent of our total postpaid revenue, which is very below benchmark. This gave us an EBITDA margin of 53%, proven by our solid quarter on quarter EBITDA trajectory. And you can see the development year on year as well very clearly in this slide. Moving on to the next slide. We would like to highlight how we work on managing the risk for our trade receivables. Digi has a full focus on key objectives to manage this risk. 1 is to improve our free cash flow to optimize liquidity. Secondly, we want to have effective receivables management to reduce our bad debt risk, and we want to support our postpaid growth On the quality, phone Freedom 365 program. So I want to single out 3 solutions that we have done. First of all, we have a very stringent acquisition process for our PhonePeeron 365 program in order to drive good quality subscribers and reduce bad debt Secondly, last year, we launched a transfer of risks and rewards to a financial institution on a nonrecourse basis, While ensuring 0 impact to our customer journey, these are receivables For the Freedom 365 customer, this, of course, gives us An outcome of a very optimized balance sheet through the derecognition of these receivables. And thirdly, we have a rigorous Credit controls and collection process ensuring efficient debt management. So in total, we are also monetizing at an earlier rate rather than 24 months by doing this the recognition of the receivable. And finally, we have a low provision for doubtful debt, below the industry benchmark, as I previously mentioned, of 3.1% this quarter. Moving on to how we are working also to protect our profitability margin through our OE initiative. Our depreciation this Quarter also included EUR 30,000,000 from MFR 16 adjustments beside rental expense and EUR 3,000,000 impact on recognition of our asset Retirement obligations, ARO. This resulted in a reported PAT Moderated by 27% year on year, 13% quarter on quarter to CHF 288,000,000 but an healthy margin of 19.8 We have tried to show you the year on year development because Q2 last year was an extraordinary year Due to also some non recurring items, the normalized PAT would have equaled 2 The €99,000,000 that is a 13% year on year reduction and a 20.6% PAT margin If you exclude the nonrecurring effect, I mentioned earlier the 34,000,000 COGS Nonrecurring last year, which is the traffic occupancy in this waterfall. We also have a €60,000,000 site rental Non recurring net impact due to a €30,000,000 reversal last year and offset by a €40,000,000 reversal this year. And finally, you will see an asset retirement obligation impact on our PAT of EUR 16,000,000 Due to what we have initiated, a full fledged finance transformation program, whereby we are going through diligently Balance sheet. And through this initiative, we made an adjustment in this noncash based CapEx of EUR 46,000,000, which I will also Comment on the next slide. So moving on, we are doing prioritized investments on what matters most for our We ended up this quarter at a EUR 275,000,000 CapEx investment or 17.1% CapEx to service revenue, if you include this ARO adjustment of EUR 46,000,000 Excluding this, The CapEx was at €179,000,000 or 13.6 percent of service revenue to support the Network rollout of our 4 gs plus network and capacity upgrades, fiber network expansion as well as traffic management. We have been able to do this despite the MTO, saving the way for improved network experience for our customers during this Critical time. Our operational cash flow then ended at $545,000,000 or 37.5% Margin anchored on a sharp focus on managing our working capital as well as protecting our cash flow during this time. I want to end this financial review session by sharing with you that we have a healthy balance sheet for future growth opportunities. We have a solid asset Staying at €8,200,000,000 We have a total borrowing of €2,901,000,000 Of which 77.1 percent is comprised from Islamic borrowing. Commercial debt over total asset is at 8.2 Well within the Sharia compliance threshold. And our net debt to EBITDA ratio is at 1.5 times. This is reflecting our financial capability to embrace new technologies and also drive a future proof organization. So with that, I will leave the word back to Alban to share a little bit on what else we are doing to strengthen our growth going forward. Thanks, Inge. Okay. Now just a few more slides before we end the session, And I will Inder, you will take the last two slides. But let me just talk a little bit about what you intend to do now on the consumer segment second half and also On the next one, we'll talk about B2B. Here on this slide, I'm going to talk to you a little bit about what our ambitions are now going forward on DG Home Fiber. As you know and you remember, we did a bit of a pilot previously in last year in Jazin, and then we moved into announcing a collaboration with Tan.com in January this year. We also then now just announced the collaboration with Telecom Malaysia. Now that These two collaboration partnerships will enable us to have close to 3,500,000 homes that we can now address. And both of this will then enable us to take This as an extension of our postpaid bundles through connectivity at home and on the go. So both now from a home and from a mobile space, This will definitely be a full complementary bundle from us. What you see on the right side is basically on July 1, we went out to market With 3 different propositions ranging from a ringgit to ringgit, depending on the various brands that you take, It's a simple and straightforward way of getting connected. We also see now post COVID as the connectivity requirements and work from home and work On mobile has become much more relevant. We're also now using this opportunity to step up our own efforts In this space through these partnerships and collaborations. On the next slide, on B2B, there is also now an opportunity Where SMEs and more businesses are looking to digitize themselves and to become less reliant on the traditional way of doing business. So we've taken this opportunity now as serving ourselves as not just top leaders in this space, but also having solutions to cater for these SME and businesses. One thing to note here is we've also been satisfied as the technology solutions provider in supporting Malaysian SMEs In digital adoption, this is under the SME digitization grant. We've also now partnered MDEK To launch business continuity digitalization program that was just done in May. This is a take through web Webinar series, whereby we share with SMEs different tools and solutions that are available. And then recently, we're also now Exploring an SME grant bundling with Internet connectivity as part of the Conjurano stimulus package that just went out. Along The above. We also now have 3 products coming out from DGX, which is extremely relevant taking out the SMEs. We have now launched a new digital workplace workforce management solution, and this is Free for now for companies which have up to 50 employees, and it's free till end of the year. And basically, this will then Help capitalize on sustaining remote working arrangements for many companies that are going through this change in the new normal. Omni is basically our virtual PABX solution. This has taken off very well, and we are onboarding a lot of new companies, particularly startups I'd want to have this service, but without that huge cost and infrastructure. And we're providing complementary products to support SMEs for their virtual office. I3 continues to give us strong positions with new clients. And as not only businesses but e commerce now Growth, we're also seeing the demand for i3 solutions encouraging to increase and this then helps us lead to higher ARPU For N2M Connectivity. Now while we do it both from a consumer and a B2B point of view, we also need to look internally to ensure that We're keeping our team safe and our customers safe during this period as we now try and get back into a new normal. So on this slide, it just gives you comfort that the way we are focusing on both DCP and SOPs with strict guidelines for our employees. We intend to keep the dual infection as long as we can, and that comes with a whole list of SOPs and education To our employees that we take seriously, we have now moved at one point of time, there was More than 80% of DG events working remotely, and we've been able to fully do that because of high adoption rates of new tools That we did during the MCO period. We do recruitment now fully virtually, and we also then use the time now when employees are working rotationally On a weekly basis, even now, we then allow employees to then improve and upscale themselves through online learning and many other different initiatives. On the upscaling part and on the staff optimization that continues, we continue to look at how we can actually maximize employee management Supply chain, I ensure that our business is maintained well. On the last slide before I hand over to Inder, it touches a little bit on our responsible business And how we lead in this space. 3 Yellow Heart, which is our responsible business brand, We had a segment offering for seniors, persons with disabilities and P40 communities now taken out to market. We were ranked 2nd in brand recall reflecting high awareness during this period of time when COVID was at its peak. And as mentioned earlier, we contributed 1,000,000 to frontliners through the joint initiatives via GDRM, And we continue to sponsor and maintain sponsor connectivity and solutions, including network solutions for key areas like hospitals in the country that needed that During that period of time. And on a broader stroke, we continue to have top leadership influence when it comes to response to a business, both internally and externally. We continue to use digital as a way of educating and doing inclusion so that we remain true to our Brand position across our community. In that, just last two slides before we take Q and A. Yes. Thank you, Alban. So now let me talk a little bit about the outlook and guidance. As you might Recall the last quarter, we were still in the MIMO control order. We did not know when it was going to end. So we held back our guidance last quarter. I think, of course, there is still a very fluid macroeconomic outlook, but did you believe that we are well As the economy gradually recovers now, there are different prospects on how the GDP will develop. And we will, of course, monitor and we are pending clarity on the recovery pace of the business activity And also the reopening of borders as it impacts obviously our roaming revenues, but we have taken that into account And we are now guiding the market. We're also seeing shifting consumer behavior and also gradually now Recovery of the unemployment rate in the new normal. And of course, the stimulus package as well as Call and monetary policies. I could also help you with the domestic economic growth outlook as well. So we believe that we have a very solid foundation to manage the future development. One is the financial resilience that I've explained earlier. We have a solid Financial strength. We know how to drive an efficient operation and cushion future potential headwinds on the top line. We have an organizational agility that enables us to really be flexible and agile in our way of work and Meeting this with a continued focus on digitalization, new operating model innovation as well as our future ready network. And finally and most importantly, we have a very strong brand and a brand proposition. And our best in value and best in network Experienced very strong in this period of time as well. So we do expect a gradual improvement, But also an increased duration of the impact of the COVID-nineteen into the next quarter, especially on Looming. So with that, let me go to the guiding slide. As you may recall, our previous guiding was on both service revenue and EBITDA, flat To low single digit decline. With the outlook that we see now and the compounding effect of the 2nd quarter top line impact, We are now revising the service revenue guiding to low single digit decline and our EBITDA guiding to medium single digit decline. We keep the CapEx as similar to 2019 level. And our 2020 priorities now is to step up our growth effort We targeted and best in value propositions to deliver on our core products. It is to really continue to focus on enhancing our Channel digitization and modernization across both sales, marketing and distribution function. Maybe most importantly, optimizing our spending and cash management effort to secure resilient cash flow, while adapting to this changing environment. And finally, to strengthen our network and IT infrastructure to support our growing Internet and digital adoption. And with this, I hope that next time we speak on the next quarter, we will see a more positive outlook. Thank you very much. Thank you. And our first question comes from Arthur Pineda from Citi. Hi. Thank you for the opportunity. Just two questions, please. If you could talk about competition, how it's evolved Post MCO, given that there's been some movement towards unlimited data, are you seeing escalation within the industry? Is that something you're looking The follow-up as well. Second question I had is with regard to how the trends have actually fared, if you can give some color On the momentum at the start of the quarter versus the end of the quarter, are you now approaching pre MCO levels, for instance, on pop ups? Or is it still Some way to call back. Thank you. Hi, Arthur. This is Lo. I think on the first question, right, yes, towards the end of June, we do see some new movement That's unlimited in the prepaid. But the way we look at this, this is just another segment in whether it's in prepaid and postpaid. And a limited low speed is really not something new. It has been around in the market. It's available in prepaid and postpaid. But again, So we see this another segment and then we also what Alban mentioned, We also have launched refresh some of our prepaid product to prevent neck as well as to prevent our body. And We also see that those are another segment that we feel that is relevant. I think how we see this whole thing is really back to know how we balance The portfolio, be it prepaid and postpaid and why is it relevant to the spending outlook here? Question number 2, I hand over to Inge. Hi, Arce. Yes. With regard to how the trends have fared after the MCO, pre MCO levels now, It's a very good question because this quarter is definitely very different from the beginning till the end. And as I mentioned in my Slide number 8, we do see recovery in data monetization in June after the 1 gigabyte fee offer was Shifted from open to all services to restricted to productivity and educational services That has improved on our data monetization. And secondly, we do see full recovery in our voice revenue after the businesses reopen. What we also have managed is to mitigate the reduction in the migrant segment With the Malaysian recovery going back to even better than before the MCO, which is also a higher Policy segment that we is aligned with our strategy to be focused on. So I think it's Still the roaming revenues that we are raising the borders to open again before we can look at pre LCO levels. Understood. Thank you very much. Thank you. Our next question comes from Alex Yao from Am Yes. Thanks for the opportunity. I have five questions. Let me run through 1 by 1. Regarding I just want to follow-up on the question regarding the competition for Hello. I'm looking at your entry level package, which is a ringgit per month, which is half your current Poo for your prepaid segment. How would this impact your prepaid output going forward? And how would you expect the Competition to react. I know it's only 3 gigs, but I think it is still seems very attractive. And Do you expect cannibalization from your higher or From your higher price products. Now my second question is regarding your ARU, your Asset retirement charges, what assets exactly are being retired? And how much more provisions Do we need to expect from that? And my third question is regarding your postpaid segment. I noticed that your number of users have actually dropped by 29,000 quarter on quarter, right, from 1st quarter to Q2 and this has never happened for a very, very long time. I'm just wondering what actually happened? Was this Non revenue generating users that dropped out or was there migration from your customer pool to somewhere else? My fourth question is regarding your interest cost. It was up quarter on quarter Significantly, I think there was some one off charges in the previous quarter, But it is still up 30% year on year. I'm just wondering, are there any exceptionals there? And is this the run rate we should expect for your interest cost? And my 5th question is regarding our sales and marketing, it was down 21% year on year. What should we expect going forward under the current MCO scenario? Okay. Maybe I will since I picked the call, right, so I will answer the 1, 3 and Farai, before I hand it back to Inge. Coming back to your question number 1, right, the prepaid. I think as I say, there's multiple segment Within the prepaid line, I mean there's unlimited, but they go in with the higher price, low speed. And then we have It's an easy entry, always a good experience. But we also believe that right and it comes with the 3 gigs and some social application. It's really at the end, right? I think what we believe is you start low and then when you need to use, right, there's where the flexibility It is there for you to buy up. I think if you and it's really a customer choice, right, especially now with the COVID impact and also the outlook remain uncertain. It depends on how you want to look at this whole thing, right? I mean, if you look at the industry usage, You said, of course, in the month of June, in fact, it spiked up to 18 gig. So from the 3 to 18, there's quite a number of gig there. And then same thing, right, for the unlimited, The industry is at the top I mean, at least we look at our June is 18 gig, right? But for a ringgit extra ARPU, I know it's about question of how much gig that we are willing to give it away. So again, I think end of the day is really Customer choice, I don't think we can force them. But what we really believe is flexible And we have managed this credit business balance of portfolio with And there's a multiple segment in there. So that's my answer to your question 1. And I'll jump straight to the question 3, the drop in soft as what Ingo so touched upon is really due to there's about 1.5 months The retail closure, I know there's very minimum acquisition activity. We do still have a base management It is running through the online channel as far as the contact center, but the acquisition activities are really Amped by the closure of the retail. We also see that there's some movement from post to pre. But again, there will be some period of adjustment that we are continuing monitoring. And then On the last question from the SMM, right, is really directly a lot of this SMM are currently linked to the acquisition activities in the market And also some of the advertising spend that related to also what is happening on ground. I mean, One example is our home, right? During the lockdown, there's really no reason why we should spend on our home spending. That's all I have for the question 135 and I'll pass to Inge. Thanks. Hi. Thank you, Alex, for your questions. I'll take the asset retirement obligation nonrecurring that we had this quarter. So this is an obligation we have in terms of when we are building a site. We need to set aside the provision In case we will dismantle or be forced to dismantle it in the future that we have sufficient funds to do that. We do add an ARO every time we build these sites that has an obligation for dismantling. What we did this quarter was Basically a cleanup to ensure that we have rightfully put the correct ARO to all these sites Through a financial transformation program we are running internally. This is an exceptional quarter Because we have to make an adjustment because we found this gap. Normal here, we would book around EUR 5,000,000 ARO in our books. So you should not be expecting this type of numbers going forward. On the last question on your interest cost, which has gone up quarter on quarter, this is actually our finance cost Adjustment of the ARO, because we are also booking this as a liability in our balance sheet And then we also have to book it as the finance cost in our P and L. And that is a EUR 13,000,000 nonrecurring this quarter. And just to be very clear, we have definitely taken advantage of the lower OPR this quarter, and our interest Cost is down this quarter compared to previously. Thank you. Okay. I just follow-up on the question answered by Lo. You mentioned that the postpaid users down 29,000 was due to less acquisition activities during a retail closure. I can Understand that, but that would just mean if there's no acquisition that you should just be flat, not a negative number. So would it be Hello? Would it be safe for me to say that there were Some migration of postpaid users away from DG. I'm not sure how you've been high migration, right? As I say, there's some movement from post to pre. We also see some involuntary churn. The voluntary churn usually is linked to Either they don't pay the bill on time or the user just go silent, right? So I mean, Yes. The acquisition is the same one of the big element, but there's also a churn element that is continue happening, right? And when they churn, I mean, they don't really I mean, I write they should reach out to us. But I mean, during this period, I mean, there's also some silent subs. So I think this actually adds up to what you see there's a contraction in the subs. But was this situation improving I'm not sure that I answered your question. Yes. But was this situation improving in June? I mean, I understand April and May was really bad, but in June, was there improvement in the trajectory? We see some recovery in Most of the I mean, including the acquisition activities, yes. I see. Okay. Thank you so much. But also as highlighted by Inge, right, I think when we move into June, Yes. Also a lot more careful in terms of acquisition, credit scoring and the risk going forward. Yes. Okay, great. Thanks. Thank you very much. Thank you. And our next question comes from Sean Hsieh from Mayspring. Hi. Sean here from Mizpraeng. Thanks for the call. I have two questions. First one, Your coalition with our TM recently to bring home fiber to Malaysia. Just wanted to get more colors from you guys. Besides, I mean, Trying to bring fiber to the home. I mean, our conversion with GM on wholesale, do you guys prepare for Enterprise more aggressive enterprise solution launch or just purely bringing fiber to the home Because notice that your companies are ramping up on the enterprise front quite aggressively and Wondering whether this segment will be the strategic segment for you guys. This is the first question. 2nd is on your prepaid subs notice that even before the COVID and lockdown, There's been quite a significant weakness in the churn, while some of your peers seem to be The trend stabilized. Can you guide us moving forward after the lockdown in terms of the churn, would Will we see a more serious kind of channel? Can we expect some stabilization? Thanks. Hi, Sean. So I'll answer your first question. The collaboration with TM is only for the consumer side. I think as what share by Alban, right? This is I mean, the bundle of Home and on the go, we believe that you will be a complementary to our postpaid strategy. But at the same time, right, you also opened up new opportunities for us to further grow our postpaid. Okay. And then back to the questions on the prepaid swaps, right. Please understand the swap not necessarily Reflect the real position or outlook of the business, right? Because The previous half, there is system destination where it will sit there for depends on the product and the category, Some 60 to 90 days before the churn out is required by the regulatory as well as Some of these are business rules that we have set in the prepaid product where you will go into a silent period for 60 days before you can terminate the same. So I think, of course, we don't share the number, but the active stuff That is more reflective of the prepaid that we are happy with the development and is relatively Stable throughout even before the COVID and now we are in the recovery mode Yes. I mean the COVID recovery. So we are happy with the active sub development. Okay, okay. Thanks. Thank you. Thank you. And our next question comes from Prem from Cory. Hi. Thank you for the opportunity. One question from me. Essentially around these unlimited plans, We have seen them introduced in a number of markets and they have destroyed significant Value over time for operators. What makes Malaysia different? And what do you think the long term impact I appreciate that today it's only at 3 megabits per second And it may only appeal to a smaller segment because we're used to higher speeds. But what stops someone from Introducing an unlimited 20 megabit per second service at 50 ringgit or something like that. And then causing that shift From postpaid back into prepaid and then introducing new risk to the marketplace or do you see this As an opportunity to potentially stave off some of the smaller competitors who may Not have as resilient a network as the incumbents. What are your thoughts around this unlimited move? Thank you. Yes, start with speed versus the price, right? I think that is got to do with It's also good to do with the technology. So whether one day with the technology available for you to sell at 20 megabits per second at a much lower price. I think if anybody gets, but for now, what we can see is really You know the RM 35 at the 3 Mbps. But as you know, right, the industry usage Gig per user is still at the teens, right? It's below 20. Again, I think depends on who you talk to and how we do a study. If you give unlimited low speed, The typical users, right, can be used anything from 30 to 45. So for the industry to monetize, 5 more ringgit, Let's say based on the current ARPU of 2,930 and give away another 15 gig, Honestly, I don't know whether is it a good business or a bad business. Perhaps you guys can guide me. Yes, that's my answer. Ma'am, hope I answer all your questions. Yes, I mean on that point, right, so yes, the average usage is 18 gig. But as you rightly pointed out, the high end is probably going to be using 50, 60 gigs. You're speaking to someone who struggles at 1 gig. But if a person can use 50 or 60 gig, He would historically have paid you closer to ringgit. Today, he can do it At 35, I frankly struggle to see the logic here unless our cost Structure has moved towards a 5 gs cost structure at which point by all means give it unlimited they can't use enough. I'm struggling because everybody seems to be going this way. What is the risk that we barrel out of control And destroy value for shareholders, that's my biggest concern. I hope I can answer all the questions. But I think as of now, right, As I shared earlier, we still look at this as another segment. In order then, we are continuing to monitor what will be the tick up. And then it's also got to do with the maturity of the technology As well as the cost development of delivery per gig and then we will go along as and when We have a clearer impact. Yes. So could I summarize it as you are a reluctant participant In what your industry peers have done and you're forced to just go with the flow whether you agree or not. Would that be No, we believe no, no, no. I think we believe in I can't comment the industry and the other strategy. What we believe is we have 10,300,000 base and we are spending time every day To understand each of them, what they need, how to use it and what price they are willing to pay and our strategy is to Okay. We still have the personalization and the very targeted and offering that what do you think that's relevant to them. Okay. All right. Thank you very much. Thank you. And our next question comes from Usman Ghazi from Berenberg. Hello. Thank you for taking my question. I've just got 2 questions, please. The first one was just on roaming. You've indicated that it was down 64% Year on year, would it be possible to give an absolute ringgit million number as to what the headwind was this quarter Rather than the percentage, that would be helpful. The second question was just on the disclosure that you've given on the Malay Segment being up 3% year on year. I mean, I just wanted to clarify. So you had mentioned that the performance here was better now than it was Pre lockdown, I just wanted to clarify whether that is correct. And secondly, is this segment More than 50% of your service revenues now or is it still less than that? Hi, Usman. Let me start first. On the roaming that we've indicated 64% decline year on year. We have never and we are reluctant to share the granularity of this in our numbers, Unfortunately, but we wanted you to understand that it is impacting our business really this quarter by sharing this Presentation, VK Chen. On the second question, we call it Malaysian segment, this is primarily in our prepaid base. So what we have seen is, yes, this It's a 3% improvement quarter on quarter, especially also on data users It's now at the end of the quarter and also voice usage that has improved the total usage revenue on this segment, Questioning, the decline are more like a stable non growth in the migraine segment. Great. Thank you very much. Thank you. Thank you. Hi, last question, Jesse. Sure. And the last question comes from Ranjan from JPMorgan. Hi, good afternoon and thank you for the call. Two questions from my side. Firstly, You talked about your I think with your partnerships now your HomePass The fixed broadband network is 3,500,000. How many of these homes can you target on an economically viable basis? Because I guess what I understand is under the current MSEP, parts of the networks are unregulated. So just want to understand like how many of these homes can you effectively target at the current price points? Secondly, is there any update on 5 gs in Malaysia? Thank you. Sorry, I'm just trying to understand your first question, right? The 3,500,000 home passes, 3,000,000 from PM, approximately 500,000,000 from time. And what was your question again? How many of these we can target, is it? How many of these homes can you target With services, on a commercial side of the business Yes, but there's nothing stop us from targeting this whole 3.5. Of course, some of them, they already have assisting connectivity with contract and etcetera. So again, It's going back to our offer as was shared by Alban just now the Internet freedom category Where we actually bundle the fiber as well as postpaid and then you will get savings on the postpaid subscription as well as we also have As well as we also have digital content partnership with Amazon Prime Video. Rajin, maybe just add a comment to what Lo just shared. There is basically no limitation in terms of who we can address. And so that's the opportunity was the size of the 3.5 that you talked about. Thank you. But maybe I can just clarify because The perception I've had like from talking to the different telcos in Malaysia is that After the price after the tariffs were cut over 2018 2019, It was commercially unviable to target all the households, which are connected because Operators or resellers will have to resell large parts of the network. And large parts of the network are Not at regulated prices, where the network owner might charge exorbitant prices. So that's what I was trying to understand. Like of these 3,500,000 homes, how many you can target on a commercially viable basis? But it seems like you are saying all of them. Yes. And the reason why we why we noticed all of them is because You're all addressable. You might the rates might be different in terms of the margins that we made from that. But then don't forget, we are not selling this just as Kind of we're talking about this as postpaid bundle. And therefore, we're looking at it very differently in terms of how we package it. Okay. And then maybe joking on the 5 gs update from a regulatory perspective. Thank you. And that's it for the Over to you, Kristine. Yes. Jeffrey, thank you very much. Then thank you Everyone for the call in today. I'm sorry for running a little bit later than expected. And thank you very much and have a good afternoon everyone. Thank you For calling in and spending the afternoon with us. Have a good day, everyone, and stay safe. Thank you. Thank you. And thank you for your participation. You may now disconnect. Goodbye all.