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 second quarter of 2020 financial results for Digi.Com Berhad. Without much further ado, let me just give a quick introduction to the management that presents together with us today. On the call, we have CEO Albern. We also have CFO Inger. We have Loh and Eugene, CMO and CBO respectively. Last but not least, we also have our Chief Technology Officer, the CTO, Kesavan, and as well as Chief Corporate Affairs Officer, Joachim. Without further ado, I would like to pass the mic to Albern 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 second quarter 2020 performance and update from 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. Let's take the next quick slide. We will cover today key messages from me and some business highlights. We'll also cover with Inger the 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 us started with giving you a little bit of overview of how business has done in Q2.
As all of you know, globally, Q2 was the peak of the COVID-19 challenges that we had globally. In the second quarter, there was a lot of external factors and headwinds that we had, particularly because of COVID reaching the shores of Malaysia, where the government had made an announcement to lock down from the 18th of March and various different control orders until the 9th of June. We were well-prepared for this prior to MCO, and I was actually quite happy to see that Digi had actually made a readiness and a BCP plan well before March 18th. In fact, a week before the 18th, we were already practicing remote support from the office. We had all our backup centers and network centers and running centers all ready to go. We had most of the employees already rotating between the weeks.
For us, it was not an issue in terms of moving into a BCP operation and remote work, and we will talk about that in the later slides as well. Due to the lockdown, retail across all touch points but also retail in general had to be closed, and we did close to customers during this period of time to prioritize the safety of our customers and employees. We supported the government's initiatives for the MCO and also the lockdown period. This also brought, of course, closure of our borders and this affecting then roaming revenues and movement of people both tourists and foreign workers in and out of the country. During this period of time, as most of you would have seen in the media there was a lot of requirement, a lot of need for helping the government and Malaysians during this period.
First of all, our commitment was to provide a network that customers could use and stay connected to their loved ones. This was our priority. We focused on ensuring quality of the network and consistent network across the nation. It was also not easy during the lockdown to maintain a network, especially when you have certain outages in certain areas that you needed to fix immediately. The team did a really good job. A lot of appreciation out to the teams that supported our customers during this period given these challenges, but also with customer help. As you know, we also supported an industry-wide initiative as part of the stimulus plan from the government with a free 1 GB data for every day during the MCO period and that was further extended. That also helped customers stay connected.
Besides the consumer segment, we also supported SMEs with various digitization efforts. We have come past June 10th as Malaysia started to open up many different sectors slowly but certainly are moving in the direction. We see positive recovery post MCO. What we want to talk about today in the later part of the slide is also what's now after Q2, how do we actually drive operational momentum that we actually built initially from our digital touch points. We were able to serve our customers digitally and remotely we also want to focus on customer experience and how we actually managed the traffic during this period. We want to talk about how we actually managed to provide personalization for our customers and we see growth now coming from our Malaysian base. We take the next slide.
On this slide, it's a little bit of giving you a feeling of the resilience and agility that we displayed during the second quarter. I'll break it down within the four areas of our strategy that we have in the company, which is also connecting customers to what matters most. I want to start with our employees for a change and actually talk about how we had expedited digital capability in working remotely and working from home extremely effectively during this period of time. As I mentioned earlier, we were well prepared ahead of this lockdown, and this had helped us stay close, stay collaborative, but also execute on our Q2 network and our future plans. We engage employees very regularly. In fact, I just had one right before this engagement session.
We continue to operate currently with high SOP in our retail stores, although now they've opened up. We continue to ensure that we have BCP plans in place and strict SOP. This is to keep up to the zero infections that we've managed to have to date. Our retail outlets, just very briefly, are fully open, and our employees are given the safety guidelines and the safety protection gear required to keep both themselves and our customers safe during interaction. I'll switch a little bit to what we did for the community. I touched on the OneGig, so I won't talk about that again. We also did a donation drive to GDRN, which is in support of the frontliners. We, as members of FTSE4Good Bursa Malaysia Index, we also came out well in the score that was just revealed in June.
On the financials, which Inger will go through, I want to pick up a couple of things which is key highlights here on growth. Monthly data usage per user increased by 50% during this period. Remember, most people had to move away from office, going to their residential areas, residential homes, work from home, and data utilization was high during this period of time. Internet and digital revenue increased by 8% year-on-year. Postpaid subscribers grew 4% during this period. We also, as you've seen yesterday, we signed a wholesale agreement on fiber with TM 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 headwinds beyond our control due to COVID-19 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 a new normal. MyDigi, which has been extremely a powerful tool that we've used for many times and many quarters reported, continued to give sales traction of 16.7 million. We saw cost of goods reduction of 7% year-over-year, OpEx improvement of 7% year-over-year, and our EBITDA margin stood at 53%. You can go to the next slide. Now, I spoke a little bit about the network. Can we move on to the next slide? Thank you.
On the network, basically, if I look at what I started talking about, prioritizing network experience while maintaining high quality, you could see that the data usage patterns had a shift from a post-MCO due to the OneGig and a pre-MCO period. You could see that the initial weeks, you could see a huge increase of 18%-29% during that period of time. As the control order changed in terms of how much flexibility came back to the people, you saw that traffic then shift back to almost trending towards the pre-MCO level. What we also saw was on 4G and download speeds during the period of time when we first went into MCO, you could see that that was of course the experience that we've expected. We sustained the number one position on consistency and throughput with minimal degradation during the period of time.
The current download speed is back to pre-MCO levels. As you can see, we're on week 35.6, which we're happy to report as well. The team has done a good job in terms of rebalancing between residential areas and then when people now start to go back, as economic sectors open up, you will see that shift in traffic patterns. A lot of the investment that we had to do during this period of time on the network was focused on upgrading the quality in pockets and areas where we needed to go in and push up a little bit of the network capacity and the quality. As I look at deployment, happy to report that. Sorry, stay on the slide, please. Yeah.
Happy to report that in spite of the lockdown, we still managed to do a bit of network rollout and the backlog experienced in April and May. The network coverage footprint returned a 9% year-on-year improvement and upgrade of sites in the first half of the year still carried on. Fiber, we were also to deliver from Q1 an additional 110 km of on-net fiber during that period there. You can move on. As we now move into a new way of work, 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, this is, we're seeing now customers being able to use digital capability and digital channels.
We were very fortunate that we had done this in the past, and for us, it was now allowing customers now to experience it fully. Customer service, telesales, outbound calls, you could also see that increase in quarter-on-quarter. There was much more success in conversion in the second quarter of 2020 via the telesales. There was a little bit of more upsell the customers did themselves, which I talked about in the MyDigi transaction. There was an improvement as we opened up the stores. Naturally, in June, you could see that there has been much more customers now walking into our stores.
Because of the steps that we have taken to protect the health and care, wellbeing of our consumers and retail staff, there was much more confidence in them walking into our stores and seeking help or signing up for things that they 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 can also take more in the Q&A session, where we now focus on our base management and our retention strategies around quality acquisition, segment focus with best value mind.
MyDigi has always had that position of innovation and best value, which is extremely valuable during a period like this when you pass something like COVID-19 and how we now move back into a recovery phase. We have launched Digi Prepaid Max, which is an entry-level prepaid plan, which has bite-sized data plans in it at high speed. There's no speed cap on this offering. We have also then looked at rewarding loyal customers with additional quotas or privileges in their box of surprises, for example, MyDigi. We are focused on acquisition mechanism because of the limited touchpoints initially coming from Q2 that was available to be open and moving into June. We're now making sure that the customers that we acquire are credit-worthy and eligible, and we're making sure that the quality of our acquisition is maintained.
Basically, all of this goes around ensuring that our customers have the best experience across the channels to make sure that they get the best from us. Innovatively, we also have one additional Digi prepaid product, which is Digi Abadi. This was partnered by AXA Affin, and we have launched this not very long ago. This was also bundled with COVID-19 insurance. This was actually, we see a good take-up from this as customers now look for different solutions that meet their current needs. Innovation around Easy Add and MyDigi Bazaar continues to lead in the industry. We can take the next slide. I'll just cover one last slide on B2B after coming from consumer update, before I hand over to Inger for the financial.
I'll start maybe with the right side, where a little bit of storytelling around how we have ourselves been able to adapt to this change very dramatically. Also very quickly to support our customers that have needed to change their business model and their new ways to serve their customers. This one example is Costa Coffee now moving into out-of-premise outlet using a mobile truck, and we were able to do this with Digi solutions very quickly for them. We also see then another example with Standco Hydraulic Enterprise, where digital bundles then allowed them to quickly expand the business. Up-selling to our existing customers also continued across these 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 due to this.
The lower acquisition during this period in B2B was also linked to the MCO not able to move out there and reach out to customers. This has seen steady recovery, and that's what we hope is going through the second half of the year post the reopening, post MCO. Second quarter B2B revenues grew at 4% year-on-year. For the first half of the year, grew at 5.5%. Sorry, at 5%. Business continues to grow, and as I told you in the last quarter, B2B as a business is a huge opportunity for us on the SME space. We do that in 2 methods. One is to create interesting new plans, and go out there and show that these digital bundles are able to help SMEs digitize themselves. We'll see a couple examples on the slide.
This also then helped us to continue to grow our customer pipeline by 5%. I'll stop here and hand over to Inger with the financials, and then I'll come back on some of the updates going forward. Inger, please.
Thank you, Albern. I will go through the financial review for the second quarter in 2020. We will start by talking about the softer performance on our service revenue amidst the COVID-19 headwinds that we have seen coming from the lower business activities, in particularly on the first part of this quarter during the MCO when the stores were closed. Digi's total service revenue moderated to MYR 1.317 billion this quarter. We did see a recovery in our data monetization in June, despite the competitive internet offers in the market, and also after the industry-wide free one gigabyte data offering shifted 9th of 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 -64% year-on-year and 53% quarter-on-quarter due to the closed borders, and both less inbound and outbound travels. On the postpaid revenue, it is down by 1% year-on-year and 3% quarter-on-quarter, down to MYR 639 million. This has been driven also by cautious acquisition in this quarter. We have a full focus on ensuring quality subscribers now to manage our collection risk. What we see is that our PhoneFreedom 365 sales in June were back to normal. 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. It was a decline by 2% quarter-on-quarter to MYR 953 million.
We do see a stronger demand for our gaming activities, subscription management services, and customized digital solutions for B2B. Our online 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 -5%. I would like to go into our subscriber mix alongside our ongoing 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 closure that lead to lower inbound subscription in this quarter, involuntary churn, and continued SIM consolidation, whereby customers tend to remove a silent SIM in their phone and go over to the primary SIM.
We have cushioned the growth rate by recovering the Malaysian base by 3% quarter-on-quarter, which is offsetting the decline that we've seen in the migration segment due to the migrant segment being challenged in this quarter. Our blended ARPU sustained at MYR 40 on the back of growing postpaid and internet subscriptions year-on-year. Our prepaid ARPU was stable at MYR 29, resilient against aggressive internet pricing and offers in the market. We continue to offer them personalized offer, meeting the customer sentiments and need. Our postpaid ARPU stood at MYR 68, down by MYR 2 year-on-year. 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-on-quarter, 58% year-on-year from 14.5 gigabytes per customer last quarter to 18 gigabytes this quarter.
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. 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 first two months of the quarter, which is coupled with the silent subs churn that I mentioned earlier. Digi is committed to regain these acquisitions and regain the acquisition momentum and expand our market position through continued targeted-based management and also meeting the customer's need for connectivity. Moving to the cost side. We have seen cost improvements in this quarter through our disciplined way of work. To cushion the top-line challenges due to the COVID-19 headwind, we have seen a quarter-on-quarter decline on our COGS of 20%.
There is a 3% year-on-year increase due to a non-recurring traffic cost benefit last year of MYR 34 million. Excluding that, our COGS would have been down by -7%. We do see a higher traffic charges also coming from stronger demand for bandwidth and digital products and services in this quarter. Finally, we also see that we have been able to cushion this by also lower regulated interconnect rates and is also due to the lower device volume due to lower device sales this quarter. Our OpEx is down by -7% year-on-year and 10% quarter-on-quarter, down to MYR 369 million due to the lesser on-ground activities during MCO and also reprioritization of critical spend and acceleration of operational efficiency initiatives that we have taken out based on these lockdown learnings.
The optimization is coming primarily from sales and marketing costs, which is completely offsetting the network 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 MYR 20 million at an only 3.1% of our total postpaid revenue, which is way below benchmark. This gave us an EBITDA margin of 53%, proven by our solid quarter-on-quarter EBITDA trajectory. 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 some key objectives to manage this risk. One is to improve our free cash flow to optimize liquidity.
We want to have effective receivables management to reduce our bad debt risk, and we want to support our postpaid growth on the quality PhoneFreedom 365 program. I want to single out three solutions that we have done. First of all, we have a very stringent acquisition process for our PhoneFreedom 365 program in order to drive good quality subscribers and reduce bad debt on them. Last year, we launched a transfer of risks and rewards to a financial institution on a non-recourse basis, while ensuring zero impact to our customer journey. These are receivables for the PhoneFreedom 365 customers. This, of course, gives us an outcome of a very optimized balance sheet through the derecognition of these receivables. Thirdly, we have a rigorous credit controls and collection process ensuring efficient debt management.
In total, we are also monetizing receivables at an earlier rate rather than 24 months by doing this derecognition of the receivables. 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 margins through our OE initiative. Our depreciation this quarter also included MYR 30 million from MFRS 16 adjustments to site rental expense and MYR 3 million 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 MYR 288 million. A healthy margin of 19.8%. We have tried to show you the year-on-year development because quarter 2 last year was an extraordinary year due to also some non-recurring items. The normalized PAT would have equaled MYR 299 million.
That is a 13% year-on-year reduction and a 20.6% PAT margin if you exclude the non-recurring effects. I mentioned earlier the MYR 34 million COGS non-recurring last year, which is the traffic up we see in this waterfall. We also have a MYR 16 million site rental non-recurring net impact due to a MYR 30 million reversal last year and offset by a MYR 14 million reversal this year. Finally, you will see an Asset Retirement Obligation impact on our PAT of MYR 16 million due to what we have initiated, a full-fledged finance transformation program whereby we are going through diligently our balance sheet. Through this initiative, we made an adjustment in this non-cash-based CapEx of MYR 46 million, which I will also comment on the next slide. Moving on, we are doing prioritized investments on what matters most for our customers.
We ended up this quarter at a MYR 275 million CapEx investment or 17.1% CapEx to service revenue. If you include this ARO adjustment of MYR 46 million. Excluding this, the CapEx was at MYR 179 million or 13.6% of service revenue to support the network rollout of our 4G Plus network and capacity upgrades, fiber network expansion as well as traffic management. We have been able to do this despite the MCO, paving the way for improved network experience for our customers during this critical time. Our operational cash flow ended at MYR 545 million 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 sustained at MYR 8.2 billion.
We have a total borrowing of MYR 2.91 billion, of which 77.1% is comprised from Islamic borrowing. Commercial debt over total asset is at 8.2%, well within the Sharia compliance threshold. 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. With that, I will leave the word back to Albern to share a little bit on what else we are doing to strengthen our growth going forward.
Thanks, Inger. Okay. Just a few more slides before we end the session. Then you will take the last two slides. Let me just talk a little bit about what we 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 Digi Home Fibre. As you know and you remember, we did a bit of a pilot previously in last year in Jasin, then we moved into announcing a collaboration with TIME dotCom Berhad in January this year. We also then now just announced a collaboration with Telekom Malaysia. That with these two collaboration partnerships will enable us to have close to 3.5 million homes that we can now address.
Both of these will then enable us to take this as an extension of our postpaid bundles through connectivity at home and on the go. 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 1st, we went out to market with three different propositions ranging from MYR 130 to MYR 290, depending on the various plans 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 also now using this opportunity to step 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. We've taken this opportunity now as establishing ourselves as not just thought 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 certified as a technology solutions provider, in supporting Malaysian SMEs in digital adoption. This is under the SME Digitalisation Grant. We've also now partnered MDEC to launch business continuity digitalization program that was just done in May. This will be taken through a webinar series, whereby we share with SMEs different tools and solutions that are available.
Recently, we've also now exploring an SME grant bundling with internet connectivity as part of the PENJANA stimulus package that just went out. Along the above, we also now have three products coming out from Digi-X, which is extremely relevant, taking out to SMEs. We have now launched a new digital workplace workforce management solution. This is free for now for companies which have up to 50 employees. It's free till end of the year. 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 PBX solution. This has taken off very well, and we are onboarding a lot of new companies, particularly startups, that want to have this service, but without that huge cost and infrastructure.
We're providing complementary products to support SMEs for their virtual office. iFleet continues to give us strong positions with new clients. As not only businesses but e-commerce now grows, we're also seeing the demand for iFLeet solutions encouraging increase. This then helps us lead to higher ARPU for end-to-end connectivity. Now, while we do it both from a consumer and a B2B point of view, we also need to look then internally to ensure that we are keeping our team safe, and our customers safe during this period, as we now try and get back into a new normal. On this slide, it just gives you comfort that the way we are focusing on both BCP and SOPs with strict guidelines for our employees. We intend to keep the zero infection as long as we can.
That comes with a whole list of SOPs and education to our employees that we take seriously. At one point of time, there was more than 80% of Digizens 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. 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 upskill themselves through online learning, and many other different initiatives. On the upskilling part and on the staff optimization that continues, we continue to look at how we can actually maximize and improve management of supply chain, ensure that our business is maintained well.
On the last slide before I hand over to Inger, it touches a little bit on responsible business and how we lead in this space. Through Yellow Heart, which is our responsible business brand, we had a segment offering for seniors, persons with disabilities, and B40 communities now taken out to market. We were ranked second in brand recall, reflecting high awareness during this period of time when COVID was at its peak. As mentioned earlier, we contributed MYR 1 million to frontliners through the joint initiatives via GGRM. We continue to sponsor and maintain sponsored connectivity and solutions, including network solutions for key areas like hospitals in the country that needed that during that period of time. On a broader stroke, we continue to have thought leadership influence when it comes to responsible 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. Inger, just last two slides before we take Q&A.
Yes. Thank you, Albern. Now let me talk a little bit about the outlook and guidance. As you might recall, the last quarter, we were still in the Movement Control Order. We did not know when it was going to end. We held back our guidance last quarter. I think, of course, there is still a very fluid macroeconomic outlook. Digi believes that we are well-prepared as the economy gradually recovers now. There are different prospects on how the GDP will develop. 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. We have taken that into account when we are now guiding the market. We're also seeing shifting consumer behavior, and also gradually now a recovery of the unemployment rate in the new normal.
Of course, the stimulus package, as well as the fiscal and monetary policies, could also help here with the domestic economic growth outlook as well. 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 digitization, new operating model innovation, as well as our future-ready network. Finally, and most importantly, we have a very strong brand and a brand proposition, and our best-in-value and best-in-network experience stands very strong in this period of time as well.
We do expect a gradual improvement, but also an increased duration of the impact of the COVID-19 into the next quarter, especially on roaming. 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 second 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 levels. Our 2020 priorities now is to step up our growth efforts through 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 functions.
Maybe most importantly, optimizing our spending and cash management effort to secure resilient cash flow while adapting to this changing environment. Finally, to strengthen our network and IT infrastructure to support our growing internet and digital adoption. 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. Ladies and gentlemen, should you like to raise a question, please press star one on your telephone keypad. 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 to follow 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 top ups, or is it still some way to claw back? Thank you.
Hi, Arthur. This is Loh. I think on the first questions, yes, towards the end of June, we do see some new movement that's unlimited in the prepaid. The way we look at it, this is just another segment, whether it's in the prepaid and postpaid. Unlimited low speed is really not something new. It has been around in the market. It's available in the prepaid and postpaid. Again, we see this another segment, and then as what Albern mentioned, we also have launched, refreshed some of our prepaid product, the Prepaid NEXT, as well as the Prepaid Abadi. 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 how we balance the portfolio, be it prepaid and postpaid, and why is it relevant to the spending outlook. Yeah.
Question number two, I hand over to Ingrid.
Hi, Arthur. Yes. With regards to how the trends have fared after the MCO, I think the pre-MCO levels now. It's a very good question because this quarter is definitely very different from the beginning till the end. As I mentioned in my slide number eight, we do see recovery in data monetization in June after the one gigabyte free offer was shifted from open to all services to restricted to productivity and educational services. That has improved on our data monetization. Secondly, we do see a 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 quality segment that is aligned with our strategy to refocus on.
I think it's still the roaming revenues that we are waiting the borders to open again before we can look at pre-MCO levels.
Understood. Thank you very much.
Our next question comes from Alex Yeo from AmBank.
Yeah, thanks for the opportunity. I have five questions. Let me run through one by one. I just want to follow up on the question regarding the competition for flow. I'm looking at your entry-level package, which is MYR 15 per month, which is half your current ARPU for your prepaid segment. How would this impact your prepaid ARPU going forward, and how would you expect the competition to react? I know it is only three gigs, but I think it still seems very attractive. Do you expect cannibalization from your higher-priced products? Now, my second question is regarding your ARO, your asset retirement charges. What assets exactly are being retired, and how much more provisions do we need to expect from that? 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 first quarter to second quarter, this has never happened for a 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 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? My fifth question is regarding your Sales and Marketing, which was down 21% year-on-year. What should we expect going forward under the current MCO scenario?
Okay. Maybe since I take the call, right? I will answer the 1, 3, and 5 before I hand it back to Inge. Back to your question number 1, right? The prepaid. I think as I said, there's multiple segments within the prepaid, right? I mean, there's the unlimited but they go in with the higher price, low speed. We have the 15, it's an easy entry, always a good experience. We also believe that, right? It comes with the three 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? That's where the flexibility is there for you to buy up. I think it's really a customer choice, right? Especially now with the COVID-19 impact and also the outlook remains uncertain.
It depends on how you want to look at this whole thing, right. I mean, if you look at the industry usage, of course, in the month of June, in fact, it spiked up to 18 gigs. From a three to 18, there's quite a number of gigs there. Same thing, right. For the unlimited. The industry is at about, I mean, at least we look at our June is 18 gigs, right. For a MYR 5 extra ARPU, it's about a question of how much gig that we are willing to give it away. Again, I think at the end of the day, it's really a customer choice. I don't think we can force them. What we really believe is flexible and we manage this prepaid business, a balance of portfolio, and there's a multiple segment in there.
That's my answer to your question one. I'll jump straight to the question number three. The drop in subs as what Inger also touched upon is really due to there's about one and a half months retail closure, where I know there's very minimum acquisition activity. We do still have base management activities running through the online channel as well as the contact center. The acquisition activities are really hampered by the closure of the retail. We also see that there's some movement from post to pre. Again, there will be some period of adjustment that we are continuing monitoring. Then, on the last question on the S&M, right. Is really directly a lot of this S&M directly 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 out-of-home, right? During the lockdown, there's really no reason why we should spend on out-of-home spending. That's all I have for the question one, three, five, and I'll pass to Inger. Thanks.
Hi. Thank you, Alex, for your questions. I will take the asset retirement obligation, non-recurring that we had this quarter. This is an obligation we have in terms of when we are building a site. We need to set aside a 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 have an obligation for dismantling. What we did this quarter was basically a cleanup to ensure that we had rightfully put the correct AROs to all these sites through a financial transformation program we are running internally. This is an exceptional quarter because we had to make an adjustment because we found this gap. Normal year, we would book around MYR 5 million ARO in our books.
You should not be expecting these 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. We are also booking this as a liability in our balance sheet, and then we also have to book it as a finance cost in our P&L. That is a MYR 13 million non-recurring this quarter. 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 Loh. You mentioned that the postpaid users down 29,000 quarter-on-quarter was due to less acquisition activities during a retail closure. I can understand that would just mean if there's no acquisition, that it should just be flat now, not a negative number. Would it be safe for me to say?
No, but-
Hello.
Yeah, go ahead.
say that there was some migration of postpaid users away from Digi?
I'm not sure how you define migration, right? As I say, there's some movement from post to pre. We also see some involuntary churn. Involuntary churn usually is linked to either they don't pay the bill on time or the user just goes silent, right? Yes, acquisition is definitely one of the big element, but there's also a churn element that is continual happening, right? When they churn, by right, they should reach out to us. During this period, there's also some silent subs. I think this actually adds up to what you see there's a contraction in the subs.
I see. Was this situation improving?
I'm not sure whether I answer your question?
Yeah. Thanks. Was this situation improving in June? I understand April and May was really bad, but in June, was there improvement in the trajectory?
We see some recovery including the acquisition activities as well. Yep.
I see. Okay. Thank you so much.
Also as highlighted by Inge, right? I think when we move into June, we are also a lot more careful in terms of acquisition and credit scoring and the risk moving forward. Yep.
Okay, great. Thanks. Thank you very much.
Thank you. Our next question comes from Sean Say from Maybank.
Hi, Sean here from Maybank. Thanks for the call. I have two questions. First one, your collaboration with TM recently to bring home Fibre to Malaysia. Just wanted to get more colors from you guys. Besides trying to bring Fibre to the home, collaboration with TM on the wholesale, do you guys prepare for more aggressive enterprise solution launch or just purely bringing Fibre to the home? Notice that your companies are actually 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. Second is on your prepaid subs. Notice that even before the COVID and lockdown, there's been quite a significant weakness and the churn, while some of your peers seems to be the trend stabilize.
Can you guide us moving forward after the lockdown, in terms of the churn, would we see a more serious kind of churn, or can we expect some stabilization? Thanks.
Hi, Sean. I will answer your first question. The collaboration with TM is only for the consumer side. I think as what said by Albern, the bundle of home and on the go, we believe that it will be a complementary to our postpaid strategy. At the same time, we also open up new opportunities for us to further grow our postpaid. Back to the questions on the prepaid subs, please understand the sub not necessarily reflect the real position or outlook of the business. Because the prepaid subs, there is a system destination where it will sit there for, depends on the product and the category, from 60 to 90 days before they churn out.
It's 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 SIM. I think, of course, we don't share the number, but the active subs, that is more reflective of the prepaid that we are happy with the development, and it's relatively stable throughout, even before the COVID and now we are in the recovery mode. Yeah, I mean the COVID recovery. We are happy with the active sub development.
Okay. Thanks. Thank you.
Thank you. Our next question comes from Prem from Cowry.
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. They have destroyed significant value over time for operators. What makes Malaysia different? What do you think the long-term impact? I appreciate that today it's only at three megabits per second, and it may only appeal to a smaller segment because we're used to higher speeds. What stops someone from introducing an unlimited 20 megabit per second service at MYR 50 or something like that, and then causing that shift from postpaid back into prepaid, and then introducing new risk to the marketplace? 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.
Today, I start with the speed versus the price, right? I think that is also got to do with the technology, right? 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 guessed But for now, today what we can see is really the MYR 35 at the three Mbps. Today, as you know, right, the industry usage per gig per user is still at the teens, right? It's below 20. Again, I think it depends on who you talk to and how we do a study. If you give unlimited, no speed, the typical users can use anything from 30 to 45. For the industry to monetize five more MYR, let's say based on the current ARPU of MYR 29.30, they give away another 15 gigs.
Honestly, I don't know whether is it a good business or a bad business. Perhaps you guys can guide me. Okay, that's my answer, Prem. Hope I answered all your questions.
Yeah. On that point, right, yes, the average usage is 18 GB, but as you rightly pointed out, the high end is probably going to be using 50, 60 GB. You're speaking to someone who struggles at one GB. If a person can use 50 or 60 GB, he would historically have paid you closer to MYR 100. Today, he can do it at MYR 35. I've frankly struggled to see the logic here unless our cost structure has moved towards a 5G 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. I think as of now, right, as I shared earlier, we still look at this as another segment. We continue to monitor what will be the take-up.
It's also got to do with the maturity of the technology as well as the cost development of delivery per gig. We will go along as and when we have a clearer insight. Yeah.
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?
Well, actually, we believe-
a right assessment?
No. I can't comment the industry and their strategies. What we believe is, we have 10.3 million 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. Our strategy is still how can we scale up the personalization and are very targeted in offering what we think that relevant to them.
Okay. All right. Thank you very much.
Thank you. Our next question comes from Usman Ghazi from Berenberg.
Hello. Thank you for taking my question. I've just got two 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 MYR 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 just wanted to clarify, you had mentioned that the performance here was better now than it was pre-lockdown. I just wanted to clarify whether that is correct. Secondly, is this segment more than 50% of your service revenues now, or is it still less than that point?
Hi, Usman. Let me start first. On the roaming that we've indicated, 64% decline year-on-year. We are reluctant to share the granularity of this in our numbers, unfortunately. We wanted you to understand that it is impacting our business really this quarter by sharing this percentage indication. On the second question, we call it Malaysian segment. This is primarily in our prepaid base. What we have seen is, yes, it is a 3% improvement quarter-on-quarter, especially also on data users now at the end of the quarter and also voice usage that has improved the total usage revenue on this segment, cushioning the decline or more like the stable non-growth in the migrant segment.
I see. Great. Thank you very much.
Thank you.
Thank you.
Hi, last question, Jeffrey.
Sure. Our last question comes from Ranjan from JP Morgan.
Hi, good afternoon, and thank you for the call. Two questions from my side. Firstly, you talked about, I think with your partnerships now, your home pass or the fixed broadband network is 3.5 million. How many of these homes can you target on a economically viable basis? Because I guess what I understand is, under the current MSAP, parts of the networks are unregulated. Just want to understand how many of these homes can you effectively target at the current price points? Secondly, is there any update on 5G in Malaysia? Thank you.
Sorry, I'm just trying to understand your first question. The 3.5 million home passes, 3 million from TM, approximately 500 from TIME. 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 commercially viable basis?
There's nothing stopping us from targeting this whole 3.5. Of course, some of them, they already have existing connectivity with contract etc. Again, it's going back to our offer as was shared by Albern just now, the Internet Freedom category, where we actually bundle the Fibre as well as postpaid. You will get the savings on the postpaid subscription as well as we also have digital content partnership with Amazon Prime Video. Yeah.
Ranjan, maybe just to add a comment to what Loh just shared. There is basically no limitation in terms of who we can address. That's the opportunity was the size of the 3.5 that you talked about.
Thank you. Maybe I can just clarify, because the perception I've had from talking to the different telcos in Malaysia is that after the tariffs were cut over 2018 and 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. Large parts of the network are not at regulated prices, where the network owner might charge exorbitant prices. That's what I was trying to understand, of these 3.5 million homes, how many you can target on a commercially viable basis. It seems like you are saying all of them.
Yeah. The reason why I noted all of them is because they're all addressable. The rate might be different in terms of the margins that we make from them. Don't forget, we are not selling this just as a standalone. We're talking about this as postpaid bundle. Therefore, we're looking at it very differently in terms of how we package it.
Okay.
Maybe, Joachim Rajaram on the 5G update from a regulatory perspective.
Thank you. That's it for the Q&A session. Over to you, Christine.
Yeah. Jeffrey, thank you very much. Thank you everyone for the call in today, and sorry for running a little bit later than expected.
Yes. It's okay. It's all right.
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. Thank you for your participation. You may now disconnect. Goodbye, all.