Earnings Call: Q1 2020

Apr 23, 2020

Good afternoon, ladies and gentlemen. Welcome to the Digi conference call. Please go ahead. Thank you. Hi. Good afternoon, everyone, and welcome to Digi's Q1 2020 quarterly announcement. So with us today, we have Alvin, Lou, Eugene as well as also K7 who will bring us through the presentation today. So sorry for the delay. Without further ado, I would like to DigiByte, Alban, to kick start the earnings call. Thank you. Over to you, Alban. Hi, Binnie. Thank you. Good afternoon, everyone, and good morning for those of you from different parts of the world dialing in. Firstly, thank you for taking the time DG in taking this call given the issues that are going on globally. So I hope everyone is safe, and I intend to just run through very quickly this presentation together with some of the management team. Just on the agenda slide, I intend to cover key highlights. Inge will then walk through the performance review. We've talked we will talk through the plans that we are putting in place for the business continuity based on COVID-nineteen. Of course, everybody is a little bit anxious, and we'll assure you that what we're doing on the steps taken there. And then some outlook and guidance before we end and take Q and A. The next slide, let me get started. So coming out from a strong finish in 2019, we basically had that as a foundation for going into 2020. It was a good start of the year with the follow-up from Q4. However, it was Something that we have to thank the previous years of preparation. And if you remember, we went into a major digitization of our customer journey not too long ago, and that has prepared us to actually take 100% of our touch points totally digital, also the way we operate our channels today. And we'll talk more about that and give you some examples of things like myDG and also the touch points, digitization of touch points, chaos, so on and so forth. On the networks, we continue to see improvements from our network, and you've seen the stats in network. And today, Keesugan will walk through a little bit of what we have done in the network. We have also then innovated operating models and modernize the way we focus our core competence in the front end on consumers and leave capabilities that are on the network side and also on the IT side for taking through our partners. Scale is, of course, something that comes both on procurement, but also in terms of leveraging And then just the way of work, I will actually show you some examples later on in terms of the way we work. So just on Q1, let's take the next slide. Yes, thank you. So just on Q1, maybe before Inge comes in the next slides where she talks about the financials. Some key highlights I would like to just put on paper. Our focus around acquisition and retention in Q1, we really went into continue our postpaid development. We looked at device ownerships, DG. And we took a big innovation around family proposition in the market. We're also going to build the rewards both from a platform perspective, but also on existing Digital Services and how we actually continue to provide loyalty for existing customers. On digital services and digital solutions, DG. Eugene will cover that a little bit later, but we managed to continue our innovation into taking SME and B2B position. Discipline efficiency is something that we've been known for and reported a couple of times now, and we continue to focus on that. And that has actually enabled us to then free up funds to invest into new areas and new capabilities, especially in the network and IT, but also across the channel. DG's Way of Work and also the Sustainable Business Conduct, part of our core culture and value proposition for employees in the company, All of which sort of helped us in Q1 drive some of these behaviors in consumers. You see that consumers have now increased Almost 40% year on year in terms of data usage to 14.5 gig. Internet and digital revenue improving 13% year on year and service revenue slightly shy of 1% year on year When you exclude interconnection. On the efficiency bit and the simplification, the digital ambitions that I talked to you about can be seen here when we touch now 4,000,000 users, which is an increase of 25% year over year. OpEx continued focus on this area and happy to report that we have flat year on year on OpEx EBITDA margin holding firm at 48.5%. DG. A couple of things that we are proud of, which translated from the customer and the employees we have worked is best managed company in Malaysia and also committed to social. DG's. Next couple of slides, Inge will walk you through the financials. Inge, please? Thank you, Algon. Good afternoon, everyone. I will walk you through the Q1 performance 2020. So next slide is around our growth that we see in Internet usage, usage, which has grown steady. And it has also contributed to our healthy revenue development. DG. As Alvin mentioned, we are seeing an Internet usage of an average of 14.5 gigabytes per user. DG. And this is below industry average, thanks to the way we are packaging our products and also from key initiatives to keep our customers connected. And we have seen a steady growth year on year of 40 PGU% and 5% quarter on quarter. We have also see that we drive loyalty TGIF through rewards and incentives and also the easy device ownership and also attractive family proposition and also our wider range of digital services that we are doing through partnerships and collaborations, for instance, through ETI. DG. On Internet subscribers, we have 188,000 year on year increase. There was a Life decreased quarter on quarter, mainly coming from non revenue generating subscriber decrease, DG, which again did not impact our revenues, which you see here that we have $150,000,000 year on year Internet and digital revenue increase, which is actually now 70% of our service revenue. So that drives actually a 13.3% year on year increase from Internet and digital and a 4.7% quarter on quarter. Moving on to the next slide. We see resilient Q1 service revenue HJ Health and Health and ARPU. So first on the ARPU, as you see, we are at a steady RMB40 DG supported by higher postpaid subscriber mix. From prepaid side, we are at which is actually an increase of ringgit year on year due to an improved acquisition quality of our subscribers and lower revenue generating subscribers. DJI. On the postpaid side, we're at ringgit, slightly down year on year, but still supporting our postpaid subscriber growth and also pre to post migration. Our subscriber base moderated year on year and quarter on quarter slightly from 11.3 average last year to 11,000,000 now. This is mainly driven by reduction in traditional prepaid subscribers as well as non revenue generating subscribers. We see that our service revenue excluding interconnect strengthened year on year. As you can see, it's a 0.7% strengthening and the quarter on quarter is minus 2.4%, mainly driven by lower non internet usages and also the roaming services coming from the COVID-nineteen impact due to the travel section. Moving on to next slide. Our total revenue was supported by improved service revenue mix. So as you can see here, year on year we have a 3.4% increase in our total revenue DG from stronger service revenue mix from postpaid and digital revenue contribution. DG. Our prepaid Internet and digital revenue actually grew by 8.2% year on year to RMB434 1,000,000, which is also a 2.5 percentage point year on year. This is now 31.3 percent of our total service revenue. On postpaid revenue, we have increased 5.5% year on year DGX. And that now constitutes 47.3 percent of our total service revenue. DG. So device and other revenue development was mainly driven by demand from handset contracting and renewal activity. Then I think I will move on to the next slide. So we're continuing discipline OpEx Management through Efficient Operations as well as Cost Management. So starting on with COGS, You will see that we have a 31.5% increase in COGS year on year and a minus 16.8% quarter on quarter. This is driven by our focus on contracting our total subscribers through device plans. DG. Year on year, we have an increase in devices sold as shown in the lower left side of the slide DG from 118,000 devices to 129 year on year. The seasonality effect from the higher device sales in Quarter 4 gives a slight reduction in the devices quarter on quarter, which also impacts the COGS reduction quarter on quarter. This is then offset by lower traffic costs due to the interconnect rates revision. On the OpEx side, we see that we have or the total cost side, but OpEx side, we see that we have We continue to invest in our network on 4 gs LTE and LTE network coverage, which also would drive OpEx. Research. This is cautioned by operational efficiency and also digitalization, automation and operating model shift. So we will see that we have a quarter on quarter impact also from a non carrying cost benefit that we incurred last quarter. The total cost reduction is 7% DG's Q1 quarter on quarter. Moving on to the next slide. We have continued to invest in what matters most and prioritize to Pure Network Availability and Reliability and Network Quality for our customers. DGX. It's a data driven way of work, where we strengthen focus on customer experience and driving network deployment. And this has actually resulted in improved customer confidence and satisfaction on Digi's network. CapEx ended at $139,000,000 as planned mainly to support capacity upgrades and fiber network expansion to deliver consistent data quality and also investments into our IT systems and digital capabilities to support and improve our core businesses and processes. This resulted in operational capital margin at 40% for this quarter, which is a healthy margin. Moving on to the next slide, we have a continued focus on delivering profitable growth. Our EBITDA margin remained healthy at 49%. The year on year and quarter on quarter Klein, which is trickling down from our investment into our subscribers and postpaid DigiCash Enterprise contracting them as earlier mentioned through device subsidies and the Phone Freedom 365 that we are offering in the market for 2 year contracts. Our profit after tax was moderated by 2.9% year on year, a 3.2% quarter on quarter at a healthy margin of 21%. We are proposing $0.042 per share and this will be payable on the 26th June of RMB327 1,000,000. DG. Last quarter, same year last quarter was $0.043 so 0.01¢ lower than 1 year ago. Moving on to the balance sheet view, we see that we have Strong Working Capital Management and also strong funding capability. We have solid assets, which is anchored by our prudent allocation of resources and asset management. The quarter on quarter development that you see is mainly due to repayment of borrowings, which amounted to RMB238,000,000. As you see also, we have healthy borrowings at RMB2.97 billion and 76% of that from our Islamic borrowing. Our financial debt over total assets is at 9%, well within the Sharia compliance threshold. And our net debt to EBITDA ratio is at 1.5 times, which is also below the industry average. We continue to be AAA rated by WRAM rating. I think I will hand it over to you, Alvin, for a little update on the COVID-nineteen and BCP. Thank you, Inge. So you went to the financials now, and then you can see that we've actually had a good start DG's. And on March 18, as you know, the global phenomenon also with Malaysia, where we're starting to go into movement control. And I think it just basically is a different way of us having to operate. And we were basically very quick on our feet. As you know, we have kicked off a BCP plan in the company way before the MCA was implemented in Malaysia. And the teams had well prepared ahead of time in terms of being able to support the services that we needed to give our customers. Communication was an essential service, and the government had announced that. And therefore, we needed to make sure that first priority was around making sure that while we provide connectivity for our customers, please stick on the previous slide. DG. Don't move to the technology slide yet, maybe. DG. Thank you. So as we move into an essential survey, we need to make sure that we protected DG's safety first, while focusing on network, consumer and business. And, Keesevan, Loa and Eugene will cover next couple of slides DJ. When we talk about what we're doing in those three areas. But however, our DNA continues. And as you can see here, we continue to look at how we can play our part as DG. In terms of the picture, Malaysia stayed safe with that period of time while staying connected. And innovations like the DG Stay Home to support the government's call during the period, which was the MCO, to stay home and allow the fund managers to do what they need to do to protect the country. We also try follow that period. So over to you, Keesevan, to talk a little bit about the network and then Lo and Eugene, the consumer and business. Thank you. Thank you, Alban. Can we move on to the next slide? Yes. So good afternoon, all. Let me just give you some insights into how the Digi's network is performing and actions that we have taken to ensure we maintain a robust network and ensure customer experience and network quality. DG. Just to give you a bit of an insight into what we have observed upon MCO. We saw traffic shifting from urban, suburban business areas towards urban, suburban and some rural residential areas. Secondly, we also observed higher usage per subscriber. 3rd, we have also seen up to 2x increase in services such as Facebook, Google and Netflix contributing to the increase in traffic and higher usage from some of the work from home apps like WebEx, Zoom and Microsoft Teams. What we have also seen in addition to that is that traffic the hourly traffic has actually DG. Distribution per day has actually increased, but still keeping to the normal trending of busy hour. So you would see between midnight and 6 a. M, it has increased by 29%. 8 a. M. To 6 p. M. It's increased by 29% and then 16% from Now just on some initiatives that we have taken to maintain a robust network, ensuring customer experience and network quality. First thing that we did was we have continuously performed in network optimization down to the site and cell level to ensure optimal traffic management. Secondly, we have also collaborated with partners like CDN partners like Google, Netflix and YouTube To ensure that they can help us manage the traffic where Netflix, as you would have known, has reduced the bit rate, whereas YouTube has start their start resolution default setting has been set at 480p. On the quality side, We have maintained the quality for some critical areas and services as key government installations, Hospitals and Quarantine Center. Now as a consequence of these actions that we have taken, we have been able to see that We can maintain a robust network, a consistent network providing the quality experience and customer experience as we intended to do. DG. We also do this to ensure that we provide good download speeds and at least impact to the network Digi. Now the current download speeds are adequate to support customer needs and experience on commonly used apps and services, such as Netflix, Facebook, YouTube, etcetera, etcetera. Last but not least, we have also managed to run a 20 fourseven operations for both network and IT teams to ensure that we are We have close monitoring of our systems and network and to maintain a high network availability and stability despite some of the restrictions that we see out there on the ground. We also have our field force teams, which I call the critical frontliners who are actually out there on the ground on daily basis, where we have split them up by regions and subregions to ensure that We are able to reach out to the sites should there be any network outages to bring the services up as we see DG network connectivity as being a critical service, especially at this point in time. And then we also continue to perform corrective maintenance and preventive maintenance to ensure the availability of the network. Now in addition to that, as I mentioned earlier, we have also been Committed in supporting the current situation that we are in by providing enhanced services to DG Government's installations, quarantine centers and also where it is needed to ensure that we are able to manage the needs of the people at this point in time. That's it from my side, on the network side. Can I hand it over to Lo? Thank you, Katherine. For the consumer segment, during the MCO, There are really 3 main priorities that we are working on. And the first one is continue to offer DG's things that is relevant to the consumer. The free one gig is something that we are doing to pre and post together with the industry. Other than that, we also have 0 rated all the access to hotlines as well as website that provide COVID information. Other than these 2, we are actually working with partners to provide content, especially on the learning part as well as the insurance for the COVID insurance. So there's one top there's one priority. The second thing is how do we continue to keep customer connected. DG. And besides the retail as well as the contact center where we are allowed to operate on certain hours, We're also updating the community portals and there's way customer able to get the latest information from time to time DG in order to stay connected. Other than that, my DG and Kiosk is really something that we have been working on the last DG. It's become very handy now. These are some of the self serve channel where customer able to do most of the things by themselves in view that a lot of the physical touch points are closing DG. And the last is in the last 2 years we have also have built out a very comprehensive Digi Store online store. And that's where customer again are able to assess and .:] To buy new connectivities or change of line by themselves. And that's what something that we are doing now. And we also extended these capabilities to our frontliners as well as the dealers where they can actually use the same capabilities to continue to serve the customers offline. And last but not least is during this period we also see that consumer behavior in top up and DG. They are changing and they are moving to different channels. While some of the physical channels are closed, there are other channels that is opening, mainly the convenience store, the Petrol Mart, ATMs. And this is also very important during this period that now we ensure that The supply is adequate and is continue to able to supply the top up to the customers. That's all I have for the consumer segment. I'm going to hand over to Eugene for the business segment. Thank you. Yes. Good afternoon. So during the Movement Control order, I think our objective for our vision of connecting businesses, both SMEs and corporates and their employees to what matters most, I think it is more important than ever. Immediately after the Movement Control order was announced by the government, we launched a broadband package As part of the BCP for our SME and Corporate Malaysian customers, right, in order to enable a lot of the employees to work from home During the Movement Control order, that's been very well received. Following that, I think we have also make sure that we enhance the digital bundles that we have introduced into the market, right, to enable SMEs in order to go digital or to digitize their business, right. DG. From going digital on the front end, the bundle included digital marketing capability. And then on digitizing the back office part of the business, there's a separate bundle that basically enables SME to do customer service and also some HR processes over digital apps. DG. On the B2B, the focus immediately after the MCO, We are very focused to help our SME customers survive like the period, right. So there will be a strong focus on basically value And on savings with very low upfront commitment to some of the telco and connectivity plans that will be made available. Finally, I think like internally in terms of the way of work and the readiness, right, during the MTO period, I think we have the DG's sales and the channels have been reaching and engaging the customers and the SME markets a lot more effectively now online. I think we have moved from basically face to face meetings to online, the digital meetings via Facebook and Facebook online. And this will help us to build DG. I then can pass on to Alban and to Huvi with you next. Yes. Thank you very much, Eugene. So So just a last couple of slides from us. And the first one is, we covered the network, the consumer and the business. How do we manage during this period of time? And of course, there is an impact from COVID-nineteen. But what we want to make sure that we understand is how we have prepared not just in this period, but also how prepared we were in our strategy over the last couple of years and how that has helped us during this period of time. From a macro perspective, it is quite clear that from Bank Negara and others, there's also a re guidance on GDP growth. Therefore, you can definitely see an economic impact from COVID-nineteen. And things still remain fairly fluid and the market. However, what we believe we will be able to sustain during this period is due to the things that we have done. Inger covered the financial resilience, solid financial strength, focus on being efficient, being innovative in new models of operation that we've already done and benefiting from scale and sourcing capabilities. So we continue to drive focus in that area during this period. When it comes to the organization, work from home is something that DG has done for many, many years. And also, we started a BCP organization during digital experience. However, more importantly, the digitization of our business and the model changes that we talked about earlier from both IT and network, That has been fantastic for us during this period of time as we've been able to now shift in being able to at least have those channels ready for consumers to use. And we have an option for customers to stay connected to us when things like MCO happens, where stores are closed, so on and so forth. And lastly, something that DG has always been known for is the strong brand. And one of the key propositions that we've always taken is innovation and value driven organization from a brand perspective. And that continues then. We believe that, that will be extremely important as we go forward, where customers We'll seek a good network, which is on par with the ones in the country and also then driving value during this period of time. Inge, maybe you take a look at the last slide before I wrap up. Yes. So DG. On our guiding, I just have to reiterate what Alvin was saying. There are a lot of external factors that are very fluid right now. So the management has decided that we will revisit the 2020 guidance when we have more clarity in timing of the NCO uplift and how gradual that will be on the COVID-nineteen situation as well as the economic outlook and the resumption of how the business will resume in Malaysia. Nevertheless, we will continue to focus on our 2020 priorities. Key focus is to create value for our stakeholders and our customers and remain committed to our long term strategy and also, like Alvin mentioned, focused on growth and innovation. While we need to really monitor what will Capital in the market. We have levers that we will pull to protect our cash flow through cost measures and also financial flexibility. DG. Total management is following up this on a daily basis, and we have also a practical view on our earning Power Meter. Then we will continue to invest in strengthening our network and IT infrastructure to support our growing data demand where we see needed and where it matters most. And finally, we'll continue to deliver on our core and digital businesses through focused customer offerings. So we will come back when there is a new normal and we are prepared to Digital's Future Challenges with the retail and future proof company that we are. Yes, very good, Ingo. Thank you. And so that summarizes and completes our presentation that we wanted to walk you through. We now open up for Q and A. Thank you very much. Thank you. DG. Our first question comes from Arthur from Citi. Please go ahead with your question. All right. Thanks for the opportunity. Several questions, please. Firstly, based on the trends that you've seen through April, has there been any notable change in consumer spending on mobile? Are the top ups DG. In terms of frequency, is the value on top ups remaining as well or holding up? Second question I had is what percentage of your prepaid DG. Top ups are actually dependent on physical vouchers. And last question is with regard to DG. The interest expense that seems to have declined quite dramatically quarter on quarter and year on year. What's driving that? Thank you. DG. Okay, back to the two questions on prepaid. As I shared with you just now during the presentation, We definitely have seen that customers are switching into other channels. So So some of the physical touch points are closed, but they are convenience store and other way of top up And those are available and we also see that the behavior shift very quickly to those channels. Other than that besides there is some impact on the acquisition activities, we see that the active base DG's. Are these costs popping up as much and as frequently? DG. If you look at the ARPU and the Active base. We see that it's still relatively holding. Understood. But the ARPUs, I have to qualify, maybe going into April, because ARPUs demonstrated here only reflects around 2 weeks of MCO, Now that we're going into almost a month and now you have that 1 gigabytes a day free, is that actually impacting I mean, I wouldn't be able I think it's a bit too early for us to conclude. DG. Definitely we see more usage on the freebies. So it's still I think it's too premature to DG. I will monitor this as we go along because I think it's only like as you mentioned, it's just a 1 month impact. So it's a little bit too early to just comment. Okay. So I'll take the question 3, Arthur. So the reason for our interest rate reduction over the years. It's because we have interest rate swaps that we do on a regular basis, so that we can take advantage of the spot rate. So this Decline is one off or should we expect this to be the base? So for this quarter, we have a gain of TGM. But this is what we are doing every quarter. So if you continue to see the interest rate go down, we will be able to continue to get gains on this. Got it. Thank you very much. Thank you. Next on the line, we have Feng Cheung D. J. Chen from CIMB. Please go ahead with your question. Hi. Thanks for the call. Three questions from me. Firstly, I wanted to ask about the SME customer segment. If there's any signs of stress there that you've seen? And how should we think of the impact to DG's revenue and earnings if business conditions I noted what Eugene mentioned earlier on about helping SMEs survive. So are they also asking Discounts or are they some of them also defaulting on payments? Any sort of information there would be helpful. Secondly, on the postpaid ARPU on the decline Q on Q, can I understand how much of that is Thank you to the reduction in international roaming? And thirdly, Kevin talked a bit about the work that has been done on the network side during the presentation. And I mentioned that optimizing the network capacity down to the cell level. Just curious to know what exactly are you doing there? Are you Just sort of reforming the spectrum or are you even managing traffic maybe from the more DG. Intense usage subscribers. Yes, those are my 3 questions. Thank you. DG. Thank you for the question. Maybe let me just take the first question. So from the SME side, like I said just now, I think you observed DGX. At this point of time, it is actually too early to say whether or not there is any problems on the Collections on the default. We are definitely monitoring very closely this development and ensuring that we are tightening on the Credit Management. In terms of we see we do hear a lot of focus from SMEs around we see value management or cost management. So that's one of the reasons why I think the cost position that Digi traditionally has in this market puts us in a very DG. Good place actually immediately after the MCO system. Maybe Ying Ke can take the second question. I will answer the second question. So we don't disclose specifically the impact on ARPU from roaming. However, I can say that the decline comes from a combination of roaming as well as the interconnect revenue as well as our pre to postpaid strategy, whereby we have the entry levels coming with slightly lower office into our subspace. However, the subbase is growing, which is then supporting our overall growth in the company. Okay. And I will take the 3rd one. Coming back to your question on whether we are doing How are we managing traffic? Are we reforming or managing customers with high traffic usage? Not really. I think the from the optimization perspective, there are about 11 levers that we can work on, depending on the site level and the cell level. Just to name 1 or 2, so that I don't want to go into much details of this. We have carrier aggregation between the different layers. So what we can do is we can also do some load optimization between those two layers. And also we can do some algorithm timing and changes depending on where we see the traffic and how the traffic movements are. So those are just some of the measures that we have taken depending on which site and which cell, depending on the hour based on the trends that we see. Okay. Got it. Thank you so much. Just one quick bookkeeping question, if I may. What would be the digital services revenue this quarter? I'm just trying to understand whether it has fallen off this quarter on a seasonal basis because this I think you disclosed it last quarter, but DG. This quarter, you haven't really shown the same number. Hi, Feng. So you're right. We discovered that we didn't disclose it this quarter. And so we did disclose it in 2019. We have decided not to do it in 2020 because we want to see it together with Internet and digital together. So we follow industry practice on this one. Right. But is it up still Q on Q? Or is it down? Yes, it's up. Yes, definitely up. DG. Okay. All right. Thank you so much. Thank you. And next, we have Alex Guo from Ambank. DJ. Yes. Hi. Thanks so much for the opportunity. I have three questions. The first is regarding additional costs that could come. The fact that you're offering 1 gig of free additional data and all the other additional channels that you're opening up For the customers, is there any potential increase in cost in any way or any provisions Backloaded costs that we may be seeing over the next quarter if this COVID-nineteen DG. Pandemic continues. That's my first question. The second one is regarding your prepaid subscriber. I understand it's still early days. But given the fact that it is still coming down, do you think this Trajectory is going to deteriorate further, I mean, in terms of decline in subscriber base, Given the fact that it's very difficult for new customers to come in with the fact that your kiosks are closed. DG. And part of this question is, I was wondering whether you could actually give us the breakdown of your postpaid DG. Prepaid revenue because you used to show it in the past, but now I think it would be quite good for us to able to see the breakdown in terms of your revenue in that category. And my third question is, I didn't quite catch your earlier answer on why your interest costs Thank you for coming off. Was there some early repayment of your loans? Or were you refinancing your loans? Alex, thank you. Lloyd, maybe you want to take the Two questions and then I'll get the last one. Yes. I I think the cost on the 1 gig, I will leave it to K7 to cover. Back to the channels, right. As I say, we are moving to some of the nontraditional to digital and the alternate channels and this channel in fact they are a lot more efficient and they are running 24x7. DG. So to certain extent, I would think that if we can move more transactions to some of this always on channel. In fact, it's better for us. Prepay. Maybe I can take the first one on the additional cost. Just to say that We have always said we will build a consistent and robust network. And what we see is with the additional 1 gigabytes free, The network is still able to sustain and maintain and still provide the quality experience that we have spoke about earlier. So there is no additional cost that we need to invest in. Yes. And I think just to add on to that comment, Alex. I think this was done across the industry. So you would expect that, yes, there would be some additional usage on the networks, But we also manage that by the time that this the 1 gig is offered. And also customers who already have a lot of data, They will then get this as well to do more if they needed to because you're talking about consumers who are now working from home, need to do some school online education, so on and so forth. So there's a different reason for doing that. And as you know, the operators also supported the government's request to And so you would expect that you would see utilization across the whole industry, but also the same sort of dilution on revenue if this was to be purchased, but we didn't we don't look at it like that. We built the network more robustly in order for you to cater for consumer usage. What has changed is the shift in time And then go to the question number 2 on the prepaid base, right. Of course, if you look at there is about 12 days in the month of March. This is where the SMCO. Obviously, that will impact the acquisition activity. At the same time, during this period, There will be a system churn. Those customers are no longer revenue generating and there will be some there is The duration before we can churn them out. So what I mean what you see the churn are mainly the non revenue generating subs. And so So if you look at the revenue generating subs and active base, it's still relatively holding and stable. Yes. DGX, Alex, for question 3. I can actually take it offline with you. So but in general, we are actually disclosing prepaid Internet with digital kind of segregation in terms of revenue and then postpaid and also non Internet revenue. DG. So this kind of category is going forward. Yes. And question number 4 is something that Inge has actually responded earlier on with regards to why the interest cost is lower because we also have interest rate swaps, which we actually had reached the $37,000,000 gain in quarter this quarter. Okay. How often do you do these swaps? I mean, when and usually when you do swaps, isn't there additional costs involved? We do this on a regular basis, as mentioned earlier on in the question. So we do this every Corner. Okay. Thank you. DG and there is no additional cost related to this. Thank you. And next, we have Prem D. J. From Macquarie. Please go ahead with your question. Hi, thank you for the opportunity. A couple of questions from me please. Firstly, I do appreciate that there's been a shift in the usage locations, so to speak. And based on your experience and yes, there's only so much you can achieve from tweaking the network. Do we think that if user habits change, there's more working from home elements in the economy going forward. How do you see this impacting your CapEx plans? And do you see any reason Why you should actually be accelerating, if not increasing your CapEx plans for this year as a result of COVID. And secondly, if I could just understand the risk, DG. You've been very aggressive every operator in Malaysia has been very aggressive in trying to do device bundling. The question is, To what extent does this COVID impact people's incomes and therefore impact the ability to pay for these devices, who carries the risk on all these devices? And do you see that DG. I'll stop there for now. DG. Yes. Hi, Prem. Thank you very much for the two questions. Let me take the first one and then either Ingo or Lo can take the second. So there is a shift and the shift is basically from key market centers to more residential areas. And then there's also a shift in terms of usage. So the usage one is actually beneficial for us now because now people are using it throughout the day and the peaks are slightly different. And for different areas, you will see different utilization, as you know. Now the network is built For that purpose, so besides the tweak that you talked about, Keesun also did talk to you about going down and looking at where there are Constraints and seeing whether we need to upgrade those. But we're not seeing a significant amount of activities where We have to go out and put extra sites and extra equipment, those kind of things. So you don't see that. What you're seeing is more managing the peaks at Residential Areas. And if work from home continues, we are prepared for to support that. And don't forget that the scale is where DG has actually been very strong in We do a lot of sharing on backhaul of capacity, co building of backhaul of capacity where we have already done those things. So we're leveraging a lot of too much of the CapEx. We're shifting CapEx a little bit here and there, but we see that, that will be fairly intact for the rest of the year. And the scale in terms of our sourcing capabilities It's one of the best. So we are confident that, that will see us sustaining. DG. Inger or Loth, do you want to take the second question? Back to the device bundle, first thing is we don't do it aggressively as acquisition. Digi Xun. Device bundle or Phone Freedom 365 are mainly focusing on our base. DG. There is really also leveraging on the credit scoring model internal and I mean the internal that we have developed as well as the digital external credit scoring model from those credit rating agency. In order to make a decision, who is entitled and who is not. So that's one, but of course, depends on the outlook. We will definitely need to relook at the portfolio of bundles and adjust the portfolio of devices accordingly So that on a monthly payment perspective, it's still affordable and in line with the Economic Condition. Thanks, Lou. But who carries the risk if DG. Today, DG, yes. DG. Sorry, DG carries the risk. Yes, but you see at the same time, We also have optimized subsidies compared to the device bundle. DG. I mean, if you look at the previous device bundle, those are heavy subsidies and we are moving into financing, device financing. So it's the balancing between high subsidies and lower subsidies, but You carry the outstanding amount in the balance sheet. All right. Thank you. DG. Thank you. And our next question comes from D. J. J. Juvekar:] Hi. Good afternoon and thank you for the presentation. DG. I have a couple of questions. The first one, I think one of the participants already asked on a similar line. My question is on the network usage. The spatial distribution seems to be changing, right, like more towards residential areas. I guess this only works till people are working from home. Once this COVID issue starts getting resolved, I guess people will be going back to their workplaces. How do you manage Your CapEx needs or your capacity needs for this kind of increase in traffic because The traffic might not be there after a few months. So if you could share your thoughts on that side. 2nd is on 5 gs. We had a lot of discussions early this year. DG. Have you been completely stalled or if you can give us some update on where 5 gs is with respect to Malaysia? Digi. Lastly, I see that your MyDigi app has gained a lot of traction recently. Does that give you some kind of competitive advantage? Thank you. Yes. So maybe I can take question 1. You're right. So once MCO is lifted and things get back to a certain level of normalcy, you will see people moving back. And that's why we have consistently said we will build a consistent network, and it's a robust network. So what we're doing now is doing a lot of optimization from what we see in the residential areas. Now we need to also understand that when we build our network, we took also into account business areas and also residential because that's where you See the high throughput or high peak later in the evenings. So hence, why doing a lot of this optimization will have balance. And of course, The stress to the network will definitely reduce once people come back to work. So we don't see any major need to do a lot of investments at this point in time. DG. Can you just repeat can you just kindly repeat the second question again? DG. My second question was on 5 gs. We had a lot of discussions at the beginning of this year, late last year, where Malaysia was effectively looking at a single 5 gs network. If you can share with us where DG. There we are in the process or that process has completely stalled at the moment. And the last question was, How is the MyDG app different from what your competitors are offering? And does that give you DG competitive advantage in giving your customers a very effective digital channel. Yes. Perfect. Thanks for repeating those questions. A little bit hard to hear. It's a heavy rain in KL. So just on the second question and then DG. 1st question, Lo, why don't you get to my DG. I'll take the second question. On the second question, yes, you're absolutely right. The 5 gs, what started off as a huge effort, Of course, the government has had to reprioritize and since we reprioritize that given what's going on, not just in Malaysia, but globally. And And I think it's the right prioritization. So we are still in the process and we are still doing a pilot and Testing on the 5 gs areas as per what was agreed upon by the government. And we just continue to do that. And then we just wait for guidance from the regulators as when the exercise will pick up again. As of now, we're just focused on some of the testing and the capabilities that we Digi. Already had planned to do during the period. No, just on MyDigi, please. Okay. With the competitive advantage and not, MyDigi is something we have started 2 years now. Of course, we have seen a lot of early adopters Going in there and as you pointed out, this become a very effective direct channels, right, where we can engage and continue to offer whatever, I mean things that is relevant to the customers. And this also will be a platform where We can build more services in the future beside the connectivity. But again, now there's still work needs to be done for the critical mass as well as the late adopters. So that's still something we are focusing on. Yes. I think the focus that we had on building this capability DG. A year and 2 years ago, that is definitely now also seen as an advantage that we had, especially when things like this happen and where consumers have an alternative channel, right. So but we did it at that point of time, we did it because we wanted to make sure that we were empowering the customers a lot more 20 fourseven a day to be able to transact and communicate with us and self serve. And then given in this kind of situation, yes, you're right, it is a competitive advantage to DG. Okay. Thank you. DG. Thank you. And our next question comes from Osman Gazzi from Berenberg. Securities. Please go ahead. Hello. Just wanted to make sure, could you hear me? Yes, please go ahead. Okay, great. Thanks. Yes, I had a question regarding the Digi's Exposure to the Overseas Migrant Workers segment. I know this was kind of more core area for you back in 2016. And since then, you've been Moving away from the segment, but how big is your exposure to the segment at the moment, given All of the work kind of movements that we're seeing and some financial stress in this particular end of the market. Thank you. DG. Hi, Usman. We don't really actually disclose DG on Migrant Workers segment, specifically due to competitive reasons. So unfortunately, we can't share more details on this. But I can actually have a separate follow-up session with you later after the call on your other questions, yes. DG. Okay. Thank you. And I guess we are also nearing the 4 o'clock where we need to end our earnings call for the day. If there's no other questions, we'd like to thank all the participants. Jeffrey, could you help us to end the call and Algonquin. Thank you. So just before I hand over to Jeffrey and everybody else, I just wanted to say thank you very much DG. I know a lot of you are working from home probably as well. And I just want to wish all of you to stay safe during this time and wish you and your family members all well during this period. Any further clarifications to today's session, which we all had to do from different parts and work from home and office DGX. Please reach out to Vinny. Thank you again and over to you, Jeffrey. Thank you. And that concludes today's conference call. Thank you for your participation.