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 first quarter 2020 quarterly announcement. With us today, we have Albern, Inga, Loh, Eugene, as well as also Kesavan who will bring us through the presentation today. Sorry for the delay. Without further ado, I would like to invite Albern to kickstart the earnings call. Thank you. Over to you, Albern.
Hi, Winnie. 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 in taking this call, given the issues that are going on globally. I hope everyone is safe, and I intend to just run through very quickly this presentation, together with some of my other management team. Just on the agenda slide, I intend to cover key highlights. Inga will walk through the performance review. We will talk through the plans that we are putting in place for the business continuity based on COVID-19. Of course, everybody's a little bit anxious, and we'll assure you that what we are doing on the steps taken there. Some outlook and guidance before we end, then the Q&A. The next slide. Let me get started.
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. If you remember, we went into a major digitization of our customer journey not too long ago, and that had prepared us to actually take 100% of our touch points totally digital. Also, the way we operate our channels today. We'll talk more about that and give you some examples of things like MyDigi, and also the digitization at touchpoints, kiosks, so on and so forth. On the networks, we continue to see improvements from our network, and you've seen the stats in our network. Today, Kesavan will walk through a little bit of what we've done on the network.
We have also then innovated operating models and modernized 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 capabilities and competence. Just the way of work. I will actually show you some examples later on in terms of the way we work. Just on Q1, let's take the next slide. Yes, thank you. Just on Q1, maybe before Inga comes in the next slides where she talks about the financial, some key highlights I would like to just put on paper. Focus around acquisition and retention. In Q1, we really went in to continue our post-paid development.
We looked at device ownerships. We took a big innovation around family proposition in the market. We also continue to build the rewards, both from a platform perspective but also on existing customers and how we actually continue to provide loyalty for existing customers. On digital services and digital solutions, 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. 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. A way of work, and also just sustainable business conduct, part of our core culture and value proposition, for employees in the company.
All of which 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 GB. Internet and digital revenue improving 13% year-on-year, 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 there when we touched on our four million users, which is an increase of 25% year-over-year. OpEx, we continue to focus on this area and happy to report that we are flat year-on-year on OpEx. EBITDA margin holding firm at 48.5%. A couple of things that we are proud of, which translated from the customer and the employees' way of work is Best Managed Company in Malaysia and also committed to social causes.
Next couple of slides, Inga will walk you through the financial. Inga, please.
Thank you, Albern. Good afternoon, everyone. I will walk you through the Q1 performance 2020. Next slide is around our growth that we see in internet usage which have grown steady. It has also contributed to our healthy revenue development. As Albern mentioned, we are seeing an internet usage of an average of 14.5 GB per user. This is below industry average, thanks to the way we are packaging our products. Also from key initiatives to keep our customers connected. We have seen a steady growth year-on-year of 42% and 5% quarter-on-quarter. We see that we drive loyalty through our rewards and incentives, and also the easy device ownership, and also attractive family proposition. Also our wider range of digital services that we are doing through partnerships and collaborations, for instance, through EasyAdd. On internet subscribers, we have 188,000 year-on-year increase.
There was a slight decrease quarter-on-quarter, mainly coming from non-revenue generating subscriber decrease, which again, did not impact our revenues, which you see here that we have MYR 150 million year-on-year internet and digital revenue increase, which is actually now 70% of our service revenue. 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 a resilient Q1 service revenue within healthy ARPU. First on the ARPU, as you see, we're at a steady MYR 40 million, supported by a higher postpaid subscriber mix. From prepaid side, we are at MYR 30 million, which is actually an increase of MYR 1 million year-on-year, due to an improved acquisition quality of our subscribers and lower non-revenue generating subscribers.
On the postpaid side, we're at MYR 69 million, slightly down year-on-year, 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 million average last year to 11 million now. This is mainly driven by a 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 -2.4%, mainly driven by lower non-internet usages and also the roaming services coming from the COVID-19 impact due to the travel restrictions. Moving on to next slide. Our total revenue was supported by improved service revenue mix. As you can see here, year-on-year, we have a 3.4% increase in our total revenue from stronger service revenue mix from postpaid and digital revenue contribution.
Our prepaid internet and digital revenue actually grew by 8.2% year-on-year to MYR 434 million, which is also a 2.5 percentage point year-on-year. This is now 31.3% of our total service revenue. Postpaid revenue, we have increased 5.5% year-on-year, and that now constitutes 47.3% of our total service revenue. Device and other revenue development was mainly driven by demand from postpaid contracting and renewal activity. I think I will move on to the next slide. We're continuing discipline OpEx management through efficient operations, as well as cost management. Starting on with the COGS, you will see that we have a 31.5% increase in COGS year-on-year and a -16.8% quarter-on-quarter. This is driven by our focus on contracting our postpaid subscribers through device plans.
Year-on-year, we have an increase in devices sold, as shown in the lower left side of the slide, from 118,000 devices to 129 year-on-year. The seasonality effect from the higher device sales in quarter four gives a slight reduction in the devices quarter-on-quarter, which also impacts the COGS reduction quarter-on-quarter. This is offset by lower traffic costs due to the interconnect rate revision. On the OpEx side, we see that we have continued to invest in our network on 4G LTE and LTE-A network coverage, which also would drive OpEx. This is cushioned by our operational efficiency and also digitization, automation, and operating model shift. We will see that we have a quarter-on-quarter impact also from a non-recurring cost benefit that we incurred last quarter. The total cost reduction is 7% down quarter-on-quarter.
Moving on to the next slide. We have continued to invest in what matters most and prioritize to secure network availability and reliability and network quality for our customers. It's a data-driven way of work where we strengthen focus on customer experience and driving network deployment. This has actually resulted in improved customer confidence and satisfaction on Digi's network. CapEx ended at MYR 139 million as planned, mainly to support capacity upgrades and fiber network expansion to deliver consistent data quality, and also investment 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%.
There is a year-on-year and quarter-on-quarter decline, which is trickling down from our investment into our subscribers on post-pay, by contracting them, as earlier mentioned, through device subsidies and the PhoneFreedom 365 that we are offering in the market for a two-year contract. Our profit after tax was moderated by 2.9% year-on-year and 3.2% quarter-on-quarter, at a healthy margin of 21%. We are proposing MYR 0.042 per share, and this will be payable on the 26th of June of MYR 327 million. Same year last quarter, it was MYR 0.043, so MYR 0.001 lower than one year ago. Moving on to the balance sheet view. We see that we have strong working capital management and also strong funding capabilities. 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 MYR 138 million. As you see also, we have healthy borrowings at MYR 2.97 billion, and 76% of that comes from our Islamic borrowings. Our conventional debt over total assets is at 9%, well within the Shariah compliance threshold, and our net debt-to-EBITDA ratio is at 1.5x , which is also below the industry average. We continue to be AAA-rated by RAM Rating. I think I will hand it over to you, Albern, for a little update on the COVID-19 and BCP.
Thank you, Inga. You went through the financials now, you can see that we've actually had a good start for the year. On March 18th, as you know, the global phenomenon also hit Malaysia, where we started to go into movement control. I think it just basically is a different way of us having to operate. We were basically very quick on our feet. As you know, we had kicked off a BCP plan in the company way before the MCO was implemented in Malaysia. 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.
Therefore, we needed to make sure that first priority was around making sure that while we provide connectivity for our customers. Please click on the previous slide. Don't move to the technology slide yet, maybe. Thank you. As we move into an essential service, we needed to make sure that we protected staff safety first, while focused around network, consumer, and business. Kesavan, Loh, and Eugene will cover the next couple of slides when we talk about what we're doing in those three areas. However, our DNA continues, and as you can see here, we continue to look at how we can play our part as corporate Malaysia in terms of making sure Malaysians stayed safe in that period of time while staying connected.
Innovations like Digi Stay Home to support the government's call during the period, which was the MCO, to stay home and allow the frontliners to do what they need to do to protect the country. We also tried to follow that period. Over to you, Kesavan, to talk a little bit about the network and then Loh and Eugene on the consumer and business. Thank you.
Thank you, Albern. Can we move on to the next slide? Yeah. Good afternoon, all. Let me just give you some insights into how the Digi network is performing and actions that we have taken to ensure we maintain a robust network and ensure customer experience and network quality. 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. Third, we have also seen up to 2x increase in services such as Facebook, Google, and Netflix, contributing to the increase in traffic. Higher usage on some of the work-from-home apps like Webex, Zoom, and Microsoft Teams.
What we have also seen in addition to that is that the hourly traffic distribution per day has actually increased, but still keeping to the normal trending of busy hour. You would see between midnight and 6:00 A.M., it has increased by 29%. 8:00 A.M. to 6:00 P.M., it's increased by 29%, and then 16% from 6:00 P.M. to 12:00 midnight. Keeping to the network busy hour of between 8:00 P.M. to midnight. 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 a 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 bitrate, whereas YouTube, 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 centers. 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. We also do this to ensure that we provide good download speeds and at least impact to the network quality.
Now, the current download speeds are adequate to support customer needs and experience on commonly used apps and services such as Netflix, Facebook, YouTube, et cetera. Last but not least, we have also managed to run a 24/7 operations for both network and IT teams to ensure that 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 sub-regions 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 network connectivity as being a critical service, especially at this point in time. We also continue to perform corrective maintenance and preventive maintenance to ensure the availability of the network. 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 government 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 Loh?
Thank you, Kesavan. For the consumer segment, during the MCO, there are really three main priorities that we are working on. The first one is to continue to offer things that is relevant to the consumer. The free 1 GB is something that we are doing to pre-impose together with the industry. Other than that, we also have zero-rated all the access to hotlines as well as the websites that provide COVID information. Other than these two, we are actually working with partners to provide content, especially on the learning part, as well as the insurance for the COVID insurance. That's one priority. The second thing is, how do we continue to keep a customer connected?
Besides the retail, as well as the contact center, where we are allowed to operate on certain hours, we are also updating the community portals, and that is where a customer is able to get the latest information from time to time in order to stay connected. Other than that, MyDigi and Kiosk is really something that we have been working on the last two, three years. It's become very handy now. These are some of the self-serve channel where a customer able to do most of the things by themselves, in view that a lot of the physical touchpoint are closing for now. The last is, in the last two years, we have also have built out a very comprehensive Digi online store, and that is where customer, again, are able to access and able to buy new connectivities or change of line by themselves.
That's something that we are doing now, 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. Last but not least, during this period, we also see that consumer behavior in top-up is changing, they are moving to different channels. While some of the physical channels are closed, there are other channels that are opening, mainly the convenience stores, the petrol marts, ATMs. This is also very important during this period that we ensure that the supply is adequate and continue to be 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.
Yep. Good afternoon. During the movement control order, I think our objective or 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 made 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?
From going digital on the front end, the bundle included digital marketing capability and then, in digitizing the back-office part of the business, there's a separate bundle that basically now enables SME to do customer service and also, some HR processes over digital apps. On the B2B, the focus immediately after the MCO, we are very focused to help our SME customers survive the period, right? There will be a strong focus on basically value and on savings with a very low upfront commitment in some of the telco and connectivity plans that will be made available. Finally, I think, internally, in terms of the way of work and the readiness, right? During the MCO period, I think, we have the sales and the channels have been reaching and engaging the customers and the SME markets a lot more effectively now online.
I think, they have moved from basically face-to-face meetings to online and digital meetings via Facebook and Facebook Online. This will help us to build a stronger presence and capability in order to engage customers and to conduct sales digitally. That's all I have for now. I then can pass on to Albern and to finish the next.
Yeah. Thank you very much, Eugene. Just a last couple of slides from us. The first one is, we covered the network, the consumer, and the business, how do we manage during this period of time? Of course, there is impact from COVID-19. 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, and therefore, you can definitely see an economic impact from COVID-19. Things still remain fairly fluid in the market.
However, what we believe we will be able to sustain during this period is due to the things that we have done. Inga 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. We continue to drive focus in that area during this period. When it comes to the organization, work from home is something that Digi has done for many years. We started a BCP organization during this period. 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.
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. Lastly, something that Digi has always been known for is the strong brand. One of the key propositions that we've always taken is innovation and value-driven organization from a brand perspective, and that continues. We believe that that will be extremely important as we go forward, where customers will seek a good network, which is on par with the ones in the country, and also then driving value during this period of time. Inga, maybe you take a little bit of the last slide before I wrap up.
Yes. On our guiding, I just have to retrace what Albern was saying. There are a lot of external factors that are very fluid right now. The management has decided that we will revisit the 2020 guidance when we have more clarity in the timing of the MCO uplift and how gradual that will be on the COVID-19 situation as well as the economic outlook and the assumption 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 Albern mentioned, focus on growth and innovation. While we need to really monitor what will happen in the market, we have levers that we will pull to protect our cash flow through cost measures and also financial flexibility.
The management is following up this on a daily basis. We have also a practical view on our earning parameters. We 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. Finally, we'll continue to deliver on our core and digital businesses through focused customer offerings. We will come back when there is a new normal, and we are prepared to meet the future challenges with the resilience and the future-proof company that we are.
Yeah. Very good, Inga. Thank you. That summarizes and completes our presentation that we wanted to walk you through. We now open up for Q&A. Thank you very much.
Thank you. Ladies and gentlemen, should you like to raise a question, please press star one on your telephone keypad. Once again, ladies and gentlemen, star one keys for questions. Our first question comes from Arthur from Citi. Please go ahead with your question.
Hi. Thanks for the opportunity. Several questions, please. Firstly, based on the trends that you've seen through to April, has there been any notable change in consumer spending on mobile? Are the top-ups remaining 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 top-ups are actually dependent on physical vouchers? Last question is with regard to the interest expense. It seems to have declined quite dramatically quarter-over-quarter and year-over-year. What's driving that? Thank you.
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. Some of the physical touchpoints are closed, but there 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's some impact on the acquisition activities, we see that the active base is stable.
Are they still topping up as much and as frequently?
If you look at the ARPU and the active base, we see that it's still relatively holding.
Understood. The ARPUs, I have to qualify maybe going into April because ARPU is demonstrated here only reflects around two weeks of MCO. Now that we're going into almost a month, and now you have that 1 GB a day free, is that actually impacting the value of the top-ups?
I wouldn't be able. I think it's a bit too early for us to conclude. Definitely we see more usage on the freebies. Yeah. I think it's too premature to conclude that.
Arthur, we'll monitor this as we go along because I think it's only like, as you mentioned, it's just a one-month impact. It's a little bit too early to just comment.
Understood.
Okay. I'll take the question three, Arthur. The reason for our interest rate reduction over the years is because we have interest rate swaps that we do on a regular basis so that we can take advantage of the swap rates.
This decline is a one-off, or should we expect this to be the base?
For this quarter, we have a gain of MYR 37 million. This is what we are doing every quarter. If we continue to see the interest rates go down, we will be able to continue to get gains from this.
Got it. Thank you very much.
Thank you. Next on the line, we have [Fung Chee Chun] 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 Digi's revenue and earnings if business conditions continues to be difficult? I noted what Eugene mentioned earlier on about helping SMEs survive. Are they also asking for discounts or are some of them also defaulting on payments? Any kind of information there will be helpful. Secondly, on the postpaid ARPU on the decline QoQ, can I understand how much of that is due to the reduction in international roaming? Thirdly, Kesavan talked a bit about the work that has been done on the network site 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? Are you even managing traffic maybe from the more intense usage subscribers? Yeah. Those are my three questions. Thank you.
Thank you for the question. Maybe let me just take the first question. From the SME side, like I said just now, I think we observed an increase in usage. At this point of time, it is actually too early to say whether or not there is any problems on the collections or the default, but we are definitely monitoring very closely this development and ensuring that we are tightening on the credit management. In terms of, we do hear a lot of focus from the SMEs around basically value management or cost management. That's one of the reasons why I think, the cost position that Digi traditionally has in this market puts us in a very good place actually immediately after the MCO is lifted. Maybe, Inga, you can take the second question.
Yes. I will answer the second question. 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 a slightly lower ARPU into our sub-base. However, the sub-base is growing, which is then supporting our overall growth in the company.
Okay. I will take the third one. Coming back to your question on whether we are doing, how we're managing traffic, are we refarming or managing customers with high traffic usage. Not really. I think 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 one or two, I don't want to go into much details of this. We have carrier aggregation between the different layers. What we can do is we can also do some load optimization between those two layers. We can do some algorithm timing and changes depending on where we see the traffic and how the traffic movements are.
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 just want trying to understand whether it has fallen off this quarter on a seasonal basis because this, I think you disclosed it last quarter, but, this quarter, you haven't really shown the same number.
Hi, Fung. You rightfully discovered that we didn't disclose it this quarter. 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. We follow industry practice on this one.
Right. Is it up still Q-o- Q or is it down?
Yeah, it's up.
Yes, definitely up.
Yes.
Up Q-o- Q. Okay, all right. Thank you so much.
Yes.
Thank you.
Next we have Alex Goh from AmBank. Please go ahead.
Yeah. 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 GB 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 or in any way or any provisions or back-loaded costs that we may be seeing over the next quarter, if this COVID-19 pandemic continues? That's my first question. The second one is regarding your prepaid subscriber. I understand it's still early days. Given the fact that it is still coming down, do you think this trajectory is going to deteriorate further? In terms of a 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.
Part of this question is, I was wondering whether you could actually give us the breakdown of your postpaid and your prepaid revenue because you used to show it in the past, but now, I think it'd be quite good for us to able to see the breakdown in terms of your revenue in that category. My third question is, I didn't quite catch your earlier answer on why your interest costs were coming off. Was there some early repayment of your loans or were you refinancing your loans?
Alex, thank you. Loh, maybe you want to take the first two questions and then Inga the last one?
Yes.
I think the cost on the 1 GB , I will leave it to Kesavan to cover. Back to the channels. As I say, we are moving to some of the non-traditional to digital. The alternate channels. This channel, in fact, they are a lot more efficient and they are running 24x7 . To a certain extent, I would think that if we can move more transactions to some of these always-on channel, in fact, it's better for us.
Yep. Prepaid.
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. What we see is with the additional 1GB free, the network is still able to sustain and maintain and still provide the quality experience that I spoke about earlier. There's no additional cost that we see that we need to invest in.
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 w e also manage that by the time that the 1 GB is offered. 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. There's a different reason for doing that. As you know, the operators also supported the government's request to support during this period of time.
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. We don't look at it like that. We build the network more robustly in order for it to cater for consumer usage. What has changed is the shift in time or geolocation usage, which we explained earlier.
Go to the question number two on the prepaid base, right? Of course, if you look at, there's about 12 days in the month of March. This is where the MCO, 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 is a duration before we can churn them out. What you see the churn are mainly the non-revenue generating subs. If you look at the revenue generating subs and active base, it's still relatively holding and stable. Yep.
Alex, for question three, I can actually take it offline with you. In general, we are actually disclosing prepaid internet with digital segregation in terms of revenue, and then postpaid and also non-internet revenue. These kind of categories going forward. Yeah. Question number four is something that Inga 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 a registered MYR 37 million gain this quarter.
Okay. How often do you do these swaps? Usually when you do swaps, isn't there additional cost involved?
We do this on a regular basis, as mentioned earlier on in the question. We do this every quarter.
Okay, thank you.
There's no additional cost related to this.
Thank you. Next we have Prem 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. Based on your experience, and 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 element in the economy going forward, how do you see this impacting your CapEx plans? 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? Secondly, if I could just understand the risk. 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 their ability to pay for these devices?
Who carries the risk on all these devices, and do you see that as a potential problem down the road? I'll stop there for now.
Hi, Prem. Thank you very much for the two questions. Let me take the first one, and then either Inga or Loh can take the second. There is a shift, and the shift is basically from key market centers to more residential areas. There's also a shift in terms of usage. The usage one is actually beneficial for us now because now people are using it throughout the day, and the peaks are slightly different. For different areas, you will see different utilization, as you know. Now, the network is built for that purpose. Besides the tweak that he talked about, Kesavan also did talk to you about going down and looking at where there are capacity constraints and seeing whether we need to upgrade those.
We're not seeing a significant amount of activities where we have to go out and put extra sites and extra equipment, those kinds of things. You don't see that. What you're seeing is more managing the peaks at residential areas. If work from home continues, we are prepared to support that. Don't forget that the scale is where Digi has actually been very strong in the past. We do a lot of sharing on backhaul of capacity, co-building of backhaul capacity, where we have already done those things. We are leveraging a lot of things that we've actually invested over the last couple of years, and we don't see the need to think about accelerating 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.
The scale in terms of our sourcing capabilities is one of the best. We are confident that that will see us sustaining. Inga or Loh, do you want to take the second question?
Back to the device bundle. First thing is, we don't do it aggressively as an acquisition. A device bundle or PhoneFreedom 365 are mainly focusing on our base. That is really also leveraging on the credit scoring model internal that we have developed as well as the external credit scoring model from those credit rating agency, in order to make a decision, who is entitled and who is not. That's one. 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, Loh.
Yeah.
Who carries the risk if a customer doesn't pay?
Today, it's Digi. Yep.
Sorry. Digi carries the risk.
Yeah, you see, at the same time, we also have optimized subsidies compared to the device bundle. If you look at the previous device bundle, those are heavy subsidies, and we are moving into financing, device financing. It's a balancing between high subsidies and lower subsidies. You carry the outstanding amount in the balance sheet.
All right. Thank you.
Thank you. Once again, ladies and gentlemen, star one keys for questions. Our next question comes from Ranjan Sharma from JP Morgan. Please go ahead. Thank you.
Hi. Good afternoon. Thank you for the presentation. I have a couple of questions. The first one, I think, one of the participants already asked along 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. If you could share your thoughts on that side. Second is on 5G. We had a lot of discussions early this year. Have they been completely stalled?
If you can give us some update on where 5G is with respect to Malaysia. 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.
Yeah. Maybe I can take question one. You're right. Once MCO is lifted and things get back to a certain level of normalcy, you will see people moving back. That's why we have consistently said we will build a consistent network, and it's a robust network. What we are 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 take also into account business areas and also residential, because that's where you see the high throughput or high peak later in the evenings. Hence why doing a lot of this optimization will help balance. Of course, the stress to the network will definitely reduce once people come back to work.
We don't see any major need to do a lot of investments at this point in time. Sorry, can you just kindly repeat the second question again?
Sorry. My second question was on 5G. We had a lot of discussions at the beginning of this year, late last year, where Malaysia was effectively looking at a single 5G network. If you can share with us where we are in the process or if that process has completely stalled at the moment. The last question was, how is your MyDigi app different from what your competitors are offering, and does that give you a competitive advantage in giving your customers a very effective digital channel?
Yeah, perfect. Thanks for repeating those questions. A little bit hard to hear. It's a heavy rain in KL. Just on the second question, then the third question, Loh, why don't you take the MyDigi? I'll take the second question. On the second question, yes, you're absolutely right. The 5G, what started off as a huge effort, of course, the government has had to reprioritize, and in some case, reprioritize that given what's going on, not just in Malaysia but globally. I think it's the right prioritization. We are still in the process, and we are still doing a pilot and testing on the 5G areas as for what was agreed upon by the government, and we just continue to do that. 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 already had planned to do during the period. Loh, just on MyDigi, please.
Whether competitive advantage or not, MyDigi is something we have started two years now. Of course, we have seen a lot of early adopters are going in there, and as you pointed out, this become a very effective direct channels where we can engage and continue to offer things that is relevant to the customers. This also will be a platform where we can build more services in the future beside the connectivities. Again, now, there's still work needs to be done for the critical mass as well as the late adopters. That's still something we are focusing on.
Yeah, I think with the focus that we had on building this capability a year and two 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? At that point in time, we did it because we wanted to make sure that we were empowering the customers a lot more, 24/7 a day, to be able to transact and communicate with us and self-serve. Given in this kind of situation, yes, you're right, it is a competitive advantage to stay connected to our customers.
Okay. Thank you.
Thank you.
Our next question comes from Usman Ghazi from Berenberg. Please go ahead.
Hello. Just wanted to make sure, could you hear me?
Yes, please go ahead.
Okay, great. Thanks. Yeah, I had a question regarding Digi's exposure to the overseas migrant worker segment. I know this was a more core area for you back in 2016, and since then, you've been moving away from this segment. How big is your exposure to this segment at the moment given all of the worker movements that we're seeing and some financial distress in this particular end of the market? Thank you.
Hi, Usman. We don't really actually disclose on migrant worker segments specifically due to competitive reasons. Unfortunately, we can't share more details on this. I can actually have a separate follow-up session with you later after the call on your other questions, yeah?
Okay. Great.
I guess we are also nearing 4:00 P.M., where we need to end our earnings call for the day. If there's no other questions, I would like to thank all the participants. Jeffrey, could you help us to end the call? Albern as well.
Yeah.
Thank you.
Just before I hand over to Jeffrey and everybody else, I just wanted to say thank you very much for taking the time, guys. I know a lot of you are working from home probably as well. 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 and so on, please reach out to Wendy. Thank you again, and over to you, Jeffrey.
Thank you. That concludes today's conference call. Thank you for your participation, and now you may disconnect. Goodbye, all.