Earnings Call: Q4 2018

Jan 24, 2019

Good afternoon, ladies and gentlemen, and welcome to the conference call. Today with us, we have Mr. Alban, Mr. Nakul Amwini. Please begin, and I'll be standing by for the Q and A. Thank you. Good afternoon, Jeffrey. Thank you for the introduction. Good afternoon, everyone, on the call. Thank you for taking time with us this afternoon. With me is Naku, the CFO Winnie, the IR Head and also the representative of management. Let me just introduce 2 that might join us in conversation with the Q and A, which is Lou, the CMO and Keesel Van, the CTO. So let me just get started. I just wanted to give you an overview of Q4, but also start off by giving you an overview of the performance For the full year. And let me just start off by giving you a quick overview of full year 2018. It's been a strong and a good year for us. We're happy in terms of what we've delivered, mainly on shareholders' return. If you look at some of the details in the deck that you have, I just want to point out a couple of things. Firstly, on postpaid, we took Postpaid revenue to a 14.8% growth. Internet revenues, very strong subscriber, Internet users at 500,000 subscribers, increase of it. That took Internet revenue to close to 20%. EBITDA margins improved by 2.4%. On the efficiency, we've talked to you throughout the whole year also from 2017 in terms of the structural changes that we've made in efficiency. We continue to deliver on this pillar and flat OpEx for 2018 as reported. CapEx, We invested in RMB685,000,000 for 2018 as per the guidance. Looking at LTE, On 4 gs and LTE Advanced, coverage at the end of 2018 at 65% 89% on 4 gs LTE. We've spoken a lot about Mydigi. On the digital transformation, Mydigi closed the year at 3,000,000 subscribers, But more importantly, more than 85,000,000,000 upsell transactions on the MyDigi platform. Digital distribution, you've In a recent announcement, it's a different number one position on both Facebook and Android. We would like to think that some of the digital transformation, the things that The structural changes and the model changes has helped us hold in a one position on net promoter's call for Let me now move to Q4 2018 with some specifics on The numbers. For Q4 2018, postpaid revenue was 15% year on year, Internet revenues 13.7 percent and EBITDA year on year also improved by 2.2%. You see improvements on the OpEx, Which is 0.8 lower OpEx. We've also seen significant improvement across our channels in We see a 12% improvement in sales and marketing efficiency. We also seen a rapid growth on 4 gs subscribers, taking the total slightly shy of 8,000,000 subscribers. This transformation I touched on, the one item here that we are also now exploring is to take education to a Borrowed number of students nationwide to the Jones Study Program and later this quarter we'll come up with more information on this. Let me just break it down in terms of the areas that we focused and in the Q4. In the area of core business, we saw more conversions from pre to post, mainly on the entry level. We also saw higher ARPU based on a couple of campaigns that we've run, for example, on borderless On roaming packages that we have now been pushing out of the market, trying to take a roaming position and also on plan upgrade. We also see an increased contract at pace with the launch of our flagship phone Freedom 365, And we'll cover that later. On myDG, the active users It's very promising and what it shows us is that the 30% increase year on year. But what has been probably a change From user behavior, it's also when we launched Box of Surprises and the rewards on this platform as well. And the base is not only an active once a month, but they're extremely active, which is close to 10 times 10.7 times a month on mobile. Digital distribution, something that DG started in the industry, we are now working with 2 new methods of trying to do that. 1 is on mobile data management On Android devices and the other one is making purchases on these devices much easier. On connectivity for 2018 in the last quarter, We also tried moving into 2 things. 1 is both pilot on WiFi. Client Close to 2 70 plus locations where WiFi is available and also worked with TMB on the Justin Homefighter, PLC. Let me just take you one more slide before I sort of hand over to Nakul. Just very quickly on the Internet. I touched a little bit on the coverage that we've taken on 4 gs LTE and LTE Advanced. Fiber, we are we have passed now 8,400 kilobiters of fiber. Data traffic, We see 58% year on year growth and 11% quarter on quarter. Same thing on 4 gs Internet subscribers, That growth continues with close to 8,000,000 subscribers on 4 gs and the monthly data usage is slightly shy of 10 gig Thank you, sir. Nakul, can you just walk through the next slide, please? Thank you. Thank you so much, Algon. Gentlemen, I'm going to take you through the next slides, give you a round off on Q4 and just briefly touch upon how the 2018 has been for us. Slide 7, if I speak about the postpaid, we added 75,000 customers this quarter And our subscriber base increased up to 2,800,000 as at the end of the year. With the Internet penetration Standing at a healthy 89% at 2,500,000 customers. We actually continue to grow the entry level Postpaid segment from a pre to post conversion, we also continue to drive ARPU through higher ARPU plans, Whether it's the SIM only plans or the ones which are linked to devices, we also introduced easy device ownership through the Phone Freedom 365 program. And as a consequence, the postpaid revenue grew 15% year over year And a healthy 4.2% Q on Q. Also coupled with the Internet revenue grew a healthy 26.1% year on year For the same quarter versus the same quarter last year. Rounding up the year, this has been the best postpaid growth In 2018, which is underpinned by solid acquisition momentum and stronger base management efforts. And as you can see, the 2018 has also witnessed Close to a 15% growth on postpaid business as a whole. So the quarterly performance continues to be the annual performance for us as far as postpaid is concerned. As I move on, the next slide, we speak about the prepaid. We did continue with our good efforts to strengthen the prepaid Internet adoption And also the usage as far as our subscriber base is concerned. And we have an ever increasing Internet subscriber base to about 6,700,000, Which is approximately 75.3 percent of the prepaid base. The prepaid revenue increased the FreeBet Internet revenue increased 2.8% year on year and almost the same percentage Q on Q. Although the growth has been challenged by intense data price competition And the abundant data offers that are there in the market. As a consequence, the moderating demand for prepaid legacy services And the steady conversions to postpaid has led to a 12.6% reduction in prepaid revenue year on year. And if I look at 2018, the decline did narrow to an 8.5% versus the 12.9% that was there in 2017. So on an overall basis, prepaid was better as far as 2018 is concerned, but we do continue to see data price competition And abundant data offers in the market. If I move on to overall round off on the service revenue, There was a marginal sequential growth of 0.5% on service revenue leading to a $1,480,000,000 number. And as mentioned, this is underpinned by solid postpaid growth and steady ARPU development at RM41. And like I also mentioned, this Challenged by the decline in the prepaid legacy services and the Internet data price competition. Consequent to an increase in data usage to 9.9 gigs per customer, as Alban mentioned, and along with the healthy growth Of 4 gs subscribers to 7,900,000, we did deliver a double digit growth again in 2018 Opel Internet revenue of 13.7% and 3.9% quarter on quarter. The prepaid service revenue as mentioned and the impact On mobile termination rate was substantially mitigated by the solid growth on the postpaid and also on the Internet growth. And as a consequence, The service revenue remained resilient at $5,92,000,000 for the financial year 2018. I move on to the operational Efficiency areas for us. And if you look at the cost of goods sold and this is the next slide, which is Slide 10. The cost of goods sold have increased 4.8% Year on year and 18.2 percent Q on Q because of the surge in demand for contracted device bundles And also the new phone freedom program that Albanet briefly mentioned about. However, at the same time, the gross profit Growth remained quite solid at 1.1% year on year and at 3.3% quarter on quarter because of our rationalization efforts on the subsidy front. We continue to focus on operational excellence, which has contributed to an OpEx reduction of 0.8% year on year, approximately 33.7% of service revenue. But the more important part is that we have Spent a lot of time and effort and resources in 2018 to develop new digital capabilities. And at the same time, we still managed to keep the OpEx flat, Which also reflects our solid cost management efforts and operational efficiency across the different cost elements, Whether it's sales and marketing, network or IT operations. I go further down into the P and L. Our EBITDA rose 2.2% year on year And 2.8% Q1Q at a 44% margin. The EBITDA for 2018 also Increased a similar percentage to 2.4%. Our profit before tax improved 9.4% year on year and 4.2% Quarter on quarter, which was aided by modest depreciation and a steady finance cost of $25,000,000 for the year. This result has been consequent to a healthy growth on EBITDA. Our PAT remains steady at a 23% margin, Which is up 6.9% year on year and 4.6% Q on Q. Further down, Slide 12, on the CapEx, we continue to invest to expedite network deployment and also capacity upgrades In preparation for 2019, and as has been our focus over the last years, we always look at The end of the previous year and the beginning of the next year to try and maximize how we want to invest into our network to grow profitable businesses For that, especially clear. As a result, the CapEx investment was about $230,000,000 for the 4th quarter. However, the CapEx for the whole year was within the guidance of the 11% to 12%. We ended the year at 11.6%. Because of the high CapEx spend this quarter, the operating cash flow, which did improve by 6.2%, We ended up at a 35% margin for entire 2018. Slide 13, further on, the EPS after accounting for the MFRS shifting impact, which I'll briefly touch upon in a subsequent slide, Stood at a healthy RMB0.49. The Board of Directors declared a 4th interim dividend of RMB0.48 per share, which is With this, we round up 2018 with a cumulative dividend of RMB0.196 per share, which is 4.3% uplift Of the dividend of $2,100,000,000 for 20.80. The net debt to EBITDA ratio remained at a healthy 0.8 times, While the conventional debt over total assets is steady at 21%, well within the sharia threshold. The next slide Talks about the impact on MFRS fifteen. And as you can see, The impact of IFRS on the quarter has been a reduction in service revenue of $0.45 almost compensated by an increase in device And an increase in OpEx of 2 with a net negative on profit after tax of 7. We've also indicated the full impact of 2018 as far as MFRS fifteen is concerned and it is included in the table below. Net net, The impact of pre versus post MFRS is a $78,000,000 improvement in our net profit. My last slide before I hand it over to Alvin. 2019 is going to witness an adoption of MFRS 16, and also going to see an MTR revision. However, for the purposes of easy comparison of financial statements, The 2018 will not be restated, and all communications regarding to the development will be based on the old accounting principles. Financial statements of 2019 will be based on both old and the new, which is going to facilitate a comparison as far as our underlying performance is concerned. You will also note that there is a 33% reduction in the termination rates in 2019, which we've already factored in as far as our guidance for the year is concerned. With this, I hand over to Anwin to take you through the rest of the presentation. Okay. Thank you, Nakul. Just allow me to take you away from the financials and numbers for a few minutes. I just want to talk to you a little bit about Things that we have done beyond just the core part of the business. So starting off with Jhoam study, which is a partnership with ASTRO and Mila Prima, Together with the Ministry and MDAC, we've taken the possibility of reaching children in school and kids That don't have access to either tuition or extra classes, but are able to get good content, Education Resources via the mobile phone. This is Dine Bosto through a good collaboration and partnership with the partners that I mentioned. Also on reducing inequalities, we have taken a campaign sorry, a program that we launched in Q4 to drive digital resilience By providing awareness to students on Internet safety, but also sort of reducing the quality, but providing future scale And learning opportunities for youth and Malaysians in general. On the next one, I also want to just announce the changes in the DG management. As you have seen, we announced to Bruce James is our CFO. With me today, Inge is also present to meet the team and officially start later. So I'll hand over to Linda to you next. But before I do that, I also want to just record my appreciation for Nakul. This has made a tough choice of returning back home and family. And it's definitely going to be missed Hi, PG. And I know all of you on the call have also interacted with Nakun, winning fans in the last 2 years. So Nakun, thank you very much and maybe just I'll leave it to Anew, then to Dan and then Inder. Yes. Thank you so much, Alvin. Thanks to everybody. I've loved every bit of the last 2 years that I've spent It's been fantastic running and working with all of you and the size of the company that we are. I'm happy that we And this team had a high with the good results of 2018. And I also want to personally thank you, Albin, for the support that you've given me during this tough time over the last year or so. And over to you, Hingor. Thank you, Nakul. Hi, everyone. I'm really looking forward to working with you in And now it's good to meeting everyone of you on the call as well, and actually, hopefully, face to face. Yes. Very good. Thank you, guys. Then just allow me to wrap this up with 2 last slides. One is on the priorities for 2019. On the slide, you will see that the strategy continues to be the same with a little more emphasis on a couple of areas. The growth that we look at is Based on existing customers coming into 2019, base management, increase in up levels and also focus on ensuring I'm disconnecting, please, Matt. We will continue to drive postpaid growth. Also, as mentioned before, building new inroads into B2B and SME, While deploying network with the best Internet experience across LTE and 4 gs. We've done well on efficiency for the last couple of years. We intend to keep that focus and momentum on efficiency just as we do on growth. And that will also allow us to free up I need that we need in terms of investments and to grow new areas and additional areas as well. On the organization, we'll continue to focus on the culture of the company, has been a DNA and a big part of the success of the company and constantly build talent to ensure that that continues going forward in 2019. Just allow me one last slide on the wrap up here, which talks a little bit about sustainable growth in 2019. Allow me to just look at 2018, what we've guided previously. Service revenue is plus 0.2 Close at €5,924,000,000,000 EBITDA margins at 46% And CapEx's service revenue ratio ended at 11.6. For 2019, on the service revenue side, we Provided about a pre- and post MFRS view for you. On the service revenue side, our ambition is to maintain it around the 2018 level. On the EBITDA, we aim to keep it at low single digit growth. And on CapEx as service revenue, we intend to keep it at the same range that we have guided for With that, as we conclude our presentation, And we open for Q and A. Jeffrey, over to you to help us manage the questions and answers. Thank you. Thank you. Our first question comes from Arthur Pineda from Citi. Hi, thanks for the opportunity. Several questions please. Firstly, is it possible to elaborate on the cost savings initiatives? I see in your guidance you're expecting revenue to be flat yet EBITDA to increase. What other items can you actually extract more efficiencies from? Thank you, Chris. And as with regard to Spectrum, any expectations on Spectrum assignments and the timing Based on your dialogues with MCMC, last question I had is with regard to network capacities. I noticed that you've kept your CapEx at 11% to 12%, But you've seen data volumes balloon significantly over the last year. Is this 11% to 12% Thank you for your question, Arthur. This is Nakul. I'm going to take The first one and the next two will be taken up by Erbil. On the cost saving initiatives, I think Quite proud to say that we ended 2017 with a 3% reduction in OpEx. 2018, like I mentioned, was relatively flat. But yet the more important part for us has been that we have invested into the business at the same time. As far as OpEx saving initiatives for us is concerned, The main focus that has been for the last few years and is going to be going forward as well on how we digitize our core business. And by digitizing our core business, I mean by digitizing our sales, by digitizing our service channels and also by increasing the digital solutions that we offer to the customers. All of these initiatives help us in managing our cost base. For example, help us in reducing the cost of the call centers, which I've seen a reduction of close to 50% over 2 years and obviously helps us managing our cost levels better. The kind of improvements we've seen on MyDG, which has 3,000,000 customer today, obviously helps us in actually delivering to our ambitions in this area. We also look at a lot of other elements as well and we have a host of initiatives. Some of them are on the lines of reviewing our sales and maintenance contracts And trying to negotiate with the vendors as well. And we did also announce that we introduced a new operating model Sometime in Q2 this year or in 2018, which was basically building on a future proof data centric network operating model, which Obviously, gives us tools and capabilities, but also helps us in managing our cost levels much better. And We also did see that the sales and marketing costs were reducing by 12% in 2018. So we've got good proof points To indicate that we have done well as far as our operational excellence program is concerned, and we believe that we're going to continue to work on it in 2019. Okay. I'll finish to answer the other two questions. One is around spectrum and the other one is around CapEx and how we are able to stay efficient on CapEx. On Spectrum, there has been no change from the previous update that we did in Q3, post Q3 call. However, discussions continue to be held with the Ministry and with MCMC, and we have been kept informed in the middle. So we're happy with that progress. On the network and CapEx investments, yes, you're right. There is an increase in volume of usage And customers in terms of capacity requirements. But we are very confident that we feel that we have the right CapEx level To support that growth and we also feel that the sourcing capability that we have both as Digi and as being part of Telna Group, I'll be able to scale the benefits from that. And we also believe that we will have dynamic effects if and when we need it. You'll be able to look at it. Hence, why the guidance is between our top percent, which we feel is sufficient. Understood. Thank you very much. Thank you. Our next question comes from Wei Shi from BNP Paribas. Hello. Hi. Thank you very much. My first question is with regard to the prepaid data Dynamics, you mentioned that there has been an well, the competition has been quite intense. Can you give us a little bit more details as to What changes in data dynamics happened in the Q4 for the revenues to be flat On a year on year basis in the Q4. And related to this, can you please I'm just trying to understand The apparent gap between the company's ability to combat competition in the postpaid segment where you've been relatively successful First is the prepaid space which continues to decelerate. So any sort of thoughts around that would be Appreciate it. And then second question is with regard to cost. Can we expect more O and M Cost savings in 2019 and presumably this is the cost savings that materialized in 2018 was due to the Transition in your operating model. So can we expect more synergies to be ripped In this year. And then finally, in terms of the guidance, I noted your comment that the guidance takes into How the reduction in MTR, so in the absence of the MTR reduction, where do you think your revenue growth Could potentially be in 2019. Thank you. Okay. My name is Lo. Back to the first question, I I think part and parcel will impacting the monetization of Again, if you look at our development, you can't just look at 3 and 4 as a separate, I think you should look at it on 2017. And I think Yes, happy with the progress. So what it means is really while we are moving 3 to 4, we also start to look at new segment in Prebid, it's mainly on the migrated segment, Internet is more and more relevant. At the same time, there's still So this is really laying back to the side and parcel of the digitization activities and the bulk of the supply, how do we continue to churn out relevant offering All right. Thanks, Lo. Hi. This is Nakul. I'm going to try and answer the second and the third question that you have. On the O and M cost savings in 2019, I just want to caution here that the savings that we are getting on O and M are not solely as a result of the new operating model. And like I mentioned, we run a lot of initiatives to manage our cost much tighter and much better, and this is one of the many that we are doing in each of those areas. I guess you're alluding to the fact that the O and M cost for the Q4 is slightly lower as compared to the you. Other quarters of the year, but I would also like to say some bit of it is also linked to some of the OE initiatives that have had an impact from The cost for the previous quarters and hence the cost for Q4 looks artificially low. On our ability to maintain these run rates and Work on efficiencies in 2018 sorry, 2019. Like I said earlier, we believe in running a very structured cost program, And our cost initiatives are such that help us in giving recurring benefits and structural benefits going forward. And that has been one of the motors of this company on how we can look for very sustainable avenues to reduce our costs, So which, in my view, is going to continue as far as 2019 is concerned. I cannot give you a number here if you're looking for that because we don't guide on specific elements of our costs, Let me speak about an overall cost program, and we do guidance based on the EBITDA and the top line. Your next question On the revenue growth, if it's not for the MTR, where it is going to come from? I think what has worked well for us in 2018 is What we're going to concentrate on as far as 2019 is concerned as well. And so the growth definitely is going to come from our existing customers We will try and upsell them with higher value price plans. We're going to try and see how we can sell them Devices, get them into a bundled program, use our phone, Freedom 365 initiatives and so on. The next Definitely, he's also going to come from growing the Internet. And I think we also spoke about the fact that the Internet consumption has been increasing over a period of time. And we believe that though there are some challenges on Internet monetization, especially on the prepaid, but we are well positioned in terms of How we can get the maximum benefit out of it. So that is going to be one more growth engine for us for 2019. Last but not the least, we have Spoken about the B2B segment, and we also believe that the next level of growth opportunities are going to come from B2B. And like we mentioned in the past, we are underrepresented in this market on B2B, and that is one untapped potential that DG is Currently working on it. The fact that we have been quite effective and efficient in terms of Transitioning from prepaid to a postpaid operator, we ended the year 2017 with a negative 5% and we end 2018 Slightly better than flat. We believe that we are well positioned to run transitional initiatives in the company, and hence, we are betting on B2B What a growth for the future. Thank you very much for your comments and all the best to management old and new. Thank you. Thank you. Our next question comes from Srinivas Rao from Deutsche Bank. Hi. Couple of questions and thank you very much. Also, Nakul, best of luck. I understand some constraints on your behalf. First on the Domination rate, will that have an impact on margins going forward? So I mean are you a net interconnect Yes, I would imagine. So any cut should have a positive impact, if at all modest. So if you can just comment on that. Second question on the overall revenues itself for the sector and for you. Sector revenues do not seem to be growing Almost at all, give or take. So what's your outlook for the sector? And within that, how is the competition shaping up? I mean, Clearly, we haven't had at least it looks like any major competitive impact of the TM's launch. Bert and your thoughts on someone like Qmobile would be helpful. I'll come back for more questions and if you can just talk about these first. Thanks. Yes. Thanks, Winnie. Thanks for the nice words. And yes, I look forward to speaking to you later as well. As far as your first question on the impacts on the margin of on account of MTR, I'd like to say that there is an impact on revenue and there is an equivalent impact on cost. The net effect On the margin, it's insignificant for us. So you don't expect an increase or dilution in The gross margin as far as the MTR rate reduction is concerned. On the sector revenue, we're not growing. I'll pass it on to Alwin to comment. Yes, Sune, hi. How are you? Just on the question that you had in terms of overall revenue and the sector, I think we actually had a we actually quite positive on 2018, seeing that we had come from a bad or negative Yes, to where we are today on service revenue and also on the margin. And while that took a lot of discipline in terms of how we execute on the Products and pricing, it actually required us to be even more disciplined on the channels and distribution and in terms of how we actually do The efficiencies in terms of driving that growth. And so you could see that we had intentionally moved to postpaid. We had gone into pockets of prepaid where there was still growth for us and at the same time openly doing pre to post migration and movement Strategically, and that has paid off for us. I think competition will always be there, and I think we have our own strategy in terms of focusing on the segment. So I will continue our focus as guided on postpaid. B2B, as Nakuru and Lo mentioned, will be future growth. But there's also an element of increasing usage of our existing customers, which I believe is still there for us. And that comes from moving them up onto ARPU levels, moving them into roaming plans, growing them into new devices and larger data consumption Packages, which we will see an increase on. And for me competition is not just on price and packaging, but creating competition, it's really how we engage, How we provide customer experience and also how we reach out on the channel. So first, we have our plans quite clear. Understood, Anshul. Albon, this is very helpful. Two more questions. First, what is your estimate for the addressable B2B market? I mean, we have a broad number for the mobile market in Malaysia and probably a very small percentage right now is enterprise. So A, what is your sense of the addressable market for enterprise? B, does the change in the regulatory Framework for access to fiber, does that help? How do you view that in the context of your B2B or that's not Really important for you at this stage. Yes, Srini, I'll take those 2 together. First of all, I I couldn't give a breakdown of sort of SME and business revenue per se, but I can say a couple of things. It is not the They are the slowest in terms of adoption of Internet on SMEs in Malaysia. There's still a huge opportunity for the SMEs to run business in a digital format. And that includes services like tracking, sales force, automation, sales force management and many, many things that require the The whole supply chain to move into a digital way of doing business in Malaysia, and that's something that the government is pushing and that's something that we also feel now is timely. The opportunity there is quite huge. As you know, Malaysia, 70%, 80% of the business revenue comes from SME. There is a huge upside there. PG has always had a position in SME on the mobile line, but where we see opportunity and growth is now coming from the digital or the data Internet line. I think that's where we will see subscription and pickup increase. To answer the regulatory part of the question on fiber, Yes and no. I think regulatory additions have been taken on fiber will ensure that there is Increased number of businesses that move on to fiber. But that I don't think that certainly your business space is very different from Consumer space, you see more Malaysians using Internet on their mobile, and that's their first gateway into the Internet. And I see that as also the Same way that SME and businesses will move in. When I talk about businesses, I'm not talking about the few of us that have said in corporate buildings in 2 market centers. I'm talking about the majority of Malaysians that are neither so called small and medium businesses, between 50 to 100 employees. That's where the opportunity is. Understood. This is helpful. Thank you so much. I'll come back for more questions in the queue. Thanks, James. Our next question comes from Prem from Macquarie. Thank you for the opportunity. Few questions from me. Firstly, if you could talk about Your broadband plans, I noticed this comment around working with Tanaga in Jassen. What has the experience been and do you think there's an opportunity for you to Draw this part of the business even further going forward. That's 1. Number 2, I note your comments In the slides where you talk about ARPUs postpaid ARPUs from new additions of R5 to R10 higher, Could you talk about what's happening there? Is it that people coming onto the network because the average usage is already going past those basic plans And therefore, they're going for bigger plans? Or are you attracting the higher end of the market, which naturally has a higher ARPU? If you could Talk around those things. And finally, again, I'd make this comment that your 11% to 12% CapEx to service revenue number seems very, very efficient. Do you think there's any risk to this number from a regulatory perspective if there was A greater emphasis on QOS, do you think there's a risk that this number will have to move up over time or are you comfortable with this Over the medium to long run. Thank you. Hi, Prem. Thank you for the question. I'll split up the questions between me and Lou and Naku, so in that order. Just on the question that you had on the pilot that we did in the TMB and whether we see fixed broadband is something that we want to go into. This was a pilot, and the pilot was with TMB. We saw that as a good opportunity to actually do 2 things. 1 is to try and see What it would take to get on to the regulatory changes that we've seen now on fiber. 2nd one is to actually Take the pilot as a learning to see and do a proper assessment, whether there is some form of a business opportunity that we would like to Please, Adrienne. So our position is still in discussion. It's just started. We will come back To this call in future, to make a clear stand in terms of whether we see and whether we will be part of it. But as of now, we are treating it as an opportunity. We're looking at the new regulatory frameworks that have come out on fiber and we're evaluating it as we do with any You've got a new technology opportunity in the market space. Do maybe you want to take the next question? I think if you back to the question on postpaid carpool partly, Really there's a few components here. One is when the customer moving from pre to post and if you understand postpaid is Almost like always on, right. And so when you're always connected to the network and then the tendency to use Always say it was a postpaid. So naturally, when you move from a B2B, you are always connected in debt. As a result, you Good morning. And then we'll move into the postpaid. And also, this postpaid comes in a different device bundle. I think the device will also Look at our average user growing a lot more healthy and now it's And I think this also going back to how we package the product and we see it to monetize. Yes. Prem, this is Nahul. I'm going to take your third question. This is on the CapEx. Yes, I mean, it's quite obvious that We are probably one of the more efficient in the market as far as CapEx spends are concerned. But I just also want to put it on record that we do have we are amongst the best The market as far as the 4 gs LTE penetration is concerned, we are close to a 90% and the LTE advance is actually sitting at 65% With our fiber footprint at 8,400 kilometers. So we've demonstrated the fact that even though we spend between 11% to 12%, We are right up there as far as the network performance is concerned. What we regularly shout out is that we want to be the most consistent network in This means that we want to give 10 megabits a second to the customers 80% of the time and we also want to make sure that 4 gs is available 80% of time for the customers. And this is the mindset with which we invest into our network. If there are bits and pockets where we feel that we will need to invest a bit more To give a better quality to the customers, we take those bets and we invest in those areas. And if LM to 12% may Fall short of that particular range, then we look at dynamic CapEx, as Alban mentioned, to invest in those specific areas for us. Alban also did mention earlier that we take a lot of synergies as far as the global procurement is concerned. And like we've mentioned in the past as well, there is a procurement Company that does the sourcing of procurement in Telenor for all the BUs, and we get a huge benefit on economies of scale. And that fact definitely helps us differentiate from the market. And We are going to be consistent as far as the network promise is concerned. Yes. Thank you. All right. Thank you very much and good luck, Nakul. Thanks, Ben. Thank you. And our next question comes from Alex Guo, Ambank. Thank you very much. I've got 3 questions. Your notes mentioned that you are South African will in fact account The MFRS sixteen for leases. Could you give us a bit of guidance? Would it be any would it be significant to 2018 numbers, if that were to be applied? That's my first question. And Second one is regarding the broadband that you're looking into in terms of opportunities. The MSP involves freeing up fiber and it includes, I think, even your backhaul fiber. I'm wondering is that a new business opportunity that you're also Good morning. And I'm just wondering how big is that market if you were to be involved in? And my third question is regarding the Cost initiatives that you are doing, I mean, I've noticed there were significant reductions in terms of your O and M, the traffic costs And as well as the sales and marketing, I'm just wondering internally, what sort of KPIs have you Come up with in terms of is it how you look at 5% or 10% reduction this year? You. I'm just wondering how do you measure the reductions in terms of those particular markets? And my first question is regarding the challenge on the postpaid segment. I mean, we've seen some of your peers coming out with prepaid I mean postpaid plan at ringgit for unlimited period. I'm just wondering is that going to put a lot of pressure on the postpaid segment In terms of the pricing and in terms of the permutations that are going to come up later this year? Thank you. Thank you for the questions. Alex, this is Nafil. I'm going to take the first and the third And Alban will take the second and Lo is going to take the 4th one. But on the first one, you spoke about the MFRS 16 And the significance of the impact for our 2019 numbers. Actually, we are going to like I mentioned, we will use a Prospective method to account for this accounting standard. And then next week on Wednesday, we're going to organize a session in our office To give you a brief of how this is going to be implemented in 2019. So I don't want to spend too much time as far as MFRS 15 is concerned in this call. I hope you don't mind. And let me just take the third one first, And that's on the O and M and the sales and marketing and the traffic cost and how do we measure them. See, our fundamental is very, very basic here. We are working on in a structured way to digitize our core business. And whatever KPIs we define to digitize the core business, Whether it's reduction in call volume, whether it's monthly active users, whether it's digital sales, whether it's a digital service to the customers, whether it's How much of our transactions are going through the cloud and so on and so forth. So those are the KPIs that we measure. So we don't set our eyes on an x percentage cost reduction Because we believe that a top down ambition there without granular KPIs or key drivers is not the way to run a structural cost initiative. So hence we break it down into those elements and that's how we deliver cost reductions in different areas without Please note, without compromise to our growth ambitions. And I've mentioned in the past, cost reduction is as much in the DNA of Digi as growth is. And the fact that we don't compromise on either of the 2 for the benefit of the other is seen in our numbers as well. The second one, Alex, I think the question is on broadband and whether we see an opportunity on backhaul fiber. Certainly, it's an opportunity, but I think the way we've been doing backhaul fiber and fiber deployment for DG is one is we do it on our own, 2 we do it Two partnerships and you announced that at Cellcom before. And the fiber that we have is backhaul mainly for right now for sites ensure that this capacity at the site level are able to take the traffic, yes, and so it's stepping into the backhaul. So we will evaluate it and then we see at appropriate level that we see this opportunity, then we will also evaluate that fully. But for now, we are just waiting to On the question number 4, I think price is important, but Look at the Internet market, what drives consumption is more than 5. I think really today if you look at The device and the rich content that really drives the consumption. So and this will continue to customer will continue to continue more. So then the question here is really not just about price, it's a lot more of our experience, especially in the postpaid market. If you go deeper into the process segment, there were different needs and we can consume different content with the different prices. So again I think we believe here is yes, price is important, but it's even more important to continue to work on The flight packages and the experience that will continue to help us. Thank you. Thank you. Our next question comes from Chongqing Fang, CIMB. Hi, thanks for the call. Three questions from me. Firstly, on the cost front, I saw a couple of movements in the key items like staff cost Provisions, so I think in the deck you mentioned professional fees to strengthen digital and distribution capabilities. Can you sort of provide a bit more color on that, the movements Q on Q? Whether there are any one off there or Is this going to be the run rate going forward based on your maybe your new operating model? And also just to clarify on the O and M question earlier on, Would you mean to say that the 4Q 2018 level is the sustainable level going forward and the Q3 was the one where it was artificially high because you had some costs Related to OE initiatives in that quarter. That's my first question. Second question on the prepaid side, the business still looks Fairly under pressure. So appreciate if you could give us some idea or outlook on the prepaid revenue going into 2019. And thirdly, on the postpaid side, very clearly, I mean, you guys are doing quite well migrating pre- to postpaid in terms of the sub base. But regarding new customers, right, customers that you're looking at in the medium to high ARPU range, Are we gaining share from other competitors? Yes, those are my 3 questions. Thank you. Hi, Fong. This is Winnie here. With regards to the SaaS cost That is a little bit higher in the Q4. That's kind of one off in nature. So it's a provisional catch up for the full year cost. So I think for assessment purposes, it will be better for you to take the whole year to protect for 20 Yes. The next question on the O and M, which seems to be the hot topic in this call. I think I would also recommend let's not look at the cost for the Q4 here because like we did also mention, there are some elements of one off in nature. But our endeavor definitely is to run the structural cost program from 1 year to the other. And hence, even on O and M, the advice would The same to look at the whole year trends because like you also mentioned, Q3 was abnormally higher as compared to Q2 and then Q4 is lower as compared to Q3. So Let's look at an overall trend for the full year as a reference looking at the cost for the quarter. But like you. It is quite clear that our structural cost program covers all elements of cost and nothing is left unturned. Okay, thanks, 3 and 4. I think back to your question number 3, again, I don't think we can Just look at pre and post separately, we really need to look at from a totality point of view. So, yes, as we just covered earlier, as I mentioned we moved from the pre to post, Obviously, then there will be a new segment within the pre mainly the lagging segment as well as more HMO users that they're not necessarily copying. Then the user behavior and how they pay, how they consume will be very different. So I think if you look at 2018 our MI development both pre I think we are happy with what we have done so far. It's the right strategy. So again, if you look at the totality, as and when we move from the pre to post and within the post date Ben, there's a totally different activity that focus not just on the pricing but is really focused on upgrading them The device bundle as well and also offer them The right quarter for the right segment within the full scale. So I think holistically, so if you look at a lot of this you have seen in 20 The revenue is flat. We are happy with the Mi development. And given the soft development On the combined basis, we are happy with it. Okay. And then just one more point on the high output segment that is really All to do with the what we are working on now with the device bundle as well as the B2B segment and what has Okay, got it. Thank you so much and good luck, Nakul. Thanks so much. Thank you. Our next question comes from Nazzari from Capital Dynamics. Hi, good afternoon. This is Efeffer. One question. Speaking upon the B2B before, you mentioned you'll be targeting the small SMEs. May I know the reason why You wouldn't want to target the enterprise? That's all. Thank you. Thanks for the question. We didn't say we didn't want to target enterprise. Actually, we would welcome anybody to move forward to the DG network. But on B2B, we actually see SME as an underserved area Where they're actually transforming and transitioning into Internet data, they're going borderless into their business. Malaysian SMEs in a lot of businesses in the region And data roaming are becoming relevant to these group of potential customers. Hence, I will take those focus on B2B to TPS and E. For enterprise customers, we are definitely working and having our base and we continue to grow both enterprise and semiconductor. Okay, clarifies it. Thank you. Understood. Thanks. Thank you. And next we have a follow-up question from Arthas Citi. Hi. Just a follow-up question on this enterprise and B2B SME push. As you said, you are underrepresented in these areas and see opportunity. How big a portion of the market is this? What percentage of the market would be Enterprise, B2B and SME. And when I look at your flat revenue guidance, it doesn't seem to imply growth In these segments or is it merely because you're seeing shrinkages in the consumer segment and that's offsetting the growth in enterprise? Thank you. Yes, Arthur, thank you for the follow-up question. And so what I mentioned earlier was on B2B. I think we see We see this opportunity and we see this growth. What we really see is the growth coming from data and the data monetization towards the B2B customers. On the market and guiding in terms of how big the market is, I'm not going to probably be able to do that right now. But what we see is we have a Big group of SME in our own base that is now starting to use and starting to want data To do their business cross border and locally as well. And what we're doing is investing into solutions that It's based on connectivity and based on core services that we already provide today. For example, rowing, for example, fleet management, sales force automation. Those are the things that we're taking out and packaging out to the market. You would have seen in Q3, Q4 that we took a big position on roaming and borderless. Those are also areas which have pain points today for B2B and enterprise customers, and we see this as an opportunity to grow. Yes. There's some level of rebalance between movements in terms of prepaid, postpaid and enterprise and B2B. But we are just starting this journey, and hence why we think that this is for the long haul in terms of bringing growth for the next couple of years. Hence why we've guided as such, We believe that that's the right way to look at this opportunity. And just to clarify, this is coming from Your competitors? Or are they relatively unserved customers at this stage? I think there's both in that category. There There's a big base that is has not gone into the space and there's also those that are and there's new opportunity there as well. Understood. Thank you very much. Thank you. And next we have a follow-up question from Srinivas. Jeffrey, we'll take the question from Stenyra. And do you think that could be the last question? Yes, we have no more further questions. Okay. Swinney, please go ahead. Yes, hi. Thanks. Just sneaking in. Does the what you call the Chinese equipment manufacturers, the global issues which are going around On account of that, does that have a potential impact on you going forward? And especially, As I understand that there is a fair amount of sourcing which happens from them. So any feedback as to A, How do you see the landscape play out over the next 12 months? Yes, 21. Thank you for the question. I think we've seen some trends The past with Enbago and everything else that we've done before. But I think we have basically, together with the other business units and Telenor, are looking Yes, this is Matta. So now we consider business as the normal. We're also looking at what the country is Concluding in this area and you've seen recently news in this space as well. And we're just monitoring. For now, it's business usual for us. Understood. Albin, thanks so much. Thank you. Thanks for the question. Everyone, thank you very much for participating in the call. Thank you for the very list Good questions today and also a very engaged session. I wish everyone a pleasant day and also wishing you ahead Happy Chinese New Year to everyone that celebrate. Thank you. Thank you. And that concludes today's call and you may now disconnect. Goodbye.