Communication and Multimedia Market Capitalization
As of Dec 2014, the major Communication and Multimedia (C&M) companies produced a market capitalization of RM208.48bil (2013: RM195.33bil) which represented 12.63% of the entire Bursa Malaysia’s market capitalization of RM1,651.17bil (2013: RM1,702.15bil). This indicated a y-o-y growth of 6.73% for the major C&M companies with telecommunication sector leading the pack due to a surge in mobile data-centric users whereas Bursa Malaysia’s market capitalization registered a decline of 3.0%. The decline followed a major capital flight that took place as market assimilated a series of unfavourable external factors such as the fall in crude oil price and the weakening Ringgit coupled with persisting political uncertainties. C&M companies’ operations on the other hand are domestically focused and were not impacted.
DiGi registered double digit gains of 24.4% in market capitalization at RM47.97bil (2013: RM38.56bil) due to improved reported earnings. DiGi’s revenue for 2014 showed a 4.3% growth to RM7.02bil from RM6.73 bil in 2013, fuelled by more affordable data plans and improved network coverage.
The awarded contracts to Telekom Malaysia (TM), namely, High Speed Broadband Phase 2 (HSBB 2) and Sub Urban Broadband (SUBB) of RM1.8bil and RM1.6bil respectively over a ten-year period have aided TM in recording a double digit growth of 28.9% in market capitalization to RM25.59bil in 2014 (2013: RM19.85bil).
In an environment with boosted investor sentiment amid improved financials and optimistic business prospects such as the award of submarine cable projects, TIME dotcom (TIME) marked a growth of 37.9% in market capitalization to RM2.8bil in 2014 (2013: RM2.03bil).
Communication and Multimedia Industry Revenue
The Communication and Multimedia (C&M) industry generated revenue of RM58.91bil in 2014, a 3.0% growth compared with RM57.20bil recorded a year earlier. Noticeably, the revenue growth had been decelerating from 2012-2013 growth of 7.2% and 2011-2012 growth of 11.4%. However, it can be noted that the C&M industry still managed to show small but positive revenue growth despite economic uncertainties, stiff competition, and the impact of Goods and Services Tax (GST) implementation.
In 2014, telecommunication sector took the largest portion of the C&M family with 78.0% (RM45.96bil) revenue contribution; while broadcasting and postal sectors contributed 10.5% (RM6.19bil) and 2.6% (RM1.53bil) respectively.
The C&M industry has gone through constant development in terms of technology advancement as companies continued to increase CAPEX in the establishment and/or upgrading of digital platforms. A few notable mentions which have impacted the industry’s revenue are:  Devices that enable internet connection are now made available in many different form factors which has eased users’ experience in accessing a wide range of contents and multimedia functions. This has in turn spurred higher usage of mobile data for application and services.  Aggressive penetration of over the top (OTT) applications has been hurting revenue of typical telecommunication business model.  Wider range of services and application that provides content to increase TV viewership and music subscribers has been seen as a potential avenue for telco, advertisers and broadcasters to monetise their content.
Revenue for the telco market remained relatively stable, which saw revenue for 2014 inched up 1.24% to RM45.96bil (2013: RM45.36bil) with TM contributing the largest pile at 24.5% followed by Axiata with 23.9% and Maxis with 18.3%. The y-o-y growth was also relatively smaller as compared to 4.54% in 2014 or at RM45.36bil (2012: RM43.39bil) due to the highly competitive nature of the industry.
Revenue contribution from mobile voice has always been the largest chunk and remains the status quo. However, it has been on a downward trending trajectory no thanks to OTT applications (WhatsApp, Viber, WeChat) that allow voice call, instant messaging, and file transfer simultaneously all in one application, all of which have caused a reduction in the usage of mobile voice and mobile messaging (SMS). Consequently, the industry has experienced a 4.4% dipped in mobile voice revenue to RM12.61bil (2013: RM13.19bil) and a 27.2% decline in mobile messaging to RM1.87bil (2013: RM2.57bil). The accessibility and functionality of these OTT applications rely heavily on internet connection. This was reflected in both mobile data and fixed broadband revenue which have experienced a double digit growth of 17.4% y-oy to RM6.96bil (2013: RM5.93bil) and 12.0% to RM3.46bil (2013: RM3.09bil) respectively. In contrast, fixed voice has taken the path of contraction due to lower subscriptions as users prefer portability and privacy, thus relying mostly on mobile phones whether at home or on the move.
All telecommunication companies offer homogeneous services with pricing that varies. Maxis, Celcom and Digi, 3 mobile network giants in Malaysia, creatively market these identical services with different packaging to appeal to their targeted prospect. With similar services offered across the industry without regulated pricing, it creates a customer base that is highly price-sensitive. In the 2014 handphone user survey conducted by the Malaysian Communication and Multimedia Commission (MCMC) regarding the loyalty of the customer towards their service provider, 90% of users have stayed on to their service provider for at least a year, and of the 10% that switched telecom service provider, 60.7% of the users switched because of cheaper rates and packages.
Internet Penetration in Malaysia
Broadband internet is recognized as one of the essential catalysts in the development of a nation and growth towards a digital economy. Broadband internet has been rolling out progressively for the last couple of years to broaden network coverage in order to increase internet penetration throughout Malaysia.
According to the 2014 statistics gathered by the International Telecommunication Union (ITU), Malaysia showed a slight bump of 2.83% in mobile cellular subscription to 148.8 subscribers per 100 inhabitants (2013: 144.7 subscribers). Unsurprisingly, this number is significantly higher than both the developed countries’ average and the world’s average by 24.1% and 54.84% respectively as MCMC reports that 28.9% of Malaysian carries two phones and 4.3% carries three or more phones. Mobile broadband subscription on the other hand sky-rocketed 366.4% to 58.3 subscribers per 100 inhabitants (2013: 12.5 subscribers), although it is still 40% shy of the developed countries’ average. The figure doubled the developing countries’ average and led the world average by a respectable 56.72%. The sudden leapt in mobile broadband penetration in 2014 can be greatly attributed to the aggressive competition by China’s production of mobile devices, namely, Xiaomi, Huawei, Lenovo and Meizu which made smartphones much more wallet friendly together with the flourishing mobile apps in the Android operating system that induced consumer’s demand for higher mobile data capacity. Telco service providers in turn are faced with tight competition among its peers’ aggressive strategy of repackaging exiting products in order to appeal to the growing demand of mobile internet that is needed to facilitate higher usage of content and application services.
Fixed mobile broadband subscription edged up 2.0% to 10.1 subscribers per 100 inhabitants (2013: 9.9 subscribers), nearly on par with the world’s average of 10.3 subscribers and 53% above its peers of 6.6 subscribers. Meanwhile, the average individual using the internet in Malaysia at 67.5 per 100 inhabitants is within close radius of the developed countries’ average of 79.5 per 100 inhabitants and is way ahead of its peers and the world’s average of 32.4 and 40.6 respectively. Hence, this clearly illustrates that Malaysians have significantly higher preference over mobile broadband than fixed broadband due to the advancement of 4G LTE technology, with its higher speed and capacity that allow for broader access to data demanding contents and applications.
Average Connection Speed
Based on the 2014 statistics released by Akamai, Malaysia’s average internet speed grew 35% y-o-y to 4.1 Mbps from 3.0 Mbps in the previous year, achieving a global rank of 75. In the latest Q2 2015 statistic, Malaysia bumped up another megabit to 5.0 Mbps and ranked 70 globally. However it has only attained slightly above half the average speed of Asia Pacific countries of 8.22 Mbps in 2014 and 8.63 Mbps in Q2 2015. Thailand being Malaysia’s closet peer, managed 7.1 Mbps in 2014 and 8.6 Mbps in Q2 2015, placing itself 6th among its Asian competitors. Evidently, the reigning top 3 countries in 2014 both globally and in the Asia Pacific region are South Korea, Hong Kong and Japan with respectable average speeds of 22.2 Mbps, 16.8 Mbps and 15.2 Mbps respectively.
Mobile internet speed in Malaysia averaged 2.6 Mbps in 2014, a 36.8% improvement from 1.9 Mbps a year earlier. The results are based on usage from smartphones, tablets, computers and other devices that connects to the internet through mobile network providers within a country. A total of 50 countries were included in this study, specifically countries/regions that have threshold usage of 25,000 unique IP addresses. Within the region, Japan had the fastest average connection speed of 8.3 Mbps followed by Singapore with 8.2 Mbps. New Caledonia with 1.0 Mbps had the lowest average mobile connection speed.
Increasing Capacity and Connectivity
As of 2014, there were 1.56 mil High Speed Broadband (HSBB) ports and 103 exchanges installed, with utilisation rate of 52% of the available ports. Asymmetric Digital Subscriber Line (ADSL) services saw a 4.4% dip to 1.52 mil subscribers as compared to previous year due to the adoption of optical fibre that is capable of significantly higher speed without the reliance of a fixed telephone line unlike the ADSL. Malaysian government has been showing ongoing effort to improve the broadband experience by introducing the HSBB phase 2 and SUBB projects which was awarded to Telekom Malaysia. This project has been split into two parts with the former to have commenced in 2014 and a total of eight new links with a total distance of 201km have been deployed. The second part is still in progress.
According to the MCMC, 4G LTE coverage reached 27.8% of the populated areas in 2014, exceeding its national target of 20%. With expected increment of 10% each year, 4G LTE coverage is targeted to achieve a minimum of 50% populated areas by 2017. The deployment of 4G LTE has brought upon a whole new experience in Malaysia, enabling users to stream content and access applications that were hardly possible a couple years back due to speed and capacity restraint. However, there are challenges in dealing with the expansion of 4G LTE due to, inter alia, spectrum limitation, cell towers, site acquisition and cabling. While sharing infrastructure is the most effective method, service providers have to properly evaluate the competitive nature of maximizing revenue and increasing market share.
The telecommunication industry saw a moderate growth this year and is expected to continue its growth trajectory at the same pace going forward despite the penetration of OTT applications that has been causing disruption to the traditional telecommunication business model with service providers seeing a downtrend of users’ minutes of use (MOU) for voice call. In contrast, increased usage of OTT applications, which is shown in the findings of Nielsen, has also indirectly heightened service provider’s profit in the mobile internet section as it spurs mobile data usage. Apps are the core of mobile devices’ functionality and forecast by Statista shows a steady upward trend both in apps revenue and downloads which indicates a higher demand for mobile internet. Industry vendors such as Ericsson noted that apps reviews and curiosity to try out a new app are the main factors that drive users to download apps, especially apps that enable communication.
Data consumption per individual in Malaysia averaged 819MB per month in 2014 and is expected to hit 2GB in 2018 according to Ericsson’s Mobility Report. This is expected to be driven by the growing consumption of video content especially from YouTube and Facebook in particular. Inline with this is Cisco’s Visual Networking Index which states video content as one of the fastest growing segment of mobile data which takes up 55% of global mobile data traffic in 2014.
The growth of Public Key Infrastructure (PKI) in Malaysia has also echoed the increase in mobile internet banking coupled with Bank Negara Malaysia’s (BNM) effort to transform Malaysia into a cashless society that has likewise shown positive feedback. Subscribers of internet banking in 2014 advanced 12.82% to 17.6 mil (2013: 15.6 mil) with a total transaction volume of 350.7 bil (2013: 270.0 bil) carrying a total value of RM4,108 bil (2013: RM3,457 bil). In contrast, 350.7 bil of transaction volume in 2014 is 15 times more than the volume of transaction 10 years ago and is expected to thrive going forward in conjunction with Malaysia’s transition into a cashless society as part of the Economic Transformation Programme (ETP). Malaysia’s Budget for 2016 has also allocated a sum of RM1.2 bil to the MCMC for the improvement of better ICT infrastructure which is aimed at improving the internet broadband speed in rural areas from 5 Mbps to 20 Mbps and up to 100 Mbps in urban areas.
In view of all the above-mentioned prospects and expansion signals, the telecommunication industry is looking ahead with various ICT opportunities and emerging services to fulfil the digital lifestyle that is inevitably a significant part of the future. These opportunities are available for the industry stakeholders to tap into, but they would need to deal with various challenges such as facilitating intensive usage and the enhancement of ICT skills.