Saturday September 26, 2009

The big picture

By B.K. SIDHU

MAXIS Bhd took a giant step by getting iPhone to Malaysia’s shore. It is a major coup for its business but of course it could have done it sooner but Maxis took its time to negotiate a deal that favoured them.

Two years late but iPhone is here, and so is 3G iPhone. The mere entry created excitement and any push of this sort will help Maxis as it operates in a very competitive environment.

Whether it has indeed boosted its net additions is unclear. But it was a strategy to lock up several hundreds of users onto its network for 12 to 24 month period and this was done via its cleverly crafted pricing packages for the iPhone offering at a time when growth in the cellular sector is expected to remain in the single digits.

“Mobile players will do anything to get new subscribers and keep the base intact,’’ says an analyst.

While the iPhone strategy has worked in Maxis favour, there is also a huge gap in subscribers from Maxis base and that of its rivals.

We are talking about a 1.71 million subscriber gap with Maxis having 11.4 million subscribers as at end-June, 2009, Celcom (M) Bhd 9.69 million and DiGi.Com Bhd 7.2 million. U Mobile is a fairly new player in the market place and so are the MVNOs (mobile virtual network operators) which include Tune Talk.

According to Frost and Sullivan’s report attached to Maxis draft prospectus, U Mobile has 200,000 subscribers as at June 30. Tune Talk, a month old, has about 20,000 subscribers.

That gives Maxis a clear 40% market share, Celcom 34%, DiGi 25.3% and U Mobile 0.7%.

That makes Maxis a clear leader and it would be tough for Celcom or even DiGi to usurp its position.

Maxis launched its service in August 1995, nearly four months after DiGi, and about eight years after Celcom. In the early 2000s, Maxis stole the top spot from Celcom and up to now the latter has remained the underdog.

Unless Maxis does not invest and its service quality really falls, it will be a challenge to narrow the gap in subscriber numbers. Having said that, there are numerous complaints about the quality of Maxis’ service, dropped calls are rampant and the mobile broadband offering really needs an overhaul, according to several Maxis subscribers.

“The challenge is for Maxis to invest in infrastructure. Now is a chance to get it right so that it can really be a strong player in the mobile broadband segment,’’ says an industry observer.

In its draft prospectus, Maxis said it must continue to expand and improve its product offering and upgrade its network.

For the three years ended Dec 31, 2008, Maxis said it invested RM2.9bil. For the first six months of this year its investments totalled RM357mil even though its capex commitment for the period was RM1bil.

But other players – Celcom and DiGi – are committed to invest about RM1bil each this year.

While the subscriber gap is wide, the competitors are always looking for ways to eat into Maxis market share.

“If these two players, Celcom and DiGi, can come up with something fun and exciting such as free voice airtime or work on a tie-up to bring in Google Android or even the INQ Mini 3G, this can shake the market up a bit,’’ says the market observer.

Google Android is a slick, forward-thinking more-than-modern piece of software that Google created and gives away to any hardware developer who wants to ship it on a mobile device.

T-Mobile is the first company to sell Android-based phones in the United States. Motorola has joined HTC Corporation as the second manufacturer to create Android based phones for the US market. The INO Mini 3G is a social networking phone with an Internet-based Twitter client that Singapore Telecommunications will be bringing to the republic’s market place.

Celcom and DiGi should move towards that direction as not everyone wants a Blackberry, but an Internet phone or social networking phones can have mass market appeal.

The fight for subscribers is intense in the marketplace with price wars, but the real challenge in the future is video. U-Tube is a clear example of what sort of growth can be expected with video offerings.

Video is here but in bits and bites. It is not fully exploited even though there is a huge youth market with insatiable craving for faster connections and video.

“Video, music and data are big markets and it is about how fast these players can deliver what the market wants,’’ says the market observer.

Pyramid Research forecast that mobile broadband and infotainment services together will represent 64% of total data revenue in 2014.

Maxis has seen high growth in non-voice revenue, accounting for 31.1% of mobile revenues for the 6 months ended June 30.

Competition in the future will not be from the celcos alone, it will be from the MVNOs, four WiMAX players, fixed line operators and Internet carriers such as Yahoo Voice, Google Voice and Skype.

When you grow accustomed to the communication and entertainment services available on the PC or TV, it is only natural that you want access to them while on the road.

So, at some point Maxis will also need to shift gear to get into the quad play which is essentially about bundling services that can ride on more than just mobile phones.

Here is where it stands to benefit having Astro. As its sister, Astro will help in content aggregation and distribution and if it is properly done, it can really shine in the quad play environment.

Complacency is its biggest threat given its market leadership and that is something it has to worry about as well as churn a competitive market place. Consumers will opt for value and service quality.

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