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Page 1: Disclaimer - listed companydigi.listedcompany.com/misc/InvestorPresentation/...best managed companies 2016 # 1 most committed to corporate governance # 1 best investor relations #
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Disclaimer

This presentation and the following discussion may contain forward looking statements by Digi.Com Berhad (Digi) related to financial trends for future periods. Some of the statements contained in this presentation or arising from this discussion which are not of historical facts are statements of future expectations with respect to financial conditions, results of operations and businesses, and related plans and objectives. Such forward looking statements are based on Digi’s current views and assumptions including, but not limited to, prevailing economic and market conditions and currently available information. These statements involve known and unknown risks and uncertainties that could cause actual results, performance or achievements to differ materially from those in the forward looking statements. Such statements are not and, should not be construed, as a representation as to future performance or achievements of Digi. In particular, such statements should not be regarded as a forecast or projection of future performance of Digi. It should be noted that the actual performance or achievements of Digi may vary significantly from such statements.

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2016 Review

1Q 2017 Updates

2017 Outlook

Q&A

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SOLID MILESTONES AND DELIVERABLES IN 2016 in an increasingly competitive and tough market environment

2016 Review

Leading 4G+ network

85% 4G LTE l 41% LTE-A

Stronger 900Mhz spectrum portfolio

Solid progress on digitisation of

core business

RM6.23 billion service revenue

with solid postpaid growth

Stronger profitability

@ 45% EBITDA margin

20.9 sen DPS equivalent to RM1.63 billion

Inspiring Customers’ Digital Life

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ENABLING CUSTOMERS WITH FREEDOM TO INTERNET with Digi’s robust 4G+ network

2016 85% 4G LTE 41% LTE-A

2015 65% 4G LTE 29% LTE-A

Digi 4G+ Network Built for best entertainment experience

• Consistent internet experience for all forms of digital entertainment including videos & music streaming, gaming

• Deliver the internet needs the way our customers wanted

2016 Review

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Digital Customer Experience

Engaging customers via digital

Self-Serve MyDigi App Experience

Payment, account

management and rewards

Promote

Engage

Sell/Serve

Service

BETTER, FASTER AND MORE CONVENIENT digital customer experience across all touchpoints

2016 Review

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STRONGER Indoor Signal

WIDER Outdoor Coverage

BETTER Network Capacity

900MHZ SPECTRUM IN JULY 2017 to support our customers’ growing digital demand

2016 Review

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RESILIENT SERVICE REVENUE a reflection of solid internet growth on Digi’s robust 4G+ network

10.5 11.0

11.4

12.1 12.3

2012 2013 2014 2015 2016

5.89 6.13 6.33 6.35 6.23

Subscribers (‘000)

Service revenue (RM billion)

48 48 47 45 42 ARPU (RM)

Resilient service revenue with the support of 12.3 million subscribers

• Solid postpaid revenue growth of 10.2% o 2.1 million postpaid subscribers with a

steady ARPU at RM81

• Resilient service revenue with 11.4% higher internet revenue anchored by o 64.7% smartphone adoption and o 65.8% active internet subscribers

• Prepaid remained challenging from intense

competition and headwinds among price sensitive segments o Stronger focus on internet proposition o Prepaid revenue moderated by 6.6%

• Healthy ARPU over a larger subscriber base with

higher internet revenue contribution

2016 Review

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STRONGER PROFITABILITY from solid cost discipline and improved operational efficiencies

1.83 2.04 2.10 2.03 1.64

1.63 1.67 1.77 1.89

2.01

3.45 3.71 3.87 3.92

3.65

2012 2013 2014 2015 2016

2.93 3.04 3.16 2.98 2.96

Opex

EBITDA (RM billion)

46% 45% 45% 43% 45% EBITDA Margin

Solid operational efficiency to support robust acquisition activities and 4G+ network expansions

COGS

Total Cost (RM billion)

• Cost of goods sold (COGS) improved by 19.3% to RM1.64 billion from lower device costs and traffic costs

• Gross profit higher by 1.6% at RM4.96 billion

• Opex[1] increment marked a solid improvement o 3.9% annual increment versus 6.6%

previously while supporting robust NW and IT infrastructure expansions

• Relatively steady EBITDA and stronger margin at

45% o Improved gross profit albeit moderated

service revenue o Higher internet revenue contribution

alongside efficient cost management

2016 Review

[1] Excluding the shared site rental impact

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0.70 0.74 0.90 0.90

0.78

2012 2013 2014 2015 2016

2.23 2.30 2.26 2.08 2.18 Ops Cashflow (RM billion)

35% 34% 32% 30% 33% Ops Cashflow Margin

Robust ops cash flow alongside with efficient capex to deliver industry-leading 4G+ network

Capex (RM billion)

• Delivered 4.6% stronger ops cash flow to RM2.18 billion or 33% margin

• Strategically invested RM780 million capex or 12.5% of service revenue as planned, to o Improve the quality, capacity and coverage

of our 4G+ network o Accelerate fiber network expansion o Support our core business and digitisation

roadmap

• Normalised profit after tax (PAT)[1] moderated 3.1% to RM1.67 billion or 25% margin o Progressively higher depreciation from

annual capex investments in stronger infrastructure capabilities to drive sustainable growth for the business

SOLID OPS CASH FLOW with robust investments in 4G+ network and digitisation of core business

[1] Excluding prior year tax adjustment of RM35 million

2016 Review

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15.5 21.9

26.1 22.2 21.0

2012 2013 2014 2015 2016

26.3 21.3 26.0 22.0 20.9 DPS (sen)

170% 97% 100% 99% 100% Payout

Ratio

Healthy shareholders returns with dividend yield above 4%

EPS (sen)

• Earnings per share (EPS) trimmed lower to 21.0 sen after accounting for RM35 million prior year tax provision

• Total dividend of 20.9 sen per share equivalent to RM1.63 billion or almost 100% payout

• Balance sheet remains robust with solid financial capability and flexibility to fund future investments and operational commitments

• Total assets strengthened 17.9% after the upfront spectrum payment fees of RM598.5 million and investments for 4G+ network expansions

• Net debt to EBITDA ratio stayed healthy at 0.6x level

HEALTHY SHAREHOLDERS RETURNS with dividend payouts of RM1.63 billion

2016 Review

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COMMENDATION AWARD FOR ENTERPRISE OF THE

FUTURE - ACCA MaSRA Awards 2016

BEST MALAYSIAN ORGANISATION

- LIFE@WORK Awards 2016

“…mix of talent, gender, culture, experience, thoughts and values are what make Digi better, stronger and more unique”

RECOGNISED FOR BEST WORKPLACE IN MALAYSIA in establishing an inclusive, diverse and family-friendly workplace

2016 Review

E-LEARNING PLATFORM - For employees

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TOP RECOGNITION FOR OUR CONTINUED COMMITMENT in creating value for our stakeholders

FinanceAsia Malaysia’s Best Managed Companies 2016

# 1 MOST COMMITTED TO CORPORATE GOVERNANCE # 1 BEST INVESTOR RELATIONS # 2 BEST CEO # 3 BEST MANAGED PUBLIC COMPANIES # 3 CORPORATE SOCIAL RESPONSIBILITY

The Edge BRC 2016 HIGHEST RETURN ON EQUITY

OVER 3 YEARS

• MARKET CAP > RM10B CATEGORY • TRADING/SERVICES, IPC AND TECH CATEGORY

2016 Review

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2016 Review

1Q 2017 Updates

2017 Outlook

Q&A

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+15.2% Internet Revenue

+2.5% Gross Profit +1.0% EBITDA with 45% margin

RM952 million Prepaid Revenue

with improved margins

+12.1% Postpaid Revenue

Completion of spectrum refarming and LTE 900Mhz

deployment

1st Mobile Operator in Malaysia with fully capable

online retail store

68% smartphone subscribers

1.7 million Active Users

on all-new MyDigi

Financial Highlights

Operational Highlights

STRONGER INTERNET REVENUE AND IMPROVED MARGINS beset by headwinds from legacy prepaid revenue

1Q 2017 Updates

60% LTE subscribers among smartphone users

1.3x data traffic growth y-y well-supported by 4G+ network

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2016 Review

1Q 2017 Updates

2017 Outlook

Q&A

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Service revenue & EBITDA margin

Around 2016 level

Capex 11% - 13% of service

revenue

RELENTLESS FOCUS TO DRIVE SUSTAINABLE GROWTH and digital opportunities

2017 Outlook

• Clear ambition to be Customers’ Favourite Partner in their digital life

• 2017 outlook remains challenging

• To stay on course and steer in positive directions to deliver o Freedom to internet with best 4G+ network

that is suitable for all types of digital entertainment;

o Stronger operational efficiencies to deliver best value and affordable products and services to more Malaysians;

o Profitable revenue growth – with solid growth from postpaid and internet; and

o Engaging digital products, richer retail and digital experiences that are meaningful to customers

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Q&A

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RESPONSE TO MSWG’S QUERIES

Q&A

The Group recorded a decline in revenue from RM6.9 billion in FY2015 to RM6.6 billion in FY2016. What are the measures taken by the Board to improve the Group’s revenue for FY2017?

1

In FY2016, we strategically tapped on the strong demand from sim-only mobile plans and significantly scaled down on device sales. The lower device sales contributed to moderated overall revenue to RM6.60 billion although mobile service revenue remained resilient at RM6.23 billion and EBITDA relatively stable at RM2.96 billion or 45% margin. While FY2017 remains challenging, Digi is committed to deliver profitable returns with: • Sharper focus to stabilise prepaid with sustainable service revenue contributions; and • Stronger internet and postpaid growth on the back of solid our 4G+ network enhanced

with LTE 900Mhz, innovative product propositions alongside with quality digital customer experience.

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RESPONSE TO MSWG’S QUERIES

Q&A

We also noted that the ARPU has been on a declining trend from RM48 in FY2013 to RM42 in FY2016. Could the Board explain the measures taken to address the declining trend in the ARPU? What is the Board’s targeted ARPU for FY2017?

2

Over the years, we have rapidly expanded Digi’s subscriber base by 11.9% from 11.0 million in FY2013 to 12.3 million in FY2016 and empowered more Malaysians nationwide with affordable and quality internet services while steadily delivered stronger internet and service revenue. Internet revenue rapidly surged 89% from RM1.23 billion in FY2013 to RM2.31 billion in FY2016. With the advent of growing demand for internet and digital services, ARPU from traditional voice and messaging will continue to decline but in exchange for more sustainable revenue streams albeit at lower ARPU. There is no specific targeted ARPU but we will focus on driving sustainable growth in our core business and enable new digital opportunities for Digi.

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RESPONSE TO MSWG’S QUERIES

Q&A

With intense competition in the telecommunication industry, what measures have been taken by the Board for Digi to remain competitive and attractive to customers?

3

Our ambition and focus to become our customers’ favourite partner in their digital lives will continue shape our strategies and outline our initiatives to continue to create value in our business amid the intense competition and headwinds in the industry. We have rapidly strengthened our products and internet proposition with stronger relevance for different target segments, accelerated on 4G+ network expansion and enhanced digital customer experience capabilities. Going forward, we will further strengthen our distribution channels and leverage on digital tools, technologies and ways of work to cater for innovative product and services for our customers.

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RESPONSE TO MSWG’S QUERIES

Q&A

The revenue from sales of devices declined by 46% from RM502 million in FY2015 to RM271 million in FY2016. What are the reasons for the steep decline and what are the measures taken by the Board to improve its sales of devices?

4

Sales of devices in bundled plans are usually driven by seasonal demand and in FY2016 customers’ preference are highly skewed to sim-only mobile plans and affordable 4G phone bundles. As such, we took the opportunity to drive solid acquisitions via stronger propositions on sim-only mobile plans and affordable 4G phone bundles and consequentially lowered the sales of devices in FY2016. We will continue to leverage on the seasonal demand of popular 4G devices in Digi’s bundled plans but it will not be a core focus to drive sales of devices as a standalone as these are usually bundled to customers at a discount from cost.

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RESPONSE TO MSWG’S QUERIES

Q&A

It was reported that Digi would roll out the 900Mhz spectrum from July 2017 onwards. Which locations would Digi be focusing for the roll out? What would be the timeline to complete the roll out?

5

We initiated spectrum re-farming based on the new 900Mhz and 1800Mhz spectrum allocation at end 2016 and successfully completed the exercise in 1Q 2017. Our LTE 900Mhz site deployment in 2017 will primarily focus on delivering stronger indoor coverage in key market centers and driving wider 4G LTE network coverage nationwide. Going forward, we will continue to roll out LTE 900Mhz sites progressively to more locations to support customers with better network quality, coverage and capacity to complement our existing 4G+ network.

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RESPONSE TO MSWG’S QUERIES

Q&A

What was the reason for Other Receivables to increase from RM221.1 million in FY2015 to RM436.8 million in FY2016?

6

The increase in Other Receivables was mainly attributed to the claims from the Government such as USP receivables and GST rebates.

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[email protected] www.digi.com.my

THANK YOU!