Maxis Berhad | Annual Report 2012

Maxis Berhad // Annual Report 2012 76 OUTLOOK GLOBAL INDUSTRY TRENDS The global Telecoms market is expected to continue on a growth trajectory, although at a slower momentum. The sources of growth are shifting from traditional voice to broadband and multimedia content. Operators also face complex challenges in protecting their existing core revenue streams while diversifying into broader Information and Communication (“ICT”) services. The industry ecosystem is being shaped by complex, interlinked trends, impacted by the digital evolution. This is leading to an explosion in data traffic coupled with a downward pressure on prices, resulting in a clear traffic-revenue disconnect. As a result investments in new and efficient technologies such as LTE are required. In order to rapidly monetise data network investments as technology life cycles become shorter, telecom operators are looking at new opportunities in lower margin adjacent businesses. Consequently, operators with traditionally high margins have had to contend with decreasing profitability margins while pursuing growth. Telecom operators are shifting their strategic focus accordingly, taking the inorganic route to build adjacent capabilities, and operating models are changing. ECONOMIC OUTLOOK Malaysia’s demographics, economy and overall risk profile present favourable demand conditions for telecoms services. The growing number of households, large youth segment, growing consumption-driven economy and increasing income levels in particular will help sustain demand. Malaysia’s population (29.1 million) is expected to grow at an average of 1.3% YoY. Economic conditions are on a positive trend; GDP per capita is expected to grow at an annual rate of 6%. Overall, country ICT spend is witnessing a steady increase. Malaysia performs well relative to regional and global countries on related indices of ICT adoption and network readiness. Small and Medium Enterprises (“SMEs”) are the next growth driver for Malaysia’s economy currently contributing 31% to GDP and expected to grow to 50% by 2020. This growth is being enabled by a strong commitment from the Government through various assistance programmes including support from agencies such as the SME Corporation Malaysia. The Government has embarked on a transformation program to raise Malaysia’s GDP per capita by over 50% to achieve its vision to become a high-income nation by the year 2020. Several policy reforms and programmes such as the Economic Transformation Programme (“ETP”) and National Key Economic Areas (“NKEA”) initiatives were introduced to spur the nation’s economic growth. This vision has been translated into ICT sector development initiatives impacting both demand and supply of ICT services. In addition, the Government is structurally shifting the balance towards a private consumption-led economy from the previous export-led economy. Telecommunications is seen as one of the key enablers of this transformation. CONSUMER DEMAND TRENDS Malaysia is witnessing an increase in consumer sophistication and a shift towards digital behaviour, in line with global trends. There are around 17.5 million unique Internet users in Malaysia, spending an average of nine hours a week on social networks. Malaysia ranks #18 of countries on Facebook with 13.4 million users at 51% penetration. The adoption of smart devices is growing exponentially led by smartphones and tablets. Smartphones are quickly becoming the leading handset of choice, with Android emerging as the dominant OS. Smartphone penetration in Malaysia is expected to grow from its current 24% level to over 50% by 2016, driven by technology savvy Gen Y consumers and declining smartphone prices. Growth in tablets is expected to lead to a higher level of multi-screen usage.Along with growing Internet access and the social networking phenomenon, over-the- top (“OTT”) services are growing with freemium or advertising-based business models. Customers are increasingly opting to use these services (e.g. WhatsApp, Viber, handset embedded VoIP and instant messaging (“IM”) apps), which increases the risk of cannibalisation of traditional revenues. In addition, cloud services for consumers and businesses are gaining traction with increasing personal and enterprise digital content consumption and storage. A greater emphasis on cost and capex efficiency and flexible business models, offers prospects for attractive revenue streams based on cloud computing and data centre services for businesses. TELECOM MARKET OUTLOOK Malaysia’s telecoms market is growing increasingly competitive in both voice and data and is characterised by the proliferation of both new players and tailored offerings. Maxis retains its differentiated position in mobile voice and broadband, but faces increasing pressure on all fronts. Malaysia’s telecoms market is expected to continue growing at 5.6% CAGR to reach RM57.5 billion in 2017, with mobile data, fixed broadband and the Enterprise sector acting as the engines of growth. Voice revenues are stagnant. Mobile penetration is expected to reach 156% by 2017 mainly due to the proliferation of multi- SIMs. Growth is expected in under- penetrated regions such as the East Coast, Sabah and Sarawak and in the expansion of specific segments such as youth and retirees.