This article first appeared in The Edge Malaysia Weekly on September 16, 2024 - September 22, 2024

CelcomDigi Bhd (KL:CDB) has grown from strength to strength in the last two years, with its first full year of operations as a merged entity in the 12 months ended Dec 31, 2023 (FY2023) showing improvements on multiple fronts.

From 20.3 million subscribers at end-2022, CelcomDigi’s subscriber base grew to a high of 20.6 million at end-2023, despite intensified competition in the telecommunications space and amid the industry’s transition to the brave new world of 5G.

The largest telecommunications group in Bursa Malaysia by market capitalisation also upped dividend payouts from 12.2 sen per share or RM1.07 billion for FY2022, to 13.2 sen per share or RM1.55 billion for FY2023.

No stranger to The Edge Billion Ringgit Club (BRC), Digi.Com Bhd (which took its present name on March 2, 2023) has bagged the highest number of BRC corporate awards among all BRC members, taking home 26 trophies in the past 15 years, including two this year.

Since 2013, Digi has bagged the Highest Return on Equity (ROE) Over Three Years award for its sector as well as in the BRC Big Cap category (companies with a market cap of between RM10 billion and RM40 billion).

After merging with Celcom (M) Bhd, the enlarged CelcomDigi has moved up the ladder to bag the same award in the BRC Super Big Cap category (companies with a market cap of above RM40 billion) since last year. The enlarged share base also means its ROE had fallen from as high as 187.6% in 2021 to around the 10% level in 2022 and 2023. Subsequently, it won the Best CR Initiatives for Super Big Cap award this year.

Still, during this year’s BRC award evaluation period between 2021 and 2023, CelcomDigi’s adjusted weighted ROE over three years came in at a high of 45.3%, the highest in the telecommunications and media sector as well as among its Super Big Cap peers.

This year, CelcomDigi also won the Best Corporate Responsibility (CR) initiative in the Super Big Cap category. (See story on Page 81.)

Its share price had also gained during the BRC award evaluation period, climbing to RM4.19 at end-March 2024, from RM3.25 at end-March 2021, to reflect a three-year compound annual growth rate (CAGR) of 8.8%.

Earnings grew from RM1.22 billion in FY2021 to RM1.55 billion in FY2023, reflecting a three-year weighted CAGR of 10%, which partly reflects the economies of scale enjoyed post-merger.

CelcomDigi says it has realised gross synergies of RM1.09 billion (including scale efficiency and capex avoidance) since the start of 2023 until June 2024, as it aims “to realise RM8 billion synergies in net present value”.

Its CEO Datuk Mohamad Idham Nawawi, in his reflection on CelcomDigi’s 2QFY2024 performance, said the group’s network integration and modernisation is “ahead of plan”, having surpassed the 50% mark — including full integration in Penang — which saw over 8,500 sites modernised and 3,500 sites phased out. The group targets to complete the integration by mid-2025 at the earliest.

Efforts have also been put in place to improve product acceptance, an example of which can be seen in the growth of its home and fibre subscriber base to 131,000 at end-December 2023, from 101,000 at the start of that year.

On top of that, the group continues to transform its industry-leading retail network, which currently comprises over 400 CelcomDigi branded stores and close to 12,000 retailing touchpoints, said Mohamad Idham.

On the 5G front, CelcomDigi in July declared it had submitted its proposal for the deployment of a second 5G network in the country, being one of four entities that have done so.

“We believe we have the right infrastructure to do this in the speediest manner; that we have the financial strength to undertake such a project; as well as the ecosystem that is able to start almost immediately and to complete this within the shortest time possible,” said Mohamad Idham.

In 1HFY2024, CelcomDigi’s net profit grew 18.3% to RM782.48 million, from RM661.44 million a year ago, as revenue slipped 0.41% to RM6.28 billion, from RM6.3 billion.

While some analysts point to a weaker-than-expected bottom line as merger synergies came in slower than expected, those covering the group do see progress in cost savings and continue to expect improvements in the coming quarters.

On a more positive note, CelcomDigi’s dividend payout is looking up, with the amount declared rising to seven sen per share or RM821.2 million in 1HFY2024, from 6.4 sen per share in the previous corresponding period.

At the time of writing (Aug 27), its shares closed at RM3.61. This reflects a trailing dividend yield of 3.8% and a market cap of RM42.35 billion, which affirms its position as Malaysia’s biggest listed telecommunications stock.

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