KUALA LUMPUR: Maxis Bhd, which traded as expected on its return to Bursa Malaysia Securities yesterday, intends to fervently defend, if not beat, the “old” Maxis’ record highs on all fronts and is prepared to gear up to deliver good dividend yields, its top officials said.

Maxis opened at RM5.46 for a 46 sen premium and traded at between RM5.28 and RM5.50. It closed at RM5.42, a gain of 42 sen over its institutional price of RM5.

Fund managers had predicted the stock would open in the range of RM5.30 to RM5.50. The stock topped the gainers’ list as well as actives table, with 305.78 million shares changing hands, 23% of the 1.35 billion shares transacted on Bursa Malaysia yesterday. Maxis shares were offered  to retail investors at RM4.75 apiece.

“I believe the investment community is familiar with our profile and our ability to generate cash. We do not intend to deleverage our balance sheet. We intend to optimise our capital structure.

“The 75% (net profit) payout is the minimum of what we will do. We will have about RM5 billion debt — that’s about one time net debt-to-Ebitda — and we are prepared to take that up to 1.75 times on a need basis.

“Need in order of priority is first any unforeseen capex (capital expenditure) and secondly, active capital management,” Maxis chief financial officer Rossana Annizah Ahmad Rashidi told The Edge Financial Daily in an interview.

The leading mobile operator also believed it was “able to defend” its much envied Ebitda (earnings before interest, tax, depreciation and amortisation) levels above the 50% mark, she added, helped by the work that was being done to “re-engineer” cost elements in network operations as well as customer service.

“As we speak, two major exercises are going on in the company. We think we would be able to defend that 50% margin provided that there is no major disruption (above 15% decline per annum) in terms of price in the marketplace.

“We acknowledge that incremental margins from the data business, specifically the broadband business, are lower than the voice business. But we hope to get the cost and scale benefits of our mature (voice) business and any mature business should give you greater margins. It is a challenge for the operating team but that is our target in the company and we will certainly fight hard to defend that (50% Ebitda margin),” she said.

Maxis chief executive officer Sandip Das admitted targets it had set were not easy to achieve, but went on to say that Maxis’ track record showed that the company had continued to deliver growth and kept its Ebitda margins above the 50% mark even as its rivals got better.

“Prices have dropped by more than 30%-40% in the last two years, everybody’s ARPU (average revenue per user) has dropped and yet Maxis has maintained its Ebitda margins in excess of 50%.

“It was 52% last year. People ask us how do we continue to do this, X has become strong, Y has become strong, but Maxis continues to lead and Maxis’ leadership should not be underestimated, we work very hard for it. Our highest market share was in the year 2008 when we went up to almost 41%,” he said.

Maxis, Sandip added, believed Malaysia’s mobile phone penetration could easily go up to 150% from just over 100% now, going by the number of people who were holding more than one mobile phone. “Real (subscriber) penetration is probably only about 75% to 80% now, so there is growth still even in the traditional market,” he said.

The fact that its younger customers in the country are using the Internet “no differently than youths in developed markets” is but one indication supporting Maxis’ belief that it could see revenue from data sources beating its traditional voice business as early as 2012.

“Our non-voice revenue was 31% of total mobile revenue last year and we actually pulled the industry average up. If you look at current trend lines, by 2012, 2013, we could have a situation where 50% of revenues come from non-voice. I think we are at the inflection point,” Sandip added.

He is also unperturbed by archrival Celcom (M) Bhd’s target to unseat Maxis by 2011.

“When you’re a leader, everyone will want to challenge your position. I am surprised there is any talk disputing our leadership. I cannot deny companies their own ambition.

“I can only say, all the best, competition makes us more efficient, competition makes us work harder. For as long as we continue to focus on offering the best value in town, I don’t think we are in danger of losing our leadership position.

“That doesn’t mean that we are complacent. I respect all my adversaries, as my team does. We don’t underestimate anybody and that is why all times we remain alert on our market shares,” he added.

Meanwhile, speaking at a ceremony at Bursa Malaysia to mark Maxis’ return, its chairman Raja Arshad Raja Uda said the stock would become a part of the FTSE Bursa Malaysia KLCI Index from today.

Maxis is the fourth-largest company on Bursa Malaysia by market capitalisation after Sime Darby Bhd, Malayan Banking Bhd and CIMB Group Holding Bhd and ahead of Public Bank Bhd. At yesterday’s closing price of RM5.42, the company is valued at RM40.65 billion.


This article appeared in The Edge Financial Daily, November 20, 2009.