Digi plans greater digitisation, commits to return to Shariah list

In its filings with Bursa Malaysia, Digi said its wholly owned subsidiary Digi Telecommunications Sdn Bhd (DTSB) had yesterday entered into a settlement deal with Telenor IT Asia Sdn Bhd (TITA) and Telenor Global Shared Services AS (GSS) to exit the MoU and service order for IT infrastructure services signed between the three parties on Nov 7, 2014, and Nov 25, 2016, respectively.

KUALA LUMPUR: Kenanga Research maintained its market perform rating on Digi.Com with unchanged earnings forecasts and an unchanged target price of RM4.85.

The research firm said Digi shared its digitisation progress towards better customer experience. 

"With 8.5m (or 72% of the total subscribers) Internet users in 3Q17 coupled with over 2.2 million monthly active users on MyDigi apps, the group’s voice traffic to call centers has been reduced by 40%, thanks to higher digital interaction," it said.

Kenanga Research said Digi is set to introduce more digital services in the coming months and drive differentiation through strategic business themes, cross networking, products, services and channels. 

The telco also plans to transform its network to the cloud-based model and leverage on Telenor global scale on sourcing infrastructure collaborations and talent. It will also develop AI and machines learning and aim to deflect at least of 40% of the traffic to live chats by 2020, and reduce voice traffic to call centres to 80% by 2020 through digitisation.

"Digi is aiming to achieve 1-3% p.a. operating cost reduction over the next three-year, in-line with Telenor Group’s cost optimization initiative," said Kenanga Research.

Digi also reaffirmed its commitment to return to the Shariah-compliant list in the coming months followings its removeal from the telco's decision to settle the one-time fee at lump sum payment for its 900Mhz and 1800MHz spectrum obligation and boost its conventional debt exposure temporarily to RM2.3bil.

The telco's return to the list will be subject to the completion of an audited FY17 account and the review of the SC's Shariah Advisory COuncil.

"Digi has established RM5bil Islamic bond (Sukuk) programmes in April 2017 in keeping with the company’s commitment to tap on prospective Islamic capital and debt markets. 

"With an available 82% (or RM4.1b) of Sukuk Programmes yet to be drawn down, the group is well positioned to comply with the Shariah threshold even taking the potential upcoming 700MHz spectrum obligation into consideration (by assuming a lump-sum payment of RM431mil for 2x10MHz spectrum block)," said the research firm.