Kuala Lumpur: Maxis Bhd, the country's largest mobile operator, expects its operating margin to improve in as early as three years, once its broadband customer base reaches critical mass. The company, which has been registering an earnings before interest, tax, depreciation and amortisation (Ebitda) margin of more than 50 per cent for more than three consecutive years, has recently guided that margins are expected to ease over the near term. "I believe in the next three to four years, you will see margins coming up because we would have then achieved the critical mass of broadband users," said chief executive officer Sandip Das in an interview recently. The company expects easing of margin in the short term to be driven by investments in the data business (such as broadband) and beyond telecom business (like machine-to-machine and cloud computing). But he stressed that this does not mean that the conventional voice and text messaging business is dwindling. "Sometimes, people misunderstand me when I say our Ebitda margin will go down," he said. Maxis, controlled by tycoon T Ananda Krishnan, currently has three businesses - the "cash-cow" voice and text messaging business, the data business and the beyond telecom business. Sandip said its existing voice business has now reached maturity and does not require much capital expenditure (capex), as its network has covered more than 95 per cent of the country. "This is where growth is marginal but Ebitda margin is at its peak. This is the part of business where we can make 50-51 per cent margin for as long as we can," said Sandip. However, in order for the company to continue growing, it needs to venture into new businesses. One of it is the data business. This is where the company offers broadband services via smart phones and USB dongles. "The data business is where we are in the investment mode ... it is not as big as the voice business, so it is not generating enough revenues at this point in time for that kind of Ebitda margin. "But there will come a time when we will not have to invest anymore in network but the business will reach critical mass. Like right now, we only have 600,000 odd broadband customers, but voice we have 13 million, the day I have my broadband users go into millions, my margins will become higher," explained Sandip. The company is also exploring into businesses that are "beyond telecoms", such as IPTV, machine-to-machine solutions and cloud computing. "However, it's still too early to really determine what will work, what will not work, how long it will take, the incubation period, and others. But because this is a smaller fraction of the overall business today, so it will not affect so much on the overall margin," he said. Of all the potential beyond telecom services, he sees the trend of machine-to-machine picking up in Malaysia. "The machine-to-machine will be a trend in the future. For example, we can put chips in the vending machines, so soft drink companies can monitor their stock level in the vending machines remotely," he said. Like any new trends, Sandip believes it will take time before a new one emerges. "I remember 12 to 15 years ago, one of my friends told us that we can send text messages using the mobile phone, and all of us sitting in the room said who has the time to type. But, as you can see, SMS has exploded. "Once ecosystem is established, reliability established, consumer behaviour will change. "We have so many applications and solutions in our pipeline, some may succeed, some may not. A lot of it is a function of time," he said.
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