DiGi

Last updated June 2012

In Malaysia, DiGi.Com Berhad (DiGi) commenced operations in May 1995 when it launched its fully digital GSM 1800 MHz services, the first digital mobile communications service in Malaysia. DiGi offers mobile voice, roaming and value-added services on both prepaid and contract bases. DiGi is currently one of the leading operators in the prepaid segment, which is the largest consumer segment in the Malaysian mobile market. On 7 May 2008, DiGi obtained a 3G spectrum licence with all of its rights and benefits via a transfer from TIME dotCom (TdC) for a consideration of 27.5 million new shares. In March 2009 DiGi launched 3G broadband services for PCs, while 3G voice and data services for mobile phones were introduced in October 2009.

In 2001, when Telenor increased its shareholding in DiGi from 32.9% to 61.0% through a voluntary partial take-over offer, the transaction was approved by the Foreign Investment Committee and the Ministry of Energy, Communication and Multimedia on the following conditions: (i) Telenor’s equity interest in DiGi must be reduced to 49% within five years; and (ii) DiGi must have at least 30% Bumiputra (indigenous Malays) equity shareholding before 31 December 2006. The deadline to comply was later extended to 30 June 2008. As a result of the 3G spectrum transfer in May 2008 and an earlier placement exercise, TdC’s shareholding in DiGi at that point in time increased to 10%, which later has been reduced to 3.5%. At the same time, Telenor’s ownership interest in DiGi was reduced to 49%. As a result, DiGi is now in compliance with the 49% foreign equity condition and has been exempted from the need to comply with the 30% Bumiputra equity condition imposed by the Foreign Investment Committee.

As at 31 March 2012, DiGi had 9.9 million mobile subscriptions and the mobile penetration and number of inhabitants in Malaysia were 129% and 29 million, respectively.

Network and licences

DiGi currently holds a network facilities licence and network services licence, which are valid until January 2015, and an application service class licence, which is renewed every year. These licences are effectively technology and service neutral. A licensee may apply for the renewal of its individual licence prior to expiry.

DiGi operates a 2G network, utilising spectrum in the 1800 MHz band and also limited spectrum in the GSM 900 MHz band, which expires in January 2015. DiGi has been assigned spectrum in the 2100 MHz spectrum band, expiring April 2018, which is the basis for its 3G network. The Malaysian Minister of Information, Communications and Culture, on recommendation by the Malaysian Communications and Multimedia Commission (SKMM), has the power to approve the renewal of individual licences.

The SKMM is planning to refarm spectrum in both the 900 MHz and 1800 MHz bands, but only upon completion of the 2600 MHz award.

Competition

There are two other GSM network operators in Malaysia. These are Celcom (formerly Telekom Malaysia’s mobile unit, which is now part of TM International Bhd, the regional mobile unit of Telekom Malaysia), and Maxis. Both Celcom and Maxis have licences to operate GSM 900 MHz and GSM 1800 MHz networks. In addition to DiGi, the other 3G network providers are Telekom Malaysia, UMTS Malaysia (a subsidiary of Maxis) and UMobile (63% owned by U Television Sdn. Bhd, 33% owned by Singapore Technologies Telemedia (STT) and 4% owned by Multipurpose Holding). Under the terms of the spectrum assignments, 3G licence holders are required to offer access to their 3G networks to MVNOs. At present, Celcom is providing 3G/2G access to several MVNOs through roaming agreements and DiGi has a 2G roaming agreement with UMobile. Both Maxis and Telekom Malaysia launched their 3G services in the first half of 2005. UMobile launched its 3G service in the second half of 2008. As at 31 March 2012, DiGi was the third largest mobile operator in Malaysia, with an estimated subscriber market share of 27%. Maxis had an estimated market share of 34% and Celcom had an estimated market share of 33%. UMobile and the other smaller operators including MVNOs and Worldwide Interoperability for Microwave Access (WIMAX) had an estimated market share of 6%.

Regulatory matters

DiGi currently annually contributes 6% of “weighted net revenue” to the Universal Service Provision Fund (the USP Fund). All licensed operators are able to bid for SKMM issued tenders utilising this USP Fund to build and operate specific types of services in underserved areas and communities. DiGi has won various bids to provide extended mobile and broadband services on this basis, including building 14 community broadband centres. Mobile termination rates, currently set at 5 sen per minute, are regulated under an access pricing regime which is subject to periodic formal review. The SKMM is expected to initiate a public inquiry with regard to the review of access pricing in 2012. [SandM: We may need to update if this inquiry is initiated in May 2012, prior to publication of the Base Prospectus.]