The Star Online: Business
The Star Online: Business |
- New management team takes over in Maxis
- Telecoms industry seen headed for consolidation
- Going forward after makeover
| New management team takes over in Maxis Posted: 14 Jun 2013 06:04 PM PDT WHEN the CEO of a company leaves, people take notice. When the top management of one of the largest companies on Bursa Malaysia undergoes a management overhaul, people will stand up and wonder what's wrong. Questions of a similar vein are being asked of Maxis Bhd as the company recently appointed two joint chief operating officers (COOs) Nasution Mohamed and Suren J. Amarasekera and ripped up the old management structure for something new and lean. Such changes do not happen overnight but when they do, it goes to show that the boss is unhappy with performance. Last year Maxis saw a drop in net profit to RM1.86bil from RM2.53bil a year earlier. Maxis for years had enjoyed the highest EBITDA (earnings before interest, tax, depreciation and amortisation) margins in the country, possibly the highest in the region too, of about 50%. But last year, that fell to 47.2%. Naturally, any shareholder will wonder if that is just a one-off or a trend. Based on the statement by Maxis chairman Raja Tan Sri Arshad Raja Tun Uda when announcing the new management structure and line-up this week, the company is obviously worried. He said: "Efforts towards creating this structure have been made in response to evolving market dynamics and changing consumer demands and will enable Maxis to compete more effectively." An analyst says Maxis' growth has been flattish and revenue is not growing while at the same time it is spending money on its network. "It has not got its revenues up and the issue at Maxis now is really about performance," he adds. On area which analysts felt Maxis was behind the curve was convergence. It was something talked about 13 years ago and have celcos like Maxis morphed into players that offer consumers a whole suite of products and services in the digital era. A report says globally, IT consumerisation has redefined the business models for players in the communications, media and high-tech ecosystem, with a significant competitive advantage going to companies that position themselves optimally in the digital services revenue stream. It adds that IT consumerisation trend means that the workforce is engaging almost continuously with content-rich digital services video, social content, calendar, convenience applications and others that are accessible through those devices. When Maxis returned to Bursa Malaysia in 2009 it spelt out its ambitions to become an integrated services player. Has it achieved what it set out to do or has that picture blurred over the years? Much as it has the ambition of being an integrated player, the jury is out on whether it has achieved that. For much of what it does still revolves around the making and receiving of phones calls. Only now it is venturing into other services like broadband and IPTV. Flat structure At the point of its return to Bursa Malaysia, Maxis hired "many expatriates with impressive CVs" with an idea to push the company forward. Though it is natural for a company in the technology/telecoms space to hire expatriates due to lack of local expertise, these people also bring their teams along with them and add to the workforce. All this might have led to surpluses and duplication. Silos are created to protect managerial turf, and its a commonplace in any large organisation. That's what happened at Maxis. Eight core units which breaks into 24 smaller units but none seemed to focus very intently on end to end solutions for the consumer or enterprise. "Over the years Maxis become very bureaucratic and decision making became difficult because of the layers of people at the top," says someone in the know. This makes it difficult to respond to market changes in an industry that is evolving fast. Celcom Axiata Bhd had the same problem some years back but Datuk Seri Shazalli Ramly has reorganised things. Today its "pulse is on the customer." Though Celcom is still having the most number of staff at 4,000 in the industry, it made more money than Maxis in 2012 with a net profit of RM2.2bil versus Maxis RM1.86bil and DiGi.Com Bhd's RM1.20bil. Maxis has 3,500 staff and DiGi about 2,000. Revenue wise, Celcom earned RM7.7bil versus RM8.9bil by Maxis. DiGi chalked RM6.36bil in sales last year. Maxis has the most number of mobile subscribers at 14.9 million as at end last year versus Celcom's 12.07 million and DiGi's 10.49 million. Nasution says "our guide for top line is mid-single digit. Ebidta 48%." He is talking about RM1bil in capex spending this year and Maxis has free cash flow of RM2.3bil. Last year the capex was RM899mil. The new team When the new team was announced this week, many were surprised that Maxis had an all Malaysian team to lead its business units. Furthermore, the number of business units was halved to four. The reorganisation taking place will remove silos, duplication and surpluses. Five heads have left and some more are expected to leave. But for now, Maxis is saying there will be no voluntary separation scheme. It is a flat structure and it will be nimble, Nasution says. The average age of the top team of Maxis is between 35 to 48 but none of its units have young people which are necessary to cater for the important demographic. Another question on the lips of investors is whether the management shake up is it an admission that all is not well at Maxis? "It is an enhancement, an evolution, to refine to do things better," says Nasution in an interview with StarBizWeek. Suren adds "whenever you are a market leader you tend to get roadbumps ahead of others. We are sharpening our focus like sharpening the pencil," All this reorganisation will result in savings however Nasution will not say how much because the entire process of the reorganisation will take a few more weeks. "Once the structure is finalised we will be guiding the market on the savings. The structure will remove duplication," Nasution says. Sharpen it may be, but some bad decisions have been made in the past especially its fixed line strategy, says an analyst. That will not be repeated because the four heads are now responsible end to end. The new theme within is about empowering the workforce and making everyone responsible for what they do, align them to the right jobs. Four units have been created customer, enterprise, sales and services and digital. The heads are Shanti Jusnita Johari, Dushyanthan Vaithiyanathan, Tan Lay Han and Kugan Thirunavakarasu respectively. Nasution said each head will create their own organisation structure and pick their team. That will cascade downwards, making everyone responsible for what they do. Digital is the frontier facing Maxis. The company is not immersed into it as much as it wants but in the era of convergence and digital, they need to be entrenched because there is where value creation will be. Analysts say that if Maxis wants to increase its revenue steams, it has to source what else it can do for the customer as voice revenues gradually fall. Does the new team have what it takes to make Maxis tick? "We believe we have a good structure to meet our mission of becoming an integrated services player," says Nasution. Shanti was from Telekom Malaysia and she is the right person to push for enterprise value, Dushyanthan has moved around the industry, he knows the stuff and is savvy. Tan is a marketing person and Kugan, has been with Maxis for a long time but one expert feels that creating the new things that brings in revenues from music and videos is a role apt for him. Suren feels Maxis is ready to capitalise on its network. "We have always been ahead of the curve. We are really equipped in terms of network to support the explosive data growth. With all that it speaks of our preparedness and our focus is the customer." The final word execution While the search for the CEO continues, the position of chief financial officer has also become vacant because the current CFO Nasution is now the JCOO. The reorganisation may be Maxis inflection point as to where it is on the curve of becoming an integrated services player. A flatten structure means it removes duplication and surpluses but it has to be sensitive to the surplus staff. "It may have all the products but it has to fix its management structure then address its performance issue," said an analyst. Although Maxis is fixing its organisation structure, aligning the people to the right jobs, it still has to look into improving the quality of services. Analysts say prices have come off and but can drop more. "Maxis has to get its fixed line strategy right, it cannot just rely on the Astro partnership to push for broadband growth. Broadband is a key growth area in the future especially for its enterprise business and it needs to bring to market more enterprise solutions," says an analyst. "Though they are on a learning curve where broadband is concerned, it is the area which will drive earnings as voice revenues come down." Maxis says that its new team will address and execute its strategy for growth. The question is just how much time will the new team be given to do their job. Related Stories: |
| Telecoms industry seen headed for consolidation Posted: 14 Jun 2013 05:41 PM PDT THERE will come a time when the market is so saturated with a type of service or product that the provider industry will have to, inevitably, slow down, like a giant impeded by its own inertia. The telecoms industry in Malaysia is currently that giant, its gazelle pace from a few years back moderating into a steady march. With maturity as the backdrop, analysts are now mostly "neutral" on the sector which is trading at a rich premium compared with the regional peers and has no immediate re-rating catalysts in sight. One analyst described the telecoms market in Malaysia as "crowded", having achieved a 140% penetration rate with 38 million mobile phone users, shared out by eight players. A Hong Leong Investment Bank analyst says the telecoms market, which has been slowing down in the past two years and moving towards data service, is slated for consolidation. While data usage has doubled, its pricing has fallen, neutralising the sector's growth potential, he says. "In light of this, we expect the telcos to consolidate going forward," he says, adding that they should be exploring collaborations and sharing infrastructure and spectrum, as well as focus on the sale and marketing of their products. "Telcos need to move towards outsourcing parts of their operation. India and Indonesia players are already doing that," he points out. Local telcos, with Huawei Technologies Co Ltd as a supplier or partner, for example, was one step towards this. He also believes local telcos need to change their capital expenditure (capex)-heavy business model to a operating expenditure (opex)-focused one. "With a capex model, regardless if you have business or not, the cost is there but with an opex model, the cost becomes variable if business is good, the cost is higher and vice versa," he says. Also, he thinks that it would not be a bad idea for telcos to consider listing their assets, mainly the telecom towers. Companies that provide infrastructure solutions for cellular operators include Instacom Group Bhd and OCK Group Bhd, the latter also provides network services. "Take for example KPJ Healthcare selling their asset to another company to manage, much like entrusting it to a real estate investment trust," he says, "That sale would provide the money to expand, or they could squeeze more dividend from the cashflow." Another analyst covering the sector attests to the difficulty in getting attractive margins from data services. He reveals telcos are expecting about 5% revenue growth rate this year. "Malaysian telcos are looking at how to increase data growth but the margins for data service is not that high (compared with the traditional voice and message services)," he says, adding that players are selling bundle packages now to protect their revenue. Handset sales have been the notable driver of revenue growth of late. Although the ballooning pool of smart phone users suggests that data is the way forward, he believes "wherever the telcos are not doing as well in, they should continue to improve to gain market share". He believes telcos are "mostly rather rational" and would not wage price wars. While major cellular operators Maxis and DiGi have sizeable local businesses, Axiata has leverage in the regional arena. In stark contrast, TM's core business is in the fixed line and fibre broadband segments. That said, the sector remains attractive as a dividend play and if there is any downside to the stocks, it would be limited. Maybank Investment Bank Research says in a note this week that although valuations of wireless operators are at a premium to regional peers, "we do not expect substantial downside to telecom stocks due to the trapped domestic liquidity within the local equities market and attractive dividend support of between 4% and 6% net yield the stocks provide". Maybank analyst Tan Chi Wei adds that bond yields across the region have climbed and telecom stocks, often perceived to be yield plays, have corrected. "Concerns over the premature ending of the US quantitative easing programme have re-emerged and further yield compression thus appears unlikely in the near term," he says. Comparing apple to apple within the region, Malaysian telecom stocks have fallen less than regional peers which Tan believes is consequent of the trapped domestic liquidity. Another analyst from a foreign-based brokerage however believes there could be a re-rating of the industry that has been trading on the high side. "There is a risk from the equity market perspective as the companies are trading at more than 20 times price-to-earnings ratio which is very high already," he says. He opines that investors who need not be invested in telcos will find better alternatives. "Typically, people pay more for a company with good growth. But if growth is slowing, they may want to invest elsewhere because while the telecoms industry will sustain its growth, it will not be growing fast," he says, noting that Malaysian investors are also more confident now that the election overhang has dissipated and economic growth is decent. "They may want to look at more cyclical stocks." He notes that a growth slowdown in a matured industry is very difficult to overcome. Instead of spending unnecessarily for expansion, telcos should protect their business stability because any minute loss or gain in market share will be magnified and starkly reflected in their earnings. On the other hand, an analyst with local bank-backed brokerage thinks that telecoms counters will not suffer as big funds like the Employees Provident Fund and Permodalan Nasional Bhd would support the share prices. "The share prices could fall a little but I don't see the big funds selling down as telcos are good dividend stocks," he says, adding that the stocks will continue to outperform their regional peers. |
| Posted: 14 Jun 2013 03:48 PM PDT Nasution Mohamed and Suren J. Amarasekera are executives in the spotlight. They, as joint COOs of Maxis Bhd, appear to have the right chemistry to work together. Their collective ability and resolve will, however, be put to the test as together with a new management team, they are tasked to ensure the revamped Maxis delivers what shareholders and consumers expect of them. In an interview, they shared their thoughts with StarBizWeek business editor (news) B.K. Sidhu on the revamp and the way forward. Here are excerpts of the interview: Was there a major problem to shake up management? Suren: Whenever you are a market leader you tend to get roadbumps ahead of others. We have come up with our vision/mission some years ago to be the only integrated player and we know that could not be achieved overnight. We have built access; mobility and wireless has always been our forte. We complemented the high speed broadband (HSBB) with a tie-up with Telekom Malaysia. We went further ahead to forge a partnership with Tenaga Nasional Bhd if indeed we need to deploy fibre beyond HSBB. Last year we formed a partnership with Astro and the content piece has been stitched together. So now that all the pieces are lined up, it is about seizing the opportunities by going to the market effectively. But what was the problem Nasution: I think it is going to be quite easy for me and Suren to be sitting here today and start blaming what the previous people have been doing. But what we rather do is focus on the new structure to move forward. When you have RM9bil in revenue and when you do business in real time, we do not have the luxury of time to sit back and look and evaluate the structure. Since we are becoming an integrated player, internally the structure at the every start needs to be flat and integrated and we have to address the consumer and enterprise needs from end to end. So we have chosen the organisational structure and the four business heads. They have to now define their own operational structure and how that cascades downwards. We will see where it ends. There is obvious duplication built in for a company that is growing aggressively. When we did the operations structure it was essential to make sure we can compete better. How many units are there now? Nasution: When we look at the structure and if you don't take into account the support services, we used to have eight. There is now four. How did you select the four people to head the four divisions? Suren: We did not look at people, we looked at our vision, mission, values and how we can reach customers. We have mainly a consumer and enterprise segment – the B2B and B2C. We organised the structure around that. Then we looked at our future in the medium- to long-term. You have people like Google getting into music streaming and find companies out of China coming with games like Nintendo does. So digital is obviously our future. If you look at the regional and global telcos, they are organised around the structure. So we have consumer, enterprise, digital and sales and services to support our entire line-up. Why did you not organise it earlier? Suren: It is a journey. It is not done overnight but it has been talked about over a period of time. There is always a time to implement it. Is this the best structure? Nasution: We have the right structure. The main objective of the reorganisation is essentially to realign the mission. When we went back to the market (via a re-listing) in 2009 we said of our mission of becoming an integrated player and today we are still the only integrated player out there. This is a good structure to address the needs of customers and enterprises, end to end. How important is digital since you created a unit for that? Suren: If you look at the future, it is largely painted by a digital landscape. The consumer of the future is going to want to consume more digital channels. Telcos globally have made digital a formidable piece of their business. Nasution: As an integrated player, there are a few components that need to be in place – network, devices and with integration defined, we will provide any device anytime, anywhere. Then it is about getting the content that is meaningful for consumers of today and in the future. There was no emphasis on it earlier? Suren: Earlier, it was done among other things. Now we have brought it into focus and streamlined it to fully exploit the opportunities around it. Nasution: It is about feeding to consumers and enterprises. Say the consumer wants the best music, we will find it. It will be more and more important and at some stage, we will have a standalone PNL (profit and loss) and sell it to non-Maxis customers too. Why did Maxis hire a number of expats? Nasution: The industry is evolving and there is certain expertise we do not have locally. But with the new structure, the four heads are all locals. Across the board we only have Malaysians. It is a Malaysian team. There are a couple of boxes we are looking to fill in the short- or medium-term. It's said to have a bloated workforce. Will there be cuts? Nasution: In line with our mission we have cut duplication, silos and steamlined decision-making so that there is a quicker way of getting things done. We are looking at the structure of meetings. We are looking at all the things that need to be done and some are being implemented. Then it will cascade downwards and at the end of the process, we will see what the numbers are. Ideally it is not a numbers game. It is about having the right people manning and driving the business. We may need new talents. Suren: Whatever we have done is for the sake of the reorganisation. We are just sharpening the pencil to get our focus right. Is there disruption with several senior people leaving? Nasution: Not really. We have new heads. It's business as usual and we will just enhance it. We are not pausing anything. There will be no disruptions. Suren: One thing we have observed is that Maxis is a formidable company and we have quite a strong pool of talent. So there is no disruption. With the new structure, it is more attuned to market dynamics and we are able to respond better and are more agile. Nasution: Internally, people are re-energised and that is a positive on efficiency. What impact has the management vacuum had on the company? Suren: Whatever you may call it but we know the job and we need to deliver on performance. With a joint COO team, does Maxis still need a CEO? Nasution: It is the board's prerogative. We are here to provide leadership, direction and deliver the results shareholders want. Is the change in management an admission that all's not well at Maxis? Nasution: It is an enhancement, an evolution, refined to do things better. Suren: If you look at the progress, the company has been transparent. What's in store where dividends are concerned? Nasution: The intention is to maintain RM3bil for this year. Even players like Google are now your competitors. How will you manage that? Suren: Gone are the days when people compete. The new thing is "coopetition" - compete and cooperate. Our entire philosophy is about relationships with consumers and the local nuances is not known by global players. We are fortunate if they consider us as partners. But it has to be a win-win for all; the customers, us and our partners. And partnerships must be sustainable. How much pressure is there on both of you fixing things? Suren: Pressure is nothing new in our environment. The pressure is to address the consumer's wants, demands and dreams. With our new structure, we will be able to address that better than the recent past. Between both of you, who has the final say? Have both of you proven you can work together? Suren: Two years and we are alive and kicking. It is complimenting, we bring a combination of skill sets. Nasution: We both report to the board and we make joint decisions. Suren: What we are meant to do is service the structure well and do exactly what a CEO will do. We have a symbiotic way of working so we can do things fast and make decisions. We are held accountable for everything and accountability stops with us. What's your first priority? Suren: The most important is customer, everything evolves around the customer. Does that mean Maxis has failed to look after its customers? Suren: That is not a fair statement. There are various ways and now we are looking at it from a holistic way. Nasution: Market dynamics are changing and it is essential to give customers meaningful services. It is a strategy to refine to achieve the mission better. What's the short. medium and long-term goals and how has that changed with the new management team? Suren: The structure is in place and the first priority is to bond as a team and be formidable in our pursuit of our promise to the market and the customer. In the long term we want to be an unparellel integrated services provider and benchmark against players in the region. What has the major shareholder communicated to you all in his brief? Suren: We are briefed by the board and chairman. The brief is to put the customer at the centre and deliver on performance and keep with what we have committed. The talk is that your shareholders are interfering in the running of Maxis. Suren: I don't think there is any truth in that. In my years at Maxis, it is one of the most professionally-run companies. We have a brief from the CEO and the board and we do not imagine that will change. |
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