Earlier, DiGi reported lower Q4, 2008 earnings due to higher traffic cost and lower ARPU.
DiGi now reveals that a major bulk of this is caused by a whopping RM15mil in roaming fraud. Excluding the fraud, EBITDA margins would have expanded quarter-on-quarter by 45 per cent in the Q408. The losses accumulated from roaming fraud were however mitigated by cost optimisation initiatives, a pullback in staff bonuses and lower advertising and promotion expenditure.
OSK Research said this after its analyst had a conference call with DiGi management. “The fraud creates a loophole where users can roam for free,” says the analyst. “Therefore DiGi sees it as a cost item. But they are trying to address it.”
DiGi also says that the syndicate perpetrating the fraud also affects other telcos.
On that token, OSK has downgraded DiGi to neutral from a buy rating previously as earnings are expected to decline 7-8% in the next two years as margin pressure from starting up its 3G business starts to build up and it also faces the possibility of a tariff skirmish with other telcos.
Looks like there’s a price war afoot…interesting!
[SOURCE]
