Telecommunications Industry Analysis

The assignment delves into an analysis of the Malaysian telecommunications industry. It examines various financial ratios such as Return on Capital Invested (ROCI), Net Profit Margin (NPM), Return on Assets (ROA), Quick Ratio, and Current Ratio for companies like Celcom Axiata Berhad, Maxis, and Digi. The analysis also incorporates trends in the industry, including consumer price index fluctuations and leverage ratios. Additionally, the Ansoff Matrix is utilized to assess potential growth strategies within the sector.

Business Analysis
Project

Table of Contents
INTRODUCTION...........................................................................................................................1
1) COMPANY BACKGROUND....................................................................................................1
1.1 Key Issues.........................................................................................................................1
1.2 Comparison with competitors on the basis of value proposition.....................................1
1.3 Rationale of choice of company.......................................................................................2
2) FINANCIAL ANALYSIS...........................................................................................................2
2.1 Ration analysis and its importance...................................................................................2
2.2 Types of ratio analysis......................................................................................................2
3) STRATEGIC ANALYSIS..........................................................................................................8
3.1 PESTLE analysis..............................................................................................................8
3.2 New forces affect the organisation...................................................................................9
3.3 Operations perform by organisation.................................................................................9
3.4 Success factors................................................................................................................10
4) IDENTIFICATION OF APPROPRIATE STRATEGIES........................................................11
4.1 Ansoff's Matrix...............................................................................................................11
5) LIMITATION OF FINANCIAL MODEL AND CONVENTIONAL ANALYSIS.................12
5.1 Limitation of conventional analysis...............................................................................12
5.2 Limitation of financial model analysis...........................................................................12
RECOMMENDATION.................................................................................................................13
CONCLUSION..............................................................................................................................13
MODELLING................................................................................................................................13
REFERENCES..............................................................................................................................15
APPENDIX....................................................................................................................................17
Illustration Index
Illustration 1: Return on capital invested.........................................................................................3
Illustration 2: Net Profit Margin Ratio.............................................................................................4
Illustration 3: Return on Asset Ratio...............................................................................................5
Illustration 4: Current Ratio.............................................................................................................6

Illustration 5: Quick Ratio...............................................................................................................7
Illustration 6: Consumer price index................................................................................................8
Illustration 7: Ansoff Matrix..........................................................................................................11

INTRODUCTION
Business is a place in which good or services are exchange for money. It include those
activities which are used by the Celcom Axiata Berhad, Malaysia for achieving its desire goals
(Wesseling, Niesten and Hekkert, 2015).The present report analysis the financial position of
Celcom Axiata Berhad by comparing its position with their competitors. It describes the
company background and key issues which are arrived while analysing its conditions. It also
analysis the financial statements with the help of ratio. PESTLE, Ansoff's matrix and new forces
will also presents while determine the strategies of cited firm. Furthermore, it also explain the
limitation of conventional and financial model which make negative impact on the business
operational activity.
1) COMPANY BACKGROUND
Celcom Axiata Berhad is a mobile telecommunication services industry, which was
founded in 1988. Its headquarter is situated in Celcom Axiata Tower Kuala Lumpur, Malaysia.
Michael Kunehner is CEO of the company. It provides 2G, 3G, 4G and satellite mobile network
to the pepople.
1.1 Key Issues
Celcom Axiata Berhad is a company which deals their operations in local and
international markets. Here, key issues which company can achieve is to acquire the competitive
advantage in the markets. Cited firm faces problems of its competitors which offers substituents
products have same feature and quality in the marketplace (Amran, Ooi and Devi, 2015).
MAXIS and DIGI are the main competitors which highly affect the operational activity of cited
business. In order to face the competition and achieve the advantages, firm make several changes
in their strategies so that it would be able for its position by providing valuable products.
1.2 Comparison with competitors on the basis of value proposition
MAXIS DIGI
Targeting customers Customer's perspective such as
need and demand/taste
High Income customers with
conveniently arranged in a
high speed
Advantages Ozone-friendly environment Good structure and easy
1

and quality products design with quality
Price 15% premium 29% premium
Value for customers Good services in an affordable
price
Average telecommunication
services with normal price
1.3 Rationale of choice of company
Celcom Axiata Berhad is selected as a firm, aim of the study is to analysis the products
which offers to their customers in good quality with an affordable price. It respect to this, cited
firm decide to operates its function in those market which has been increases for over 10 years. It
can be said that it is essential for the organisation to understand the market trend and competition
which highly affect their managerial functions.
2) FINANCIAL ANALYSIS
2.1 Ration analysis and its importance
Ratio analysis is a form of financial statement. It is used to take information of final
performance of business. Ratio are of different types. The data which are provided by financial
statements are already available. The calculation of ratio are different in firms. It can be used to
compare with performance of industry (Isa and Mohamed, 2017). It is based upon accounting
information, its effectiveness is limited because of some complications which arise due to
historical cost accounting and inflation. And it can be used in a form of trends analysis to
identify the area which need to be investigated further.
2.2 Types of ratio analysis
Return on invested capital
2011-12 2012-13 2013-14 2014-15 2015-16
Return on invested capital
Celcom Axiata Berhad 5.86 6.48 5.6 5.67 5.07
Maxix 13.55 9.43 9.66 7.27 11.95
DIGI 83.24 82.21 94.31 105.01 91.47
2

Celcom Axiata Berhad Maxix DIGI
0
50
100
150
200
250
300
350
400
450
500
2015-16
2014-15
2013-14
2012-13
2011-12
Illustration 1: Return on capital invested
Profitability is calculated to find out the actual earning of a company. It indicate the
capability of percentage earning by comparing it last years. It is useful to the manager to forecast
in future. Above graph shows the return on capital invested by Celcom Axiata Berhad, Maxis
and Digi. It shows the decreasing phase of Celcom Axiata Berhad and fluctuation in case of
Kepong. It also present good financial position of DIGI in comparing to others.
Net Profit Margin Ratio
Net profit margin ratio
Celcom Axiata Berhad 27.91 29.66 24.77 25.97 24.96
Maxix 12.03 10.03 8.91 6.37 9.65
DIGI 18.28 18.23 18.81 19.86 19.2
3

Celcom Axiata Berhad Maxix DIGI
0
20
40
60
80
100
120
140
2015-16
2014-15
2013-14
2012-13
2011-12
Illustration 2: Net Profit Margin Ratio
It is a part of profitability ratio which is calculated by dividing net income by sales. It is
expressed in percentage. From the above graph, among the three companies, Celcom Axiata
Berhad has highest net profit margin which shows the highest efficiency of firm by converting
sales into real profit. In 2017, company's net profit is recorded with 24.96.
Return on Asset Ratio
Return on asset ratio
Celcom Axiata Berhad 5.47 6.02 5.14 5.19 4.68
Maxix 10.84 7.94 8.05 5.77 8.95
DIGI 52.95 58.47 67.95 73.07 60.04
4

Celcom Axiata Berhad Maxix DIGI
0
50
100
150
200
250
300
350
2015-16
2014-15
2013-14
2012-13
2011-12
Illustration 3: Return on Asset Ratio
Its is an return on assets ratio calculating the return of shown in percentage ( Yin, 2016).
From above graph it is clear that , among the three companies, DIGI has highest return on assets
ratio margin 60.04, MAXIS recorded 8.95 and Celcom Axiata Berhad continuing its lowest
position recorded 4.68 percentage.
Current Ratio
Current ratio
Celcom Axiata Berhad 3.34 3.15 2.47 2.52 3.24
Maxix 3.05 2.52 2.01 1.82 1.98
DIGI 0.9 0.69 0.72 0.75 1.26
5

Celcom Axiata Berhad Maxix DIGI
0
2
4
6
8
10
12
14
16
2015-16
2014-15
2013-14
2012-13
2011-12
Illustration 4: Current Ratio
Above graph is presenting the current sales ratio of the three companies. The highest
current percentage data on sales ratio margin (3.24) is recorded by Celcom Axiata Berhad in
2015-16 year whereas MAXIS recorded 1.98 and DIGI recorded 1.26 ratio percentage.
Quick Ratio
Quick ratio
Celcom Axiata Berhad 2.49 1.9 1.75 1.89 2.47
Maxix 2.23 1.81 1.32 1.36 1.33
DIGI 0.43 0.33 0.35 0.38 0.68
6

Celcom Axiata Berhad Maxix DIGI
0
2
4
6
8
10
12
2015-16
2014-15
2013-14
2012-13
2011-12
Illustration 5: Quick Ratio
Above graph is describing the quick ratio of sales among the companies shown in
percentage. From the above graph it has expressed that Celcom Axiata Berhad has recorded
highest quick ratio margin (2.47) whereas DIGI has lowest quick assets ratio of 0.68.
Financial Leverage: The financial leverage of the initial assessment 2011-12 DIGI has
rated highest leverage of 2.98 and the Celcom Axiata Berhad has lowest leverage rate that is
1.09 and the MAXIS remains on 1.6 leverage. The analysis of the financial leverage shows that
DIGI is leading company until 2015-16 records.
Cash Flow per sales percentage: Cash flow per sales percentage: The highest sale of the
year 2011-12 was recorded by DIGI group which is 15.68% and this year the sale of Celcom
Axiata Berhad has negative percentage of -0.81. MAXIS this year has 9.55% of the sales. As per
the other financial years DIGI has recorded largest percentage on sales whereas as the another
groups were facing favourable and unfavourable changes.
Return on capital invested: As per the return on the invested capital of the mentioned
group, it can evaluated that the highest return is gained by DIGI as compared to MAXIS and
Celcom Axiata Berhad (Wesseling, Niesten and Hekkert, 2015). So, it can be concluded that the
financial level of DIGI is high as compared to other competitive groups. The Celcom Axiata
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Berhad is in decreasing position in the ratio while Kepong group is constantly on the
intermediate level.
3) STRATEGIC ANALYSIS
3.1 PESTLE analysis
Political factors: Malaysia is multicultural company. Political factor include entry
barriers, tax or tariffs structure etc. For example if Celcom Axiata Berhad targeted low to
medium income families than Celcom Axiata Berhad expand their global supply chain to that
family's so that taxation impact can be lower without violating political law. Celcom Axiata
Berhad has tremendous opportunity in Malaysia and company can capitalize this harmonious
political situation for further expenses.
Illustration 6: Consumer price index
(Source: Isa, 2017. Unit Roots and Co-Integration Tests: the Effects of Consumer Price Index
(CPI) on Non-Performing Loans (NPL) in the Banking Sector in Malaysia)
Economic factor: It comprises many factors like purchasing power, unemployment rates
etc. With the help of economic factor Celcom Axiata Berhad deal the problem efficiently by
reducing product price and offering value services. For example if Celcom Axiata Berhad want
to raise its business than it need more workers than it employed more workers this cause raise the
employment and work can be done fast so that easy to earn more profit This is how Celcom
Axiata Berhad managed to maintain sales figure and performed better to their competitor.
8

Social Factor: Social factor refers demand and trends generally occurs due to nationality
religious and culture. To survive in this industry local liking and disliking should be followed
(Staake, Thiesse and Fleisch, 2012). It analysis life style, consumer attitude, consumer buying
pattern, their taste etc.
Technological factors: This factor shape the production output and efficiency plant and
operation. Celcom Axiata Berhad brought fruitful result in telecommunication industry after
using new technology. It have its own website and has a strong Facebook and other networking
presence. Celcom Axiata Berhad appropriate strategies to response the changing need of
customers.
Legal factors: Legal factor have both external and internal sides. With the help of this
factor Celcom Axiata Berhad know the safety of consumer, their laws, their labour laws. For
example: There are various services which are offered by the cited firm which cause the health
problem to the people. In respect to this various laws are framed which ensure the health and
safety to the people.
Environmental factors: This factor involved all factor which are surrounding
environment. It includes climate, whether, geographical location etc. Celcom Axiata Berhad
depends of those factor because business is totally depends on this factor.
3.2 New forces affect the organisation
PESTLE analysis helps the Celcom Axiata Berhad to identify the various factors which
affects its financial structure. In the present times, cited firm also face the major three issues such
as digitalisation, globalisation and deregulation which affects its operations adversely. For
example: People can get all the information like quality of products, substituents and their prices,
markets etc. Hence, organisation face the problem of digitalisation while operating its function.
Moreover, working with foreign markets and deregulation of managerial functions are the new
forces which affect the organisation (Mathur, Mathur and Kenyon, 2012).
3.3 Operations perform by organisation
Celcom Axiata Berhad adopt various innovative strategies by which it can expand its
structure in an international level. To make its position and achieve the competitive advantage
cited firm make various changes in their strategies. It deals their functions in a diversified level.
In order to this, business mainly focus to the 20-35 age group people or adult/young person for
9

selling their products. Manager of the cited firm also find various issues in their workplace such
as demand of customers which are highly increases. In respect to this, it can develop products in
a large amount by which it can successfully satisfied the need to their clients. It also face the
problem of digitalisation in which customers have completer knowledge of market and quality of
products. In respect to this, cited firm make changes in their products quality and offers them in
an affordable price. It also face the competitors which provide same products in the market. Firm
make various changes such quality, packaging, price and also provide various offers to their
customers and beat the competitive situation in the market.
3.4 Success factors
There are wide range of quality products which have highly influenced preference and
innovative techniques etc. are the factors which make positive impact on the Celcom Axiata
Berhad company's growth (Leitner, Meissner and Martyna-David, 2015). It deals in different
culture in which every person have their beliefs. It is difficult for the cited firm to satisfy the
need and demand of their each consumer. In respect to this, organisation will use balance
scorecard which shows the actual financial position of Celcom Axiata Berhad. It present various
situation of their competitors which are as follows:
Balance scorecard Specific KPI of
Industry
DIGI MAXIS
Internal growth  Training
programs held
 New products
 Marketing
strategies
 Labour
turnover
 63%
 Moderate
 High
 High
 55%
 High
 High
 Average
Process  Quality control
 Research and
development
 Always
 Medium
 Often
 Good
Perceptive of Level of customer Good Average
10

customers satisfaction
Perceptive of financial
requirement
Liquidity 1.54% 1.23%
4) IDENTIFICATION OF APPROPRIATE STRATEGIES
4.1 Ansoff's Matrix
Illustration 7: Ansoff Matrix
(Source: Yin, 2016. Application of AHP-
Ansoff Matrix Analysis in Business
Diversification
)
By analysing the PESTLE of Celcom Axiata Berhad, it is identifying that cited firm need
to use Ansoff Matrix model for the planning to achieve the desire goals in future. It can be
divided into four parts, which are as follows:
Market Penetration: Celcom Axiata Berhad operates its business in their existing market
because it firm is not in position to take higher risk. In order to this, organisation adopt strategies
such as rechecking their prices, sales, customer's beneficiary scheme and using high promotional
activity to achieve the market penetration position.
Product Development: Celcom Axiata Berhad changes its strategies by developing new
products which have more value or quality for their customers. This is the best way for the
organisation to increases its market share and profit. It also make some changes such as
11

launching wide range of products by revising their service menu and provide wide choice for
their customers (Kernbach, Eppler and Bresciani, 2015).
Market development: It refers to those situation in which Celcom Axiata Berhad
company enter into new market with their existing products. In respect to this, cited firm focuses
on different areas such as geographical areas for operation their functions. For example: Business
targeted ages between 20-35 years people for selling their products.
Diversification: This define the situation of Celcom Axiata Berhad company which
operates its works by entering into new markets with new products. It also known as risky
strategy for the firm (Houdet, Trommetter and Weber, 2012).
5) LIMITATION OF FINANCIAL MODEL AND CONVENTIONAL
ANALYSIS
5.1 Limitation of conventional analysis
There are various limitation which are analysis by the cited firm while making
conventional model. These are as follows:
 While dealing in macro factors, it is limited on this process.
 Conventional analysis does not record the resources and its availability in the business.
 All the strategies are adopted in this method does not provide sufficient growth and
sustainability to the firm.
 Company can not achieve its competitive advantage by using this analysis.
 Three factors such as digitalisation, globalisation and deregulation make diverse effect on
the success of the business.
5.2 Limitation of financial model analysis
Financial models are essential for the firm, to analysis the financial position and actual
fund requirement. It includes those methods by which manager of Celcom Axiata Berhad can
determine their turnover, liquidity and capacity. On the other hand, it also have some limitation
which are as follows:
 Celcom Axiata Berhad does not have a right to enter any vacuum.
 All the external factors make negative effect on the growth of business.
 It only adopt the standardised manner for operating its functions.
12

 Internal factors are to be considered while making financial analysis in Celcom Axiata
Berhad.
 Company does not hold the same position in the same time because it is flexible in
nature.
 Standardised methods does not provide relevant and accurate result about the cited firm.
RECOMMENDATION
From the above analysis of Celcom Axiata Berhad, it has been found that to compete in
the global market and face the competition, company need to adopt those strategies which is
useful for them. There are various recommendation can be done by which cited firm will make
sufficient improvement. These are as follows:
 Celcom Axiata Berhad need to improve the equity ratio so that its performance can be
improved (Doeksen and Symes, 2015).
 Business should allocate the resources in an effective manner which make better
utilization of investment.
 As comparing to their competitors, cited firm found that Digi's performance is better than
Celcom Axiata Berhad. It means that firm need to change their strategies to improving
their level of performance.
 If organisation can improve their current ration and return on assets than modelling of
cited firm can be improved effectively.
CONCLUSION
From the above report, it can be analysed that, the performance of Celcom Axiata
Berhad is on increasing phase. However, it needs to improve its finances by appropriate
investment. There is a negative impact of external factors on the financials of the company.
According to PESTLE analysis of Celcom Axiata Berhad, it can be inferred that constant change
in technology leads to increase the overall cost of the organization.
MODELLING
Financial modelling is useful for Celcom Axiata Berhad is to measure the market trends
and direction (Amran, Ooi and Devi, 2015). It is essential for every business to prepare a
13

financial statement and comparing them with previous year. It can be done by putting the data in
excel sheet and analysis income statement or balance in last 5 to 6 years. Financial modelling is a
easy process which provide transparent result. It is reliable process and quickly present the
errors. Hence, it is necessary fort Celcom Axiata Berhad for doing their work appropriately.
According to financial modelling of Celcom Axiata Berhad (attached in appendix) return
on invested capital it can be concluded that the company has a decrease of -3.8% by the end of
the year, if the company increases the return by 5% in 2017 the return on invested capital of the
company will increase by 1.97% , in 2018 return was 2.02% and in 2019 it was 2.07%, the
scenario of forecasting was positive. If the company decreased its return on invested capital by
5% the return in 2017 will be -8.13%, in 2018 will be -8.18 and in 2019 will be -8.23%, the
scenario forecasting will be negative.
According to current ratio it can be concluded that the company has increase of 0.88% by
the year end, if the company increases its forecasting scenario by 5% the company will face the
increase of 5.88% in 2017, 2018 in 5.93% and 2019 in 5.98% . The company will face positive
forecasting. If the company decreases it forecasting by 5% it will face a fall of -4.22 % in 2017, -
4.27 % in 2018 and -4.32% in 2019, which will cause a negative impact on the company.
14

REFERENCES
Journals and Books
Amran, A., Ooi, S. K. and Devi, S. S., 2015. The Impact of Business Strategies on Online
Sustainability Disclosures. Business Strategy and the Environment. 24(6). pp.551-564.
Doeksen, A. and Symes, D., 2015. Business strategies for resilience: the case of Zeeland's oyster
industry. Sociologia Ruralis. 55(3). pp.325-342.
Houdet, J., Trommetter, M. and Weber, J., 2012. Understanding changes in business strategies
regarding biodiversity and ecosystem services. Ecological Economics. 73. pp.37-46.
Kernbach, S., Eppler, M. J. and Bresciani, S., 2015. The Use of Visualization in the
Communication of Business Strategies An Experimental Evaluation. International Journal
of Business Communication. 52(2). pp.164-187.
Leitner, J., Meissner, H. and Martyna-David, E., 2015. The Debate About Political Risk: How
Corruption, Favoritism and Institutional Ambiguity Shape Business Strategies in Ukraine.
In EU Crisis and the Role of the Periphery. Springer International Publishing. pp. 3-19.
Mathur, S. S., Mathur, S. and Kenyon, A., 2012. Creating value: successful business strategies.
Routledge. pp.342-387.
Staake, T., Thiesse, F. and Fleisch, E., 2012. Business strategies in the counterfeit market.
Journal of Business Research. 65(5). pp.658-665.
Wesseling, J. H., Niesten, E. M. M. I. and Hekkert, M. P., 2015. Business strategies of
incumbents in the market for electric vehicles: Opportunities and incentives for sustainable
innovation. Business Strategy and the Environment. 24(6). pp.518-531.
Yin, N., 2016. Application of AHP-Ansoff Matrix Analysis in Business Diversification: The
case of Evergrande Group. In MATEC Web of Conferences (Vol. 44). EDP Sciences.
Isa, M. Y. B. M. and Mohamed, Z. B., 2017. Unit Roots and Co-Integration Tests: the Effects of
Consumer Price Index (CPI) on Non-Performing Loans (NPL) in the Banking Sector in
Malaysia. Journal of Advanced Statistics. 2(1). p.17.
Online
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What Is Business Environment? - Definition & Factors. [2017]. Available through:
<http://study.com/academy/lesson/what-is-business-environment-definition-factors-
quiz.html> [ Accessed on 30th May 2017].
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APPENDIX
Ratio analysis
2011-12 2012-13 2013-14 2014-15 2015-16
Return on invested capital
Celcom Axiata Berhad 5.86 6.48 5.6 5.67 5.07
Maxix 13.55 9.43 9.66 7.27 11.95
DIGI 83.24 82.21 94.31 105.01 91.47
Net profit margin ratio
Celcom Axiata Berhad 27.91 29.66 24.77 25.97 24.96
Maxix 12.03 10.03 8.91 6.37 9.65
DIGI 18.28 18.23 18.81 19.86 19.2
Return on asset ratio
Celcom Axiata Berhad 5.47 6.02 5.14 5.19 4.68
Maxix 10.84 7.94 8.05 5.77 8.95
DIGI 52.95 58.47 67.95 73.07 60.04
Current ratio
Celcom Axiata Berhad 3.34 3.15 2.47 2.52 3.24
Maxix 3.05 2.52 2.01 1.82 1.98
DIGI 0.9 0.69 0.72 0.75 1.26
Quick ratio
Celcom Axiata Berhad 2.49 1.9 1.75 1.89 2.47
Maxix 2.23 1.81 1.32 1.36 1.33
DIGI 0.43 0.33 0.35 0.38 0.68
Financial leverage
2011-12 2012-13 2013-14 2014-15 2015-16
Celcom Axiata Berhad 1.09 1.09 1.11 1.1 1.08
Maxix 1.6 1.56 1.66 1.79 1.76
DIGI 2.98 2.7 2.45 2.21 1.95
Cash flow per sale percentage
17

2011-12 2012-13 2013-14 2014-15 2015-16
Celcom Axiata Berhad -0.81 0.52 1.04 4.36 5.6
Maxix 9.55 4.25 -2.02 -3.46 -2.98
DIGI 15.68 17.31 19.87 21.07 15.72
Modelling
18