Celcom and Digi Merger: The Impact on the Malaysian Enterprise ICT Market

Summary Bullets:

Alfie Amir
A. Amir

• Celcom and Digi’s merger will strengthen the new entity’s IoT and mobility capabilities.

• However, there could be some obstacles the telcos need to overcome.

As Malaysian telcos are still busy reshuffling their 5G plans with the rather unexpected special-purpose vehicle (SPV) approach (for more, please see Malaysia 5G Through SPV: One Step Forward and Two Steps Back, March 8, 2021), the industry was hit again by another major news – the merger of Celcom and Digi. The merger news is not new. Axiata and Telenor announced a merger plan of their regional businesses two years ago but it went quiet since then. The merger news only resurfaced again last week, but this time, the deal is only on the Malaysian business. While Celcom and Digi Merger: The Impact on the Malaysian Telecom Market, May 8, 2019, has covered the impact on the local telecom market, this post discusses the key takeaways in the local enterprise ICT market.

Mobility and IoT

Based on the Malaysia Mobile Operator KPI Forecast, Celcom currently has the largest business mobile subscribers with a market share of 32% at the end of 2020, mainly driven by customers in the public sector. This is followed closely by Maxis (29%), Digi is rapidly expanding its customer base to 14% targeting the SME segment while the rest is scattered across smaller players. The combined customer base of Celcom and Digi will strengthen the new entity’s position through a larger market share of 46%, nearly half of the market. The merger will also expand the new entity’s IoT portfolio with wider vertical capabilities through their respective existing solutions. Celcom currently offers a range of vertical solutions such as smart utilities, connected vehicles, smart agriculture, and connected ATM while Digi has fleet management systems and oil and gas solutions in its portfolio. Furthermore, the new entity could also enhance its end-to-end IoT offerings by leveraging its parent capabilities. For example, Telenor Connexion has complete global IoT solutions ranging from connectivity, platform, SIM cards, cloud to vertical solutions, professional services and test labs. The bigger capabilities will strengthen the market proposition and hence enable them to win more deals and extend their market leadership.

Other Enterprise ICT Market

Besides mobility, both Celcom and Digi have also significantly expanded their enterprise ICT portfolio in the last two years particularly in networking, cloud and UC. They have also extended their domestic fixed infrastructure reach through wholesale agreements. However, both Celcom and Digi are still fairly new in the managed ICT service market. While they offer some of the latest networking and UC solutions such as SD-WAN and CPaaS, there is still a huge gap in the service capabilities and brand share compared to the bigger players such as TM, Maxis, and other established IT providers.

The Challenges

Celcom and Digi are direct competitors and hence there could be more overlapping capabilities than complementing resources. For example, both offer basic SD-WAN services targeting the SME segment. They also have competing enterprise products such as OMNI (CPaaS), AVANA (social commerce platform), and mobile payment solutions. Without a dominating party, the merged entity may end up retaining two similar assets/solutions and this could complicate product development and go-to-market processes. Besides, Celcom and Digi are known to have different network vendors and IT providers, and this could result in a challenging back-end integration process. Furthermore, the integration of brand, sales, and people is always a complex task that could take months or even years which may cause service disruptions to customers. There could also be a potential roadblock from the public to protect end users although the regulator (MCMC) has assured the industry that it has the right tools to prevent monopolies.

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