As if dropped calls were not enough for Maxis customers to endure on a regular basis, many living in parts of the Klang Valley recently faced 30 hours with no voice service at all.
Malaysia’s biggest mobile operator was quick to make a free SMS offer to unhappy users but it did not compensate for the frustration of a weekend without voice calls.
Some conspiracy theorists what happened on June 15 and 16 may have been an act of mischief related to the massive reorganisation taking place at the company, but no evidence has surfaced.
The problems at Maxis started to surface after CEO Sandip Das left and his successor, Johan Dennelind, declined the job a month before he was scheduled to assume the position on July 1, citing personal matters.
The company’s chairman briefly took charge before a management shakeup in which six senior people left, suggesting that all may not be well at Maxis.
Since the search for a chief executive will take time, the shareholders appointed a second chief operating officer, formerly the CFO, to oversee day-to-day operations until a CEO is found.
The joint COOs, company veterans Nasution Mohamed and Suren J. Amarasekera, have been given a daunting brief. The board wants a complete makeover in products for young people, something that has been missing to date, and a new organisational structure. As well, they have been told to get Maxis more firmly entrenched in the converged digital business, an area in which it trails its rivals, and to focus on profitability.
Listed on Bursa Malaysia with a market capitalisation of nearly 51 billion ringgit, Maxis earns 9 billion ringgit annually in revenues. Its major shareholder is one of the country’s richest men, T. Ananda Krishnan, who also owns Malaysia’s largest pay-TV company, Astro, and oil and gas assets.
Ananda owns 45% (via Usaha Tegas Sdn Bhd) in the holding company, Maxis Communications Bhd, which in turn owns 64.4% Maxis. The other shareholders of Maxis Communications are Saudi Telecom Co (25%) and local shareholders (30%)
Maxis has prided itself on the industry’s highest EBITDA (earnings before interest, tax, depreciation and amortisation) margins, often 50% and among highest in the region, but those are coming down as pressure mounts in a competitive marketplace.
Last year the company’s net profit declined to 1.86 billion ringgit from 2.53 billion a year earlier. EBITDA slipped to 47.2%.
Maxis leads the market in mobile subscribers with 14.9 million as of the end last year versus 12.1 million for Celcom Axiata and 10.5 million for DiGi, part of the Norway-based Telenor group that also controls DTAC of Thailand. But others including Telekom Malaysia are also beginning to pose a bigger challenge.
For a long time Maxis has focused on expatriates as leaders, and each one would bring his own core team to help manage the 3,500-strong workforce.
Many talented local people left in the past because they did not see a future at Maxis and now they are working for its rivals.
As Maxis strives become an integrated service provider beyond just voice, SMS and data, it has set up a new digital unit. It recently leased high-speed internet access on Telekom’s network and has teamed up with Astro for content to offer IPTV to fight rivals such as Telekom.
But that is not enough. It has made some mistakes, especially in fixed-line service, and is often perceived by consumers as an “old man” brand with little to offer the youth market.
The heat is on the two joint COOs to remake Maxis until a new CEO is found. The first thing they did was rip the organisational structure apart. Six top leaders left or did not have their contracts renewed. Eight major divisions were cut to four, all headed by local talent, sending a strong message to staff concerned about growth opportunities. The four new unit chiefs in turn will select their own teams, underlining their accountability.
The two new leaders are also breaking down silos, realigning people to more appropriate jobs and creating products for the young. Finally, Maxis is proclaiming that everything it does surrounds the customer.
There are great expectations that service quality will improve and more importantly, prices will come down and customers will be given what they want, instead of just content that Maxis thinks will sell.
As the joint COOs remake the company, more job cuts are expected, though the pair are playing down the issue for now for fear of retaliation. But if they are talking about efficiency gains, the fat has to be trimmed and a product makeover is critical. Fortunately, the branding is still strong so that will help.
Amid all the internal turmoil, there is talk that Ananda Krishnan himself wants out. Most analysts believe this is just idle market talk, but he is 74 years old and facing succession issues, since his children are not keen on the business. For those reasons, a sale is something experts will not discount, though they do not expect it to happen overnight.
The sale talk has been heard before but it resurfaced after the management shakeup. The big question now is whether any buyer is willing to commit 35 billion ringgit, Ananda’s reported asking price for his stake, for a company in transition.