We maintain our HOLD rating on Digi.Com (Digi) with unchanged forecasts and a DCF-based fair value of RM4.95/share, which implies a FY16F EV/EBITDA of 13x, the stock’s 2-year average. Digi is now offering Voice-over-LTE (VoLTE) features on its 4G LTE network nationwide at no additional charge for iPhones running iOS 10.1 such as iPhone 7 / 7 Plus, iPhon

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Digi.Com : VoLTE offered on iPhones      HOLD

We maintain our HOLD rating on Digi.Com (Digi) with unchanged forecasts and a DCF-based fair value of RM4.95/share, which implies a FY16F EV/EBITDA of 13x, the stock’s 2-year average. Digi is now offering Voice-over-LTE (VoLTE) features on its 4G LTE network nationwide at no additional charge for iPhones running iOS 10.1 such as iPhone 7 / 7 Plus, iPhone 6s / 6s Plus, iPhone 6 / 6 Plus and iPhone SE. The group said VoLTE capability in devices from other manufacturers will be rolled out soon in stages later. This is not a surprise as Digi has been testing VoLTE since late 2015 using solutions from its network vendor, ZTE Corporation, which deployed its current 4G LTE and 3G networks. VoLTE, alternatively called as HD Voice, transmits voice calls over a 4G LTE network. The higher bandwidth of 4G LTE networks make it ideal to transmit higher fidelity voice calls than over the 2G and 3G networks, in addition to its noise cancellation capability. VoLTE also allows customers to simultaneously surf the web, download or stream content from the internet at 4G LTE speeds while engaged on a voice call.

While Yes was the first domestic operator to rollout VoLTE, Maxis and Celcom and U Mobile have yet to unveil this option. Meanwhile, cellular competition remains intense as Digi has recently offered more weekend data quota for postpaid plans. Digi’s RM80 plan now offers 10GB data plus another 10GB of week-end data. Celcom’s First Gold unlimited call option at RM80 offers 5GB of data plus 5GB of week-end data while Maxis’ cheapest postpaid plan with unlimited calls is priced at RM98/month with only 5GB of data. For Digi, its recent FY16F service revenue guidance is a low single digit decline which means that there is no near-term relief in the cellular struggle to defend ARPUs and margins. The stock currently trades at a fair FY17F EV/EBITDA of 13x near its 2-year average while dividend yields are fair at 4%.

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