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Asian Wall Street Journal Survey Puts YTL No 1 in Long Term Vision

WSJ.com, June 13, 2008

Infrastructure and property company YTL Corp. topped the category of long-term vision. A YTL unit's joint venture in March 2007 was awarded one of several licenses for WiMax, a system for wireless broadband connectivity over a larger area than Wi-Fi hot spots can provide.

This is the 10th consecutive year that YTL has won this accolade, 7 of which was in The Far Eastern Economic Review. Tan Sri Francis Yeoh, Managing Director of YTL group said, “ I thank all the readers for this recognition and I want most to thank our Lord Jesus for once again perfuming YTL’s name. I give Him all the glory.”

By PETER JEFFREY

When Morten Lundal took over as chief executive of the Malaysian mobile-phone company DiGi Telecommunications Sdn. Bhd. about four years ago, he noticed something odd: DiGi was making many customers sign a two-year contract.

His senior staff told him, "Well, that's just the way it is for every company in the world," recalled Mr. Lundal, who has since moved to the British carrier Vodafone Group PLC.

His response: "But why, why, why, though? If a customer wants to leave us, we can't stop them anyway."

DiGi, Malaysia's third-biggest mobile-phone company by subscribers, behind Maxis Communications Bhd. and the Celcom (Malaysia) Bhd. unit of Telekom Malaysia Bhd., did away with the two-year lock-in on most domestic contracts. It tried other things new to Malaysia, too, such as introducing a single rate for all prepaid customers -- who buy blocks of minutes in advance -- regardless of time, distance and location.

Mr. Lundal's admitted "obsession" with simplicity and change helps explain why DiGi took Malaysia's top prize in the featured category, "Innovative in Responding to Customer Needs," in The Wall Street Journal Asia's Asia 200 survey of readers. DiGi was named the most innovative Malaysian company in the 2006 survey as well. It ranked fourth in this survey's overall assessment, down from third place.

A total of 2,477 executives and professionals participated in the survey, which was conducted last year between May 11 and July 3. On behalf of The Wall Street Journal, market-research firm Colmar Brunton polled subscribers as well as other businesspeople in the 12 Asian-Pacific countries.

Nestlé (Malaysia) Bhd., a publicly traded unit of Switzerland's Nestlé SA, earned the top spot as overall most-admired Malaysian company. Readers voted it No. 1 in the categories of corporate reputation and quality of its products and services, and No. 3 in innovation.

Maxis was second in the overall most-admired rankings after topping the list in 2006. Maxis is the biggest of the top three Malaysian mobile players by subscribers. It is this survey's No. 2 Malaysian innovator.

DiGi is small by comparison -- its annual revenue is less than Maxis' operating profit. But it is competitive. Its overall mobile market share by revenue has grown to 26% from 16% four years ago.

Mr. Lundal, 43 years old, took the helm in July 2004 after serving for seven years as an executive at Telenor ASA of Norway, which controls DiGi with a 49% stake. He left DiGi earlier this year for a senior international role with Vodafone, which has its own ambitions for the Asian cellular market.

His successor as CEO of DiGi is Johan Eric Dennelind, 38, most recently chief marketing officer of Telenor Sweden. Mr. Dennelind knows DiGi well, having served as its chief financial officer and chief marketing officer from 2004 to 2007 and played a key role in fulfilling Mr. Lundal's vision of simplicity and dynamism at the company.

"It comes down to people who live and breathe the aspirations of DiGi," says Mr. Dennelind.

"People have the DNA of thinking differently, so you just encourage them to dare to do what they think," he says, recalling how he freed employees to create "1 Low Flat Rate," a centerpiece of DiGi's marketing efforts that addresses the multiple-rate clutter of the Malaysian mobile market.


Mr. Dennelind sees retaining and attracting bold thinkers as DiGi's top internal challenge. When a job candidate arrives, he might take the candidate right into a DiGi meeting, not only to test him or her but also to make sure DiGi's own people respond well to interaction and surprise.

External challenges include macroeconomic factors, like a Malaysian fuel-subsidy reduction that could pinch consumer spending in the mobile market, and competition.

"We have been in a cozy, three-player market for a while," Mr. Dennelind says. "We now have to be mindful of new entrants."

The increasing saturation of the Malaysian cellphone market, with a penetration rate of more than 80%, doesn't help -- though Mr. Dennelind puts it somewhere around 70% when multiple SIM cards and Malaysia's large migrant population are taken into account. Over the past few years, industry profit margins have come under pressure from increased competition and are likely to face further pressure from higher customer acquisition and retention costs, though economies of scale have proved a boon to some, including DiGi. Rivalry is expected to grow sharper this year with the introduction of number portability, which will allow subscribers to take their cellphone numbers with them to a new provider.

DiGi must "strike a balance between offering a basic voice service and other value-added services, such as data to drive longer-term ARPUs," or average revenue per user, says Jeffrey Tan, senior vice president of OSK Investment Bank Research, based in Kuala Lumpur, Malaysia. He thinks DiGi, as a small and scrappy player, is well positioned in this environment. It now has "third-generation" spectrum and is expected to roll out more high-speed and advanced data services in the second half to capture higher-ARPU subscribers from its stronger rivals.

Mr. Dennelind is clearly excited about the 3G opportunities, and the chance to "bring Internet to the people, on both big and small screens." What are his plans? "We're playing our cards close to the chest," he says. "But expect surprises."

While DiGi focuses on the Malaysian market, Maxis owner T. Ananda Krishnan has taken his company private, largely to facilitate regional expansion. Allan Khoo, head of brand and marketing communications at Maxis, says that since the brand was established, in 1995, it has been based on "value, innovation and trust," attracting a customer base that now numbers 10 million in Malaysia. Mr. Khoo points to Maxis' mobile-data business as an example of the company's own innovation.

"Maxis has the largest and most-visited mobile [wireless application protocol] portal in Malaysia, with over 200 products and services, including the largest catalog of mobile music and games, mobile TV channels and other infotainment services, like football updates, news alerts and services to check traffic," he says, also noting Maxis' service for international remittance over mobile phones. "What all this technology translates to is simply this: The phone is not just a phone, but an extension of our customer's personality and lifestyle," driving Maxis to innovate.

One reason Nestlé (Malaysia), which is 72.6%-owned by Nestlé SA, won the gold appears to be because of what it isn't doing differently. Many of Nestlé's brands, including the Milo malted chocolate drink, enjoy an iconic status in Malaysia, where the company has a 95-year history and people drink more Milo than Coke.

"You don't order hot chocolate when you go out -- you order a Milo. Or you order fried Maggi" noodles, a Nestlé brand, says Foong Wai Loke, an analyst who covers the consumer sector for Credit Suisse. "They supply all these at the street-side eating places in Malaysia."

At the same time, Nestlé has allowed its brands to evolve. Milo began as a drink, then became a chocolate candy, a cereal and an ice cream. The company also has adapted to new trends. When smaller companies began offering flavored instant coffee, Nestlé brought out its own line.

The company has been working on a healthier image, as with its Maggi Tastylite instant noodles, which are air-dried instead of fried, a process that can reduce fat content by 60% to 80%, the company says. Nestlé now markets Milo as a nutritious chocolate malt drink that provides energy. Nestlé also has been making a name for itself as a provider of halal foods -- those permissible under Islam -- in Asia, the Middle East, Europe and Australia.


Nestlé faces some challenges of its own. For one, it must walk a tightrope between swallowing the rising cost of commodities, like palm oil and coffee, and passing it on to consumers. "Nestlé will continue with internal savings initiatives through operational efficiencies to avoid passing on the costs to consumers wherever possible," says group corporate-affairs manager Tengku Marina Tunku Annuar Badlishah.

Other notable names in Malaysia include Public Bank Bhd., the No. 3 most-admired company overall. Early in 2006, Public Bank, Malaysia's second-largest bank by assets, bought Hong Kong's Asia Commercial Bank, which it hopes will be a stepping stone to the China banking business. The company says it will establish an Islamic-banking subsidiary in the third quarter, addressing that burgeoning market. In April, the bank opened its Public China Titans Fund, which allows investors to tap into the growth prospects of large-cap stocks in the Greater China region.

Infrastructure and property company YTL Corp. topped the category of long-term vision. A YTL unit's joint venture in March 2007 was awarded one of several licenses for WiMax, a system for wireless broadband connectivity over a larger area than Wi-Fi hot spots can provide.

Genting Bhd., which took the top spot for financial reputation in the survey, nonetheless reported a 33% decline in this year's first-quarter net profit, partly because of lower earnings from its U.K. gambling business. However, the results also suffered from comparison with the year-earlier quarter, when the company realized some substantial gains. By contrast, revenue was up 6.6% to 2.16 billion ringgit ($660 million), thanks to the company's diversified business model and rising crude palm-oil prices. Besides owning Malaysia's only casino, Genting has interests in palm oil, oil exploration, power production and property development. Sister company Star Cruises Ltd., which shares a majority owner with Genting, is buying a 75% stake in a project in the Chinese gambling hot spot of Macau that will include a hotel and possibly a casino.

--Celine Fernandez contributed to this article.



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