Billionaire T. Ananda Krishnan’s Astro Malaysia Holdings Bhd. is counting on increased adoption of a subscription-free service by rural Malaysian homes to add pay-TV customers as consumer spending slows amid a new tax.
“We are not a one-size-fits-all service,” Chief Executive Officer Rohana Rozhan said in an interview at her office in Kuala Lumpur. “We can actually provide products and services that deal with each and every segment of the market. Those are the ones driving the growth.”
The service gives viewers some free basic channels for a startup fee with the option to buy additional programs selectively instead of committing to monthly subscriptions, Rohana said. That freedom allows Astro to woo customers from less affluent households and helped the company add about 500,000 customers last year to 4.5 million, she said.
Consumers have been holding back on spending since the end of last year, bracing for an increase in living costs as Malaysia started a goods and services tax of 6 percent in April, according to research company Retail Group Malaysia. The central bank said last week private consumption growth is expected to slow as households continue adjusting to the tax.
With 65 percent of Malaysian homes already watching Astro, the country’s largest pay-TV operator is now reaching out to more rural households to achieve its goal of a penetration rate of as much as 85 percent over the next three to five years, Rohana said.
Astro shares have fallen 9.9 percent in the past 12 months, almost tracking a 9 percent decline in the benchmark FTSE Bursa Malaysia KLCI Index.
The broadcaster is among companies hurt by the ringgit’s weakness as it will have to spend more foreign exchange buying content, Rohana said. About 70 percent of its total content costs are dollar-denominated, she said.
The Malaysian currency has lost about 8 percent against the dollar this year as Asian currencies come under pressure from the prospect of higher U.S. interest rates. An alleged scandal involving Prime Minister Najib Razak and state investment company 1Malaysia Development Bhd. has also clouded the outlook for the ringgit.
Every 10 sen depreciation in the ringgit will increase Astro’s costs by 35 million ringgit ($9.2 million), Rohana said.
“It’s manageable,” she said. The company has hedged its exposure till May 2016, Rohana said. “We have always been prudent in our forex management.”