Kenanga Research said TM's convergence strategy will provide a boost to Unifi’s average revenue per user.
PETALING JAYA: Analysts are optimistic about Telekom Malaysia Bhd
’s (TM) commitment to 5G initiatives, anticipating a positive impact on both service quality and customer satisfaction.
While Kenanga Research did not anticipate Unifi Mobile to serve as a substantial earnings driver, the research house expects positive impact on TM’s convergence strategy.
“The convergence strategy will provide a boost to Unifi’s average revenue per user, which is one of TM’s key products,” the research house noted in a report on the telecommunication company (telco).
Kenanga Research highlighted that TM’s earlier 4G services lacked appeal.
However, it is optimistic about the transformation with TM’s 5G products, positioning the telco as a strong player.
To note, in June 2023, TM switched to Maxis for 4G multi-operator core network, 4G and 2G domestic roaming services.
Arising from this, Unifi Mobile has a 95% population coverage for 4G services.
“According to TM, the change in infrastructure supplier led to a significant improvement in its network quality,” Kenanga Research added.
Additionally, the research house said Unifi Mobile’s existing postpaid plans are competitively priced, avoiding direct competition with larger, established competitors.
It highlighted that monthly fees for Unifi Mobile’s postpaid packages range from RM39 to RM99.
In contrast, postpaid plans from CelcomDigi, Maxis and Digi are priced higher, ranging between RM60 and RM139.
“Therefore, we anticipate a relatively encouraging response for Unifi Mobile’s new products,” it noted.
It added that this would boost TM’s convergence proposition, cross-selling opportunities and retention of its fixed-broadband customer base.
Moreover, Kenanga Research highlighted TM’s exploration of additional 5G monetisation avenues.
It said the telco acknowledged the financial burden of the annual RM288mil 5G access capacity payment to Digital Nasional Bhd (DNB) for smaller players like Unifi Mobile due to limited retail subscriber base monetisation.
“Nevertheless, on the bright side, TM may monetise its 5G offerings for enterprise and public sector customers,” Kenanga Research said.
For example, the research house said TM demonstrated successful implementation of Petroliam Nasional Bhd’s (PETRONAS) private 5G network and the deployment of 5G solutions at offshore platforms.
With PETRONAS aiming for over 20 5G-enabled assets by 2024, Kenanga Research said TM could leverage 5G and big data trends, supported by its track record with financially capable government-linked entities.
“Moreover, TM’s 5G access payments are also partially offset by its 10-year RM2bil fibre leasing service contract with DNB,” it added.
To note, in its financial year 2023, TM recognised about RM100mil in leasing fees from this contract that will recur over the next eight years.
Under this agreement, DNB leases TM’s fibre cable network to connect its 5G mobile sites and nodes.
The possibility of securing a similar contract for the upcoming second 5G network is not discounted by the research house.
Kenanga Research, expressing confidence as structural data trends remain intact, has maintained its “outperform” call on the stock, with a target price of RM6.76 per share.
