HLIB Research has a “neutral” stance on the telecommunications sector.
PETALING JAYA: Fixed-line telecommunication companies (telcos) are the main beneficiaries in broadband/5G infrastructure and data centre deployments as fibre’s role, as a backhaul to transfer data at the speed of light, is critical in broadband/5G builds.
According to Hong Leong Investment Bank (HLIB) Research, which has a “neutral” stance on the sector, its tactical strategy to favour fixed over wireless service providers panned out well.
“We stay the course for the second half of 2024 (2H24) as 5G rollout will continue regardless of political climate or whether in single wholesale network (SWN) or dual wholesale network (DWN) SWN/DWN structure,” it said.
As such, Telekom Malaysia Bhd
(TM) remains the research house’s top pick with a “buy” call and has raised its target price to RM7.91 from RM7.21.
“We are particularly positive on its cost optimisation measures which are now yielding an impactful outcome.
“Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of national 5G DWN and data centre deployments.
“Furthermore, TM is well positioned as the sole Malaysian cloud service provider when sovereignty is of utmost importance in dealing with government data,” HLIB Research added.
It said Digital Nasional Bhd (DNB), as Entity A, has achieved 5G population coverage of 80% at the end of 2023 in phase one (SWN). On June 28, 2024, four mobile network operators (MNOs) namely CelcomDigi Bhd, Maxis Bhd, U Mobile Sdn Bhd and YTL Communications Sdn Bhd except TM, have completed their share subscription agreements (SSAs) to take up equity stakes in DNB.
TM’s subscription is pending shareholders’ approval in accordance with its governance requirements.
The SSAs give effect to the MNO’s collective subscription of 70% equity or 14% each in DNB with the government retaining the remaining 30% and holding a special share. The signing of the SSAs will see each MNO injecting some RM233mil which will be utilised to meet DNB’s funding requirements while policies and strategies are being formulated to migrate from SWN to DWN.
Phase two of DWN has begun with the issuance of ministerial direction on the second carrier for 700MHz and 3.5GHz frequency bands and application information package, which serves as an invitation to telcos to participate in the tender of building the second 5G network.
“We think that the second 5G network will likely be superior and more cost effective.
“It will have a higher level of compatibility and seamless interworking with single radio access network technology,” HLIB Research added.
