PETALING JAYA: The outlook for the telecommunications sector in Malaysia remains challenging as mobile network operators (MNOs) face continued pressure on data yields.
While the outcome of 5G tender would remove an impasse, uncertainties about the impact on earnings could cap upside potential for the sector.
As such, RHB Research kept its “neutral” stance on the telecommunications sector.
Its top picks are Telekom Malaysia Bhd
(TM), Axiata Group Bhd and CelcomDigi Bhd, stating that on a relative basis, it still prefers fixed/integrated players over mobile players, given the more discernible structural catalysts.
In its report yesterday, the research house said the tight competition among MNOs should continue to suppress data yields with tactical promotions to sustain wallet share.
“MNOs continue to pursue tactical campaigns to reaffirm their value propositions.
“We see continuing pressure on mobile data yields (unlimited offers still dominate campaign taglines) with pre-to-post migration activities and up-selling of fibre broadband packages providing average revenue per user support,” RHB Research explained.
It noted that 5G adoption momentum has picked up, thanks to attractive device campaigns, but the lack of retail use cases and high data quotas suggest monetisation will take time.
RHB Research reckoned the revelation of the new 5G spectrum recipient would end a long impasse in the sector, and expected Maxis Bhd to be the front-runner in the race.
However, it pointed out there were still uncertainties about the underlying impact on earnings from wholesale cost, cost to serve (with 5G traffic eventually split two ways between Digital Nasional Bhd and Entity B) and capital expenditure limiting upside risks for MNOs.
“We see the outcomes as contingent on network collaborations to be formed with non-5G spectrum holders,” it said.
“The dual 5G network framework pivots the sector from a single wholesale network model where 5G wholesale costs incurred by access seekers have thus far been incremental,” it added.
According to RHB Research, additional 5G spending from the second 5G network provider and site densification works should nonetheless benefit players involved in infrastructure deployment such as TM and OCK Group Bhd.
Meanwhile, the research house said digital assets within the sector are seeing good value illumination.
“Valuation of digital infrastructure assets has gotten a boost from the start of the interest rate downcycle,” it noted.
“This could spur further corporate actions and mergers and acquisitions in 2025, in our view, with infrastructure-backed telcos in the limelight,” it added.
RHB Research viewed TM as a key beneficiary of the data centre and artificial intelligence boom given its stranglehold over fibre and digital infrastructure assets in the country. It said TM is well placed to secure more data centre connectivity jobs.
