PETALING JAYA: The award of the second fifth (5G) network in Malaysia to U Mobile Sdn Bhd appears to be a setback to the more established telecommunications companies that were initially seen as frontrunners for the project.
However, this may not necessarily disadvantage the two largest mobile network operators (MNOs) CelcomDigi Bhd and Maxis Bhd
, as well as telco giant Telekom Malaysia Bhd (TM), as they still have the opportunity to participate in the 5G ecosystem.
TA Research said in a report that CelcomDigi, Maxis and TM would still be able to continue offering 5G services due to an access agreement with Digital Nasional Bhd (DNB) despite not having the roll out of the country’s second 5G network going their way.
At present, Maxis, CelcomDigi, U Mobile and YTL Communications Sdn Bhd each holds a 16.3% stake in DNB, the entity set up to operate the first 5G network in the country.
TA Research noted that the award of the second 5G network to U Mobile could signal the company’s exit from DNB, while existing shareholders of DNB can now fully focus on implementing cost-optimisation initiatives.
“We do not rule out the possibility that U Mobile might partner with other experienced telcos to develop the second 5G network jointly,” the research house said.
“We believe Maxis could be the preferred partner, given its smaller subscriber base with around 10 million compared with CelcomDigi with around 20 million, as the Malaysian Communications and Multimedia Commission (MCMC) is likely inclined to see both 5G networks have a similar number of subscribers or a similar size to maintain competitiveness,” the research house added.
Last Friday, the MCMC announced U Mobile as the winner of the bid for Malaysia’s second 5G network.
Subject to MCMC’s approval, U Mobile is allowed to collaborate with other telcos in implementing the new 5G network.
TA Research said the development helped clear up uncertainty in the sector that had weighed on investor sentiment.
As such, it upgraded its call on the sector to “overweight” from “neutral” previously.
CIMB Research maintained its “overweight” call on the sector, despite being surprised by MCMC’s decision, as Maxis or CelcomDigi were widely expected to win.
Nevertheless, the research house said it makes commercial sense for U Mobile to collaborate with Maxis or CelcomDigi to share the rollout cost for the second 5G network.
“For the sector, this marks the end of the single-wholesale-network saga and the transition to a dual network model. We believe the remaining uncertainty pertaining to the final shareholding structure of DNB will be resolved in the next three to six months, ahead of the second 5G network rollout,” CIMB Research said.
Kenanga Research said that while the award of the second 5G network signified progress, it was neutral on the announcement until further details emerge to address ongoing uncertainty.
“Key areas requiring clarifications include specific MNOs that will collaborate with U Mobile and the partnership terms; final ownership structure of DNB, which owns the first 5G network; coverage and timeline targets for the second 5G network; and state of the first network’s financial and operational health,” the research house said.
Kenanga Research maintained its “overweight” stance on the sector.
It noted that as neither CelcomDigi nor Maxis would lead the second 5G network, it expected muted commitments in terms of capital expenditure and resources associated with building a new network.
“However, this is dependent upon the specific stake the MNO will hold in the second network, and their level of involvement,” Kenanga Research said.
“In summary, while U Mobile’s win marks a key milestone, many uncertainties linger, making it premature to assess whether this development will ultimately benefit or negatively impact other MNOs,” it added.
Also maintaining an “overweight” stance on the telecommunications sector, BIMB Research said growth would be driven by the anticipated improvement in 5G monetisation due to clarity on the final 5G network structure and attractive 5G-related bundling packages.
The research house added the other drivers for the sector include increased investment in data centres, which will enhance 5G deployment and unlock greater monetisation potential for data-intensive businesses in the enterprise segment; expectations of a rising 5G adoption rate, and the anticipated gradual recovery in roaming revenue, supported by increased usage from migrant workers and tourists, as Malaysia targets 27.3 million tourists in 2024.
