BIMB Securities Research said it expects slower-than-expected 5G monetisation and coverage expansion.
PETALING JAYA: U Mobile Sdn Bhd securing the right to operate the second 5G network in Malaysia has raised more questions and may potentially lead to a more convoluted outcome for other leading mobile network operators (MNOs).
This is so for CelcomDigi Bhd (CDB) and Maxis Bhd
, said Kenanga Research as it implies the current uncertainty facing the incumbent MNOs may potentially take longer to resolve.
The key areas that need clarifications include which MNOs will collaborate with U Mobile and the terms of their partnerships, and what would be the final ownership structure of Digital Nasional Bhd (DNB).
There may be a need to revise the terms of DNB’s 10-year 5G access agreement with other MNOs after network owner-operator (NW2) launches, coverage and timeline targets for NW2, and the state of the NW1’s financial and operational health, the research house added.
BIMB Securities Research said it expects slower-than-expected 5G monetisation and coverage expansion, as well as higher adoption playing critical roles in achieving meaningful returns.
The government’s approach of avoiding additional charges aims to optimise service usage and improve the standard of living, which shifts the focus of 5G monetisation to the enterprise segment, the research house added.
It will take longer to fully capitalise on enterprise 5G opportunities at the current pace.
That aside, inflationary pressures are expected to impact average revenue per user (Arpu) as consumers try to reduce spending and opt for more basic data services.
The research house downgraded its call on the sector to “neutral” from “overweight” due to limited potential for Arpu growth, slower-than-expected 5G monetisation, uncertainty surrounding the finalised structure of the country’s 5G dual network model and a lack of catalysts within the industry.
Its top picks for the sector are Telekom Malaysia Bhd (TM) and TIME Dotcom Bhd (TDC) for which it has “buy” calls with target prices of RM7.78 and RM6.09, respectively.
The research house said it believes TM is the primary beneficiary of providing services to both public and private sectors. TDC, meanwhile, is supported by a positive long-term business outlook and strong demand for data and data centres.
Kenanga Investment Bank Research’s top picks for the sector remain TM and CelcomDigi.
The research house likes CelcomDigi for the merger synergies that amount to net present value of RM8bil over five years, its robust average free cash flow yield of 7.3% in financial years 2024 to 2025, which implies capacity to pay steady dividends.
CelcomDigi’s position as the owner of the largest mobile-subscriber base in Malaysia, translates to economies of scale.
