Competition in broadband rising, AmInvestment keeps Neutral call

Time dot Com has introduced a new unlimited fibre broadband package at RM149 a month for 100Mbps,

KUALA LUMPUR: AmInvestment is maintaining its Neutral recommendation on the telecommunications sector while pointing out the rising competition in the broadband space.

It said on Tuesday it continues to have a Buy on Axiata for Celcom’s subscriber recovery, stronger contributions from overseas businesses, value accretive NCEL acquisition in Nepal and domestic roaming arrangement together with HSBB and backhaul collaboration with TM. 

“Our Hold calls are maintained for Maxis, Digi and Telekom Malaysia,” it said. 

On the broadband market outlook, AmInvestment said Time dot Com has introduced a new unlimited fibre broadband package at RM149 a month for 100Mbps, RM189 a month for 300Mbps and RM299 a month for 500Mbps. 

“This translates to RM1.49 per Mbps, 63 per Mbps and 60 per Mbps respectively. We highlight that this service is only available at 250,000 homes currently, usually in high density areas such as in in high density areas such as in commercial areas or condominiums,” it said. 

The research house said Time’s earlier package at RM129 a month for 10Mbps is no longer available. As a comparison, Maxis still offers 10Mbps at RM128 a month for its MaxisOne customers, which translates to RM12.80 per Mbps. 

Maxis’ pricier packages offer RM178 a month for 20Mbps (RM8.90 a Mbps) and RM228 a month for 30Mbps (RM7.60 perMbps)..

“Maxis competing on quality. While Maxis’ packages are not as competitive as Time’s on price, the group is promoting its HomeFibre option on quality of service. 

“The company is offering a 30-day satisfaction guarantee where the customer can cancel the service for free within 30 days of installation if the customer is unhappy or not satisfied with the quality of the fixed-broadband service,” it said. 

Following the latest developments, AmInvestment said TM’s offer is least appealing. 

TM’s lowest broadband package of RM179 a month with download speeds of 30Mbps translates to RM5.97 a Mbps, but provides upload speeds of only 5Mbps. 

TM's pricier package of RM229  a month for download speeds of 50Mbps and RM599 a month for 100Mbps are also not appealing as upload speeds are limited at 5Mbps. For interactive and real-time applications, these packages do not appear attractive. 

“Given that Time Home Fibre’s network footprint is much smaller than Unifi, we do not expect an immediate impact on TM or Maxis’ Home fibre’s customer subscriptions. However, in line with global trends, these competing offers will continue to drive down the sector’s price-to-speed trajectory,” it said.

AmInvestment said Competitive pressures could further intensify when TM re-launches its P1 service by 1H2016 as part of its convergence drive to bundle its mobile, wireless, broadband and fixed line services. 

Given the rising competition in both mobile and broadband services, we expect TM to offer special discounts on its bundled packages, further driving prices lower. 

“We believe Axiata Group is best-positioned to take advantage of the upcoming shakeout by offering a unified package together with TM’s broadband services, while Digi and Maxis are likely to struggle to drive ARPU rates in the longer term.” it added.

For TM, even though it owns the Unifi infrastructure and is well placed to benefit from its convergence strategy, the group is likely to be burdened by slower returns from its investment in the High Speed Broadband Project (HSBB) Phase 2 and the Sub-Urban Broadband projects. 

“Margins are likely to be compressed as the group has guided for a flat FY16F EBITDA but significantly higher capex/revenue of 25%-30% for FY16F vs 21% in FY15,” it said.