Muted impact on Maxis

On Oct 21, 2011, Maxis and U Mobile had inked a multi-billion-ringgit deal to share Maxis

PETALING JAYA: There could be some impact on Maxis Bhd’s revenue as a result of U Mobile Sdn Bhd’s termination of a network sharing agreement with the former related to the 3G radio access network (RAN), but more information will be needed before the full impact can be analysed.

A telco analyst said there surely would be an impact on Maxis, but could not put a figure on it without more information. “It will be a loss of revenue stream for Maxis, but in terms of earnings, we are not privy to such information,” the analyst told StarBiz.

Maxis, in a filing with Bursa Malaysia, said its wholly owned subsidiary – Maxis Broadband Sdn Bhd – received a termination letter on June 23 in relation to the network sharing and alliance agreement (NSA) dated Oct 21, 2011.

The termination, expected to take place in stages over a period of 18 months with completion on Dec 27, 2018, was given as an option available to U Mobile under the NSA, according to Maxis’ filings.

On Oct 21, 2011, Maxis and U Mobile had inked a multi-billion-ringgit deal to share Maxis’ 3G RAN, making it the first active sharing agreement to be deployed in Malaysia.

The deal, which was for an initial period of 10 years, was supposed to be a huge source of revenue to Maxis and enhance its network utilisation in under-utilised areas, said Maxis when it inked the deal with U Mobile.

The RAN partnership came about when the Government urged telcos to reduce duplication of network assets to enable operators to deliver better services, apart from promoting increased competition at the service level rather than at the infrastructure level.

In a mature market such as Malaysia, RAN sharing was initiated to help to reduce capital expenditure and operating expenditure, increase speed of network rollouts, enhance coverage and meet the higher demand for data and voice capacity. Maxis said U Mobile’s move to terminate the RAN agreement was not expected to have material effect on its financial results for the financial year ending Dec 31, 2017 (FY17).

Maxis’ shares closed down three sen or 0.53% to RM5.61 yesterday, with 5.98 million shares being traded.

Meanwhile, analysts said they were not surprised that U Mobile had terminated the deal.

An analyst said the news was not surprising because U Mobile has been allocated 2x5 MHz of 900 Mhz and 2x15 MHz of 1,800 MHz for 15 years, with full nationwide implementation starting Jan 1 of this year.

“With the additional spectrum allocation, they do not need to depend on Maxis for 3G network,” the analyst said.

The analyst said the bulk of Maxis’ profits came from the mobile business and that the 3G RAN lease was just a small portion of income.

“The impact on earnings will likely be around 3% to 4% because the termination is expected to take place in stages, with full impact seen in FY19,” the analyst reckoned.

Asked on U Mobile’s listing, the analyst noted that it was hard to say if U Mobile was headed for a listing in 2018 since the company has not achieved breakeven in terms of earnings before interest, tax, depreciation and amortisation.

Meanwhile, U Mobile said in a statement that it has decided to focus more on expanding its own network due to its growing subscriber base, especially after being awarded with the additional spectrum of 2x15 MHz of 1,800 MHz and 2x5 MHz of 900 MHz last year.

“The additional 1,800 MHz was made available on April 1, 2017, while the 900 MHz will be accessible on July 1, 2017.

“We are currently upgrading our network progressively to support these new spectrum bands for customers to enjoy an enhanced network experience when the spectrum bands are turned on and the upgrade is completed,” U Mobile said.

U Mobile added that the notice to terminate the RAN sharing agreement with Maxis would not impact customers’ network experience or its service quality.

“We expect to replace the RAN share sites within the stipulated timeline as we continue with our planned network investment programme,” it noted.

U Mobile, currently the fourth largest cellular service provider by subscriber base, has been eating into the market share of Maxis, Celcom Axiata Bhd and Digi.Com Bhd.

To date, the company has over five million subscribers, with one million being postpaid customers.