PETALING JAYA: The Jendela digital infrastructure plan indicates that 5G rollout in the country may be deferred to 2022, which may be favourable for telco companies, says research firm CGS-CIMB.
It reiterated that there are unlikely to be any mainstream 5G consumer or enterprise business cases in the near term, and 5G may hit the core earnings of Malaysian telcos in financial years 2021 and 2022, by 7% to 11%, if 5G spectrum is allocated in early 2021.
Regarding Jendela’s aim to provide fixed broadband (FBB) access with gigabit speed to 7.5 million premises, CGS-CIMB said uncertainties remained in terms of how and over what timeframe this is to be achieved, as Telekom Malaysia Bhd’s (TM) current high-speed broadband transmission coverage is only to around 3.5 million premises with 800Mbps maximum speed.
The research house said Jendela was in line with its expectation that the government and regulator would focus on optimising the existing 4G network for wider coverage and improved quality and extending high-speed FBB coverage, given increased demand amid the Covid-19 outbreak.
The research house also believes the additional investments due to the targeted 5% increase in 4G population coverage and faster speeds are unlikely to overburden telcos, as the 3G network will be switched off.
“This will free up the 900MHz spectrum for 4G deployment on existing sites while the 700MHz spectrum may also be allocated to telcos for a more cost-efficient 4G rollout.
“Telcos will also likely collaborate to upgrade or deploy new sites in rural areas, and the universal service provision (USP) fund will likely be used to partly defray rollout costs, ” it said.
On Aug 29, Prime Minister Tan Sri Muhyiddin Yassin announced the Jendela plan that aims to provide 96.9% of populated areas with a 4G mobile broadband network. The digital infrastructure plan will be done in phases until 2022.
Jendela also aims to simplify and reduce bureaucracy at the federal and state levels, effectively reducing rollout costs.
CGS-CIMB retained its “neutral” rating on Malaysian telcos, with key upside factors being mergers and acquisitions while key downside risks include higher-than-expected upfront fees charged for the 700MHz/3.5GHz spectrum, more intense competition and adverse new regulations.
Meanwhile, an AmInvestment report said given the low and negative investment returns for 4G connectivity in remote areas of the country, service providers would be collaborating and sharing resources such as sites, network facilities, fibre connectivity and broadcasting towers to defray costs.
The research unit also expects telcos to collaborate on the rollout of 5G services, which could be more costly than any of the previous four generations of cellular technology.
The ongoing intense global competition will dissuade providers from charging premium prices for 5G branding unless they can provide managed services and attractive solutions to customers.
AmInvestment noted that Maxis Bhd has so far been successful through superior network quality, customer care and convergence strategy by bundling with fibre solutions but its competitors have also begun similar marketing campaigns.
The research unit also reiterated that the industry’s stagnant revenue trajectory would eventually result in more merger and acquisition activities. It upgraded the sector’s rating to “overweight” from “neutral”, and retained “buy” calls on TM and Axiata Group Bhd.
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