PETALING JAYA: With telco players trying to stay ahead of the competition by coming out with new ways to give out more data to users, and at the same price, data monetisation is expected to remain weak.
The postpaid segment has been highly competitive from June to September as telcos further increased data quotas without raising prices, which will likely lead to weaker monetisation.
For this year, CGS-CIMB said it has projected the industry mobile service revenue to once again slide by 3.9% year-on-year (y-o-y), with a decline of 5.8% y-o-y for the big three celcos (Celcom Axiata Bhd, Digi.com Bhd and Maxis Bhd).
This is due to tight market competition, legacy revenue declines, a full-year’s impact of weaker wholesale revenue from U Mobile for Maxis, and lower international roaming/voice/prepaid reload revenue due to Covid-19.
As for the fixed-line front, it said Telekom Malaysia Bhd could face some near-term headwinds in the enterprise business, also due to the pandemic.
While Unifi subs growth has been strong, fixed broadband revenue will continue to be dragged this year by the decline in Streamyx subs and Unifi ARPU erosion.
CGS-CIMB said the local telecoms sector is trading at an average financial year 2021 (FY21) enterprise value/operating free cash flow of 13.7 times, or a 5% premium over the Asean telco average of 13.1 times, with a decent FY19-FY22 core earnings per share compounded annual growth rate of 7.2%.
The 2020-22 dividend yields of 3.7%-4.5% per annum are nothing to shout about relative to its Asean peers, but they should help to support share prices at current levels, it said.
The downside to its unchanged “neutral’’ call on the sector are higher-than-expected upfront fees charged for the 700MHz/3.5GHz spectrum, more intense competition, as well as adverse new regulations.
However, the upside is value creation from mergers and acquisitions.
Among the big three players, the house said Celcom was the worst performer (for the second quarter in a row), with second-quarter 2020 mobile service revenue down 6.1% quarter-on-quarter (q-o-q) (-14.7% y-o-y), versus Digi’s -5% q-o-q (-6% y-o-y) and Maxis’ -2.2% q-o-q (-5.8% y-o-y).
It added that Maxis fared the best among the three, as it had the least exposure to the prepaid segment (44.5% vs Digi/Celcom’s 53.4%/44.6%), which was harder hit by the movement control order.
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