PETALING JAYA: A low single-digit growth is projected for companies in the telecommunications sector during financial year (FY) 2023 from stronger roaming and prepaid revenue led by higher migrant traffic.
Economic headwinds, however, would continue to temper industry average revenue per users (Arpu) with tactical promotions targeted at the lower-end/price-sensitive segment.
Industry mobile service revenue (MSR) grew 2.3% year-on-year (y-o-y) in 4Q22 (up 0.9% quarter-on-quarter (q-o-q), the strongest y-o-y growth since the pandemic (2022: up 1.3%).
“Key risks to the recovery growth is competition, weaker-than-expected earnings, and regulatory and/or policy upheavals,” said RHB Research.
It said the recently concluded reporting season saw fixed-line core earnings growth of 27% y-o-y in 4Q22, thumping the mobile segment’s down 16.2% y-o-y.
Most telecommunication companies (telcos) delivered in-line results, with Axiata Group Bhd outperforming for the consecutive second quarter.
RHB preferred fixed-line players owing to their more discernible catalysts and structural drivers.
It maintained its “neutral’’ call on the sector with Telekom Malaysia Bhd (TM) as a top pick.
It said it also liked OCK Group Bhd for its strategic exposure to 4G/5G site deployments and the undemanding valuation.
However, aggregate fixed-line revenue fell 3.4% q-o-q (down 5% y-o-y) in 4Q22, mainly due to lower indefeasible rights of use sales and international voice revenue at TM.
The overall industry FY22 revenue grew 6%, with sustained double-digit revenue growth at TIME Dotcom Bhd.
The new access price framework – Mandatory Standard on Access Pricing – which came into effect on March 1, saw Layer 3 service gateway prices decline by 51%-65% versus the initial 41% to 52% decline proposed by the regulator in its public inquiry paper.
RHB expects the discussions with fibre wholesale access seekers on new commercial agreements to complete by mid-year.
It had previously assumed a 5% to 10% impact on TM’s Unifi Arpu for FY23 to FY25 from lower access prices.
In the 2018 access price revision, Unifi’s Arpu fell about 21% between 2018 and 2020, with the impact partially mitigated by stronger subscriber growth and promotions.
As for 5G, will the government still hold strong onto the single wholesale network model or open the floodgates to allow all mobile players to build their own 5G networks?
“The government will make a decision by month-end and this decision is a important for the future of digitalisation in the country,” it said.
RHB Research expetcs the current 5G rollout by Digital Nasional Bhd continuing as population coverage has surpassed 50%, albeit, with refinements to the operating model which could translate into lower wholesale cost for the telcos.