Telekom Malaysia's new headquarters in Cyberjaya that comprises an innovation hub, network intelligence centre and core data centre. – Photos: AZHAR MAHFOF
PETALING JAYA: Fixed over mobile players are the prime beneficiaries in the broadband/5G infrastructure deployment of the country.
Telekom Malaysia Bhd
(TM) remains the top pick given its vast fiber network reach and its cost optimisation measures are seen to be yielding an impactful outcome, according to Hong Leong Investment Bank (HLIB) Research.
The research house said TM is perceived to be the critical fundamental building block of the government’s 5G rollout under the MyDigital initiative.
Additionally, TM is also well positioned as the sole Malaysian Cloud Service Provider when sovereignty is of the utmost important in dealing with government data.
HLIB which holds a “neutral’’ stand on the telecommunications sector, has a “buy’’ call on TM with a target price of RM6.94.
The research house added that TM’s role as backhaul to transfer data has become more critical and a mandatory prerequisite in broadband/5G deployment.
Meanwhile, the surge in wholesale bandwidth demand would boost margins under the Mandatory Standard on Access Pricing (MSAP) regime, HLIB said.
“New fibre rollouts are also commercially negotiated (price not regulated) and fixed telecommunication companies (telcos) will command more lucrative returns.
“We are not overly concerned about the new MSAP price revision. The impact is not as severe as previous’ ‘double the speed, half the price’ objective and expected to be offset by the ever increasing consumption over time,” HLIB said in a report yesterday. On the 5G rollout, it said the phase one of the single wholesale network, Digital Nasional Bhd (DNB) will continue to roll out the 5G network until 80% population coverage is achieved by year end. Phase two (dual wholesale network will begin as early as January 2024 where other players will build the second 5G network.
It said it was business as usual as the top three telcos remain disciplined and cost-focused.
With the amalgamation of Celcom and Digi, HLIB expects healthier market rivalry with lesser price undercutting for market share gain.
Pre-to-postpaid migration will be motivated by voice-to-date substitution.
It noted that telcos’ dividend yields, which average circa 3%, are not attractive enough relative to the risk-free interest rate to spur domestic and foreign buying interests.
