RHB Research said that 5G policy uncertainties continue to linger.
PETALING JAYA: With the broadband access price concerns cleared, RHB Research sees upside to fixed-broadband (FBB) subscriber growth, plus the earnings generated per user with higher FBB adoption.
The protracted discussions on broadband access prices following the implementation of new mandatory access pricing framework in March 2023 has been “a key overhang” on the telecommunication industry, according to the research firm.
“With the mobile network operators (MNOs) having inked new wholesale agreements, new retail FBB prices unveiled and existing customers feted with complementary speed upgrades, the risk of average revenue per user (Arpu) compression in the market has been minimised, in our view.
“There is upside to industry FBB subs growth and Arpu from greater FBB adoption,” said RHB Research in a note yesterday.
Not unlike 2023, the research firm expects to see sector core earnings being spearheaded by fixed-line plays for this year too.
It noted that telecommunication companies (telcos) delivered a meagre 0.6% mean share price return in 2023, with fixed and integrated plays eclipsing its mobile contemporaries’ performance.
Notably, it said competition got stiffer in December.
“On top of the aggressive upselling and cross-selling of FBB-mobile bundles by the MNOs, competition in the mobile segment has remained tight, with Maxis Bhd
dishing out two-to-10 times more data on its new 5G postpaid plans in mid-December.
“CelcomDigi Bhd also marked the first anniversary of its merger with new unified 5G postpaid plans introduced.”
According to RHB Research, CelcomDigi is currently offering unlimited hotspot and 300 megabits per second of FBB for its top-tier bundled plan priced at RM260 per month or RM200 per month for existing customers.
The research firm does not rule out the extension of policy-centric campaigns to stoke 5G adoption in 2024.
However, it said the 5G policy uncertainties continue to linger on.
The government and four MNOs have since entered into conditional agreements to acquire a 14% stake each of Digital Nasional Bhd (DNB), which has fulfilled its 80% population coverage mandate.
Uncertainties, however, remain on the structure of the second consortium exclusive to MNOs that have taken up stakes in DNB, while 5G-related capital expenditure (capex) has yet to be guided by telcos.
The research firm said MNOs are expected to incur higher DNB wholesale charges from the financial year 2024.
That said, there is a provision in the 5G wholesale agreements with DNB that allows for MNOs to terminate the agreement when DNB is no longer the single 5G wholesale network provider.
RHB Research, which is “neutral” on the sector, said current valuation is fair and reflective of the still tight competition, with 5G monetisation and capex as headwinds.
“We continue to like fixed-line plays, given the more discernible structural and secular earnings drivers and promising dividend prospects.
“Preferred picks are TIME Dotcom Bhd and OCK Group Bhd.
“Our ‘buy’ call on Axiata Group Bhd is also in line with our broad market strategy focus on deep sector laggards, with the stock down a hefty 23% in 2023 – the worst performing among the Asean-four telcos.”
Meanwhile, in a separate report on Maxis, RHB Research said it expects the company to double down on operational improvements and efficiencies as a part of its three-year cost rationalisation programme.
“Growth will be based on tie-ups and partnerships to keep cost-to-serve low,” it said.
However, the research house said uncertainties remain on its policy shift to a second 5G network, which would have implications on the group’s dividend prospects and capex.
