RHB Research said uncertainties also remain over the second 5G network, which may have implications on players’ capital expenditure and dividends.
PETALING JAYA: Competition in the mobile segment will continue to be intense, as telecommunication companies focus on fixed-mobile bundling and upselling of 5G services.
RHB Research, which keeps its “neutral” stance on the sector, said uncertainties also remain over the second 5G network, which may have implications on players’ capital expenditure and dividends.
“We prefer the fixed line/integrated players over mobile, given their structural growth catalysts and more resilient earnings.
“We flag Axiata Group Bhd
as a laggard play on the earnings recovery and balance sheet deleveraging thesis,” the research firm said in a report yesterday.
In 2023, it noted that mobile service revenue (MSR) grew 1.2% year-on-year (y-o-y) with Maxis Bhd seeing the largest gain.
Industry mobile revenue for the big two players, namely, CelcomDigi Bhd and Maxis, grew 1.1% quarter-on-quarter in the fourth quarter of last year (4Q23) on seasonal factors and stronger postpaid growth.
“For 2023, MSR ticked up 1.2% for CelcomDigi and Maxis with the dip in prepaid offset by stronger postpaid growth – the latter supported by pre-to-post migration and bundling promotions.”
The research house noted that Maxis notched a 0.9% gain in MSR share to 43.3% in 4Q23 at the expense of CelcomDigi, whose share narrowed from 57.6% to 56.7% over the same period.
“We expect the MSR momentum to remain subdued, as weak consumer sentiment and inflationary pressures will crimp wallet share as reflected in the mobile operators’ tepid financial year 2024 (FY24) guidance of a ‘low single-digit growth’ in MSR,” added RHB Research.
On the other hand, fixed line players are still seeing resilient, superior growth.
Aggregate fixed line earnings grew 77% y-o-y in 4Q23, helped by tax credits at Telekom Malaysia Bhd.
This was ahead of the 3% y-o-y growth in aggregate mobile earnings of the big two players.
For FY23, fixed line earnings increased 45% versus an 11% decline for mobile, with the latter impacted by accelerated depreciation and network impairment at CelcomDigi.
As for the second 5G network, the rollout will be delayed due to some legalities and the formation of the new board at Digital Nasional Bhd (DNB).
“The latter is a requisite for share subscription agreements by the four mobile network operators (MNOs) for which due diligence is still on-going, with condition precedents to be met. MNOs are required to invest in DNB (14% stake) before being allowed to partake in the second 5G consortium.”
On 5G adoption, RHB Research expects the base to continue growing, supported by new 5G plans in the market and the influx of more lower-priced handsets.
As at end-January, there were 10.1 million 5G subscribers, translating to an adoption rate of 29.95%.
“We understand that 4G users connected to 5G networks (even momentarily) are counted as ‘active’ 5G subscribers, even if they are on 4G most of the time.
“If the official mobile population is applied as the base, 5G subscriber penetration would be 20% (or lower if 4G legacy subscribers are excluded.”
Ookla Research’s 4Q23 Speedtest Intelligence report puts Malaysia’s 5G availability at 27%, versus Singapore’s 53.7% and Thailand’s 45.5%, despite outperforming on median download speeds, the research firm noted.
