Apex Securities said the new venture will most likely involve additional capital expenditure. — Reuters
PETALING JAYA: Analysts are upbeat about Maxis Bhd
signalling its readiness to participate in the rollout of a second 5G network in Malaysia despite the additional costs it could involve.
In a recent note, Apex Securities Bhd said the new venture will most likely involve additional capital expenditure in which Maxis will leverage its existing infrastructure to offset costs.
The research house said that Maxis’ management is of the opinion it is more favourable to participate through a completely new entity to gain better control over network quality rather than rely on Telekom Malaysia Bhd’s (TM) infrastructure.
“Relying on TM still requires Maxis to incur additional legacy cost from maintaining TM’s assets. Should Maxis decide to exit Digital Nasional Bhd (DNB), it will dispose of its stake to the remaining shareholders in DNB,” Apex Securities said.
To recap, a number of Malaysian telecommunication operators including Maxis agreed to take up 14% each in the state-owned 5G network controlled by DNB for RM233mil each in December last year.
The operators include CelcomDigi (via Infranation Sdn Bhd), U Mobile, TM and YTL Power International Bhd.
Maxis was the first telco to be ready to complete the share subscription agreement (SSA) ahead of the deadline and is hopeful that an early conclusion to the SSA will happen so the rollout can begin.
According to the research house, 5G adoption is quickly increasing but the demand from enterprises is sluggish due to the high cost of 5G devices.
“Nevertheless, this also represents an opportunity for Maxis to tap into this space, further enhancing bottom line growth,” it noted.
Meanwhile, Apex Securities said the average revenue per user (ARPU) for both prepaid and postpaid segments has been slowing due to competition.
“However, the weakness in ARPU was offset by encouraging subscriber growth, thanks to Maxis focusing on network quality and personalised mobile packages for its customers,” the research house said.
Additionally, the the telco’s ongoing fixed mobile convergence strategy has contributed to customer loyalty and retention within Maxis’ postpaid-subscriber base.
The research house has reiterated its “buy” recommendation on Maxis with a target price of RM4.28
Apex Securities said the risks for Maxis include changes in government regulations, competitors lowering prices and higher-than-expected capital expenditure for 5G that will affect cashflow and dividends.
