PETALING JAYA: Telecommunications giants CelcomDigi Bhd, Maxis Bhd
and YTL Corp Bhd may need to fork out RM394mil each to buy out U Mobile Sdn Bhd’s and the Finance Ministry’s (MoF) equity stakes in Digital Nasional Bhd (DNB) for the second 5G network rollout, estimates CIMB Securities Research.
The research house said for now, investors looking at the sector should assume that CelcomDigi, Maxis and YTL, through its subsidiary YTL Communications Sdn Bhd, will stay put in DNB.
In its note to clients yesterday, CIMB Securities Research pointed out that if the final shareholding in DNB is evenly split, it reckons each telco firm would have to invest a “not-too-substantial” RM394mil to acquire U Mobile’s and MoF’s equity stakes, including the repayment of RM450mil in shareholder advances.
Additionally, it noted that the telecommunications companies (telcos) will have to continue paying 5G access fees to DNB and account for potential losses, which effectively represent each telco’s share of DNB’s 5G capital expenditure (capex) and operating expenses.
“However, we expect these costs to be largely offset by the telcos’ tapering 4G capex,” added the research house.
CIMB Securities Research opined there is room for DNB to rationalise costs and narrow the gap to the second 5G network.
Despite limited spectrum to support at least three, possibly four, telcos, DNB can address mid- to long-term capacity requirements via cell densification.
“DNB may also be able to get (an) additional spectrum, as the regulator is targeting to clear 100MHz at 3.5GHz by June 2025, though when/how/to whom it will be allocated is yet unconfirmed,” it said.
Still, CIMB Securities Research noted that U Mobile may offer a better 5G experience once fully rolled out, compared to DNB, with more seamless handovers when subscribers move between 4G and 5G networks.
It said this may help improve the company’s traction in the higher average revenue per user (Arpu) segments over the mid to long term.
However, after investing heavily in the 5G rollout, the research house opined that U Mobile’s focus may shift towards competing more on network experience rather than aggressive pricing, which could promote healthier market competition.
Meanwhile, Phillip Capital Research observed that telcos are increasingly concentrating on strategies to boost Arpu and grow their subscriber base amid intense competition.
“To achieve these goals, telcos offer more personalised service bundles and embrace fixed mobile convergence, leveraging data analytics to understand customer preferences better, while significant investments in digital platforms are being made to enhance user experiences.
“By targeting high-value segments and improving customer retention through loyalty programmes, telcos aim to attract new subscribers and maximise revenue from their existing customer base,” it said.
The research house said Maxis, CelcomDigi, Telekom Malaysia Bhd (TM) and Axiata Group Bhd have expanded their fibre network to meet the growing demand for high-speed broadband, while capitalising on the reliability of 5G technologies.
According to Phillip Capital Research, 5G monetisation is a key growth opportunity.
“The selection of U Mobile as the second 5G network provider last year should see more development in 2025 without collaborating with local partners.”
It noted that while subscriber acquisition remains crucial focus for directly driving service revenue growth, Arpu is still an important metric to track.
Despite an increase in net subscriber additions, telcos have experienced a decline in Arpu.
Noting that customers are increasingly drawn to value-for-money deals, Phillip Capital Research said this has led telcos to introduce a broader range of packages, often at lower price points.
“These new, more affordable packages tend to reduce Arpu as subscribers opt for more budget-friendly options.
“As a result, the sector’s blended Arpu has softened, with blended postpaid Arpu at RM65 per month, representing a 5% year-on-year (y-o-y) drop, and prepaid at RM28 a month, a 2% y-o-y decline in recent quarters,” it said.
Despite these trends, Phillip Capital Research expected continued growth in net subscribers across the sector, driven by aggressive marketing campaigns and expanded distribution channels in Malaysia.
It anticipated postpaid blended Arpu in the sector to stabilise at around RM66-RM67 monthly in 2025 and 2026.
Both research houses posted “overweight” calls on the telco sector, with CIMB Securities Research singling out CelcomDigi as its top pick with a target price (TP) of RM4.20 per share, while Phillip Capital Research identified TM as its choice counter, with a TP of RM8.35 a share.
