PETALING JAYA: Competition in home fibre Internet connections will continue to be intense as players slug it out for more market share and this will have an impact on the average revenue per user (Arpu) for telecommunications companies (telcos).
Kenanga Research is slightly alarmed by the broad-based sequential declines in net additions and Arpu for telcos, with the exception of TIME Dotcom Bhd
.
In particular, Telekom Malaysia Bhd’s (TM) Arpu saw the steepest drop due to aggressive price discounts, falling to RM127, from RM134 in the fourth quarter of last year (4Q24), due to aggressive price discounts to retain and attract subscribers.
CelcomDigi Bhd and Maxis Bhd saw their Arpu hit the lowest levels since 1Q23 as they released their recent 1Q25 results.
Competitive pressures initially emerged in 3Q24 following CelcomDigi’s roll-out of converged offerings, mirroring Maxis’ strategy.
In 1Q25, competition intensified sharply as TM turned aggressive in pushing its converged plans, a strategic shift likely triggered by rising 5G costs, the research house said.
Given that this was for the first quarter, when there is wide-spread competitive pressure, Kenanga Research said it is maintaining a wait-and-see approach.
The research house said every telco had maintained their FY25 earnings guidance, suggesting a potential recovery in the quarters ahead.
The research house retained its “neutral” outlook on the sector, pending greater clarity on the implementation of Malaysia’s dual 5G network policy.
The final outcome on each mobile network operator’s participation in either the second 5G network or the existing network will be key in shaping the outlook for earnings, capital expenditure and dividend capacities for the mobile players.
TM and Time remained its top sector picks.
The research house favoured TM for being leveraged towards secular data growth on the back of current trends such as the digital transformation, proliferation of the Internet of things, and cloud services powered by generative artificial intelligence.
The research house said TM was likely to benefit from upcoming projects for the second phase of the Jendela national Internet network via roll-out and monetisation opportunities.
The group also stands to enjoy earnings accretion from the development of new hyperscale data centres and higher demand for data transmission via its digital infrastructure that includes global submarine cables and domestic fibre optic lines.
The research house said it likes Time based on a forecast of sustained strong secular demand for its global and terrestrial bandwidth services, supported by its extensive infrastructure of submarine cables and fibre optic lines.
