PETALING JAYA: The telecommunications sector is expected to continue exhibiting tepid growth momentum in the second half (2H) of the year, according to RHB Research.
Telecommunications companies (telcos) are likely to maintain the affordable connectivity narrative via tactical campaigns, offering rebates resulting in continued elevated pressure on industry average revenue per user, it said.
“Overall, we believe the rise in 5G wholesale charges (on higher 5G traffic) and inflation-led operating expenditure pressures should weigh on industry earnings before interest, tax, depreciation and amortisation despite the good cost restraint exercised by the mobile network operators,” the research house said.
The research house has maintained its “neutral” call on the sector with top picks being Telekom Malaysia Bhd
(TM), Axiata Group Bhd and CelcomDigi Bhd.
“A stock-picking strategy oriented towards the liquid large caps is favoured given the tepid industry growth prospects and lack of meaningful rerating catalysts.
“We continue to see fixed-line telcos outperforming on structural tailwinds. With the mandatory standard on access pricing (MSAP) up for another review by the year-end, regulatory risk looks to be still a key sector peeve,” it added.
The research house favoured TM for its expanding return on equity, under-leveraged balance sheet and potential for higher dividends.
The asset monetisation exercise and balance sheet repair remain key rerating catalysts for Axiata while CelcomDigi is its preferred mobile exposure on stronger commercial execution and integration synergies.
RHB Research anticipated that the second phase of the National Digital Network or Jendela plan to kick off soon.
“We expect Maxis and CelcomDigi to exercise their put options to acquire the Finance Ministry’s 41.7% stake in Digital Nasional Bhd (DNB) by year-end.
This would mark the government’s full exit from DNB with the three mobile network operators’ holding an equal 33.3% each.
“With a new operating model instituted, a review of the existing 5G wholesale framework is plausible. The MSAP is up for review by end-2025, which could renew concerns again over broadband price competition,” it said.
However, the research house said the adjustments to access prices would be manageable and rates commercially negotiated based on the previous rhetorics.
