KUCHING: Analysts view the potential refarming of 2G spectrum on the 900MHz and 1800MHz frequency bands will likely open up new threats to the ‘Big 3’ (Celcom, Maxis and DiGi).
It was reported that the Malaysian Communications and Multimedia Commission (MCMC) plans to review and possibly refarm 2G spectrum.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) in a recent note, said methods of implementation of the refarming could include auction, beauty contest, or a combination of both.
“The regulator’s aim is reportedly to rebalance the spectrum allocation and narrow the gap between big and small players,” it added.
The research house further highlighted, “2G spectrum on 900MHz and 1800MHz are currently held by the Big 3 incumbents, which are Maxis, Celcom and DiGi.
“As such, they stand to lose if there is a refarming, regardless of the outcome. At best, if those spectrums are retained by the Big 3, there are still risks of high spectrum fees imposed by the regulator or the result of a fierce bidding process.”
It noted, the MCMC has never chosen the auction route for spectrum allocation before. As such, AllianceDBS Research believe a good gauge for spectrum price in Malaysia would be DiGi’s purchase of 3G spectrum (2x15MHz in the 2100MHz band) for about RM650 million back in 2007.
“UMobile, YTL and Puncak Semangat are potential threats as they are backed by financially strong parents. Hence, they could put up competitive bids to rival incumbents. For UMobile, securing additional spectrum would strengthen its position as an aggressive fourth player in Malaysia,” the research house viewed.
Nevertheless, it said, among the Big 3, DiGi could be the least affected as it owns very little spectrum in the coveted 900MHz band.
“In fact, the company is keen to acquire the low-frequency spectrum to compete effectively with Maxis and Celcom. With low net gearing of only 0.1-folds net debt per earnings before interest, tax, depreciation and amortisation (EBITDA), DiGi could comfortably fund the potential spectrum cost without jeopardising its dividend commitment,” it said.
For Maxis, AllianceDBS Research expected further risks to dividend payouts given that gearing is approaching its limit of two-folds net debt per EBITDA.