There is still no certainty that the Big-4 telcos — Celcom, Maxis, Digi and U-Mobile — would ink 5G wholesale agreements or acquire individual stakes in DNB by the stipulated end-June deadline, analysts note. — Bernama photo
KUCHING: It has been over two months since the government’s decision to retain the single wholesale network (SWN) and the publication of the reference access offer document by Digital Nasional Bhd (DNB).
However, there is still no certainty that the Big-4 telcos — Celcom, Maxis, Digi and U-Mobile — would ink 5G wholesale agreements or acquire individual stakes in DNB by the stipulated end-June deadline.
RHB Investment Bank Bhd (RHB Research) saw that key areas of discontent are on the prohibitive wholesale pricing structure (10-year agreement), the ability to “influence” decision-making and justify their investments without a majority stake in DNB.
“At its 1Q22 results call, Axiata said it should be able to meet the deadline,” RHB Research recapped.
“It is also uncertain if the Government would relent on the proposal by the the telcos for majority control of DNB, with the Communications and Multimedia Minister saying that the matter has yet to be decided upon.
“The stalemate on the SWN continues to be a key sector overhang, with Malaysian telcos being the worst performers among the Asean-4 telcos YTD.”
Following the recent results period, RHB Research saw that telcos’ 1Q22 results were characterised by seasonality but generally tracked in line. The economic reopening is driving a stronger recovery in industry revenue, with the focus still on wallet share as inflationary pressure mounts.
Telcos were down circa 23 per cent YTD, with 5G uncertainty as the key sector overhang.
Downside risks: Greater competition, adverse regulatory developments and earnings setbacks. The opposite circumstances would present upside risks.
All telcos within its coverage (including an infrastructure services company) delivered in-line core earnings for the March reporting quarter with the exception of a mild earnings beat from Digi.
Aggregate sector earnings improved 2.8 per cent y-o-y in 1Q22 with fixed line earnings (again) outdoing its mobile peers, at 5.3 per cent versus 1.5 per cent.
Aggregate FY22 sector core earnings are estimated to decline by circa nine per cent – due mainly to Cukai Makmur – but should rebound by about 16 per cent in FY23.
Mobile service revenue (MSR) expanded 0.9 per cent y-o-y in 1Q22.
Industry MSR (Big-3 telcos) fell 1.1 per cent q-o-q in 1Q22 due to weak seasonality.
After four consecutive quarters of growth, Celcom’ MSR dropped 3.5 per cent q-o-q as its prepaid subs base contracted 0.3 per cenr q-o-q (after the high base of net-adds in 4Q21 and steepened competition) while Digi’s MSR dipped one per cent q-o-q.
Maxis was the only big-3 telco that posted sequential MSR growth. Consequently, its revenue market share (RMS) inched up to 38.5 per cent, mainly at the expense of Celcom whose RMS eased to 31.7 per cent while Digi’s RMS was stable at 29.8 per cent.
“We see the continued focus on wallet share by the telcos, on the back of inflationary pressure and consumers tightening their belts. Strong cost discipline should mitigate earnings pressure and the impact from Cukai Makmur.
“We see fixed line operators sustaining their earnings momentum on structural demand and policy initiatives.”