Malay Mail - CGS-CIMB maintains 'neutral' rating for telco sector on revenue growth prospect

18 Oct 2021 - Malay Mail

KUALA LUMPUR, CGS-CIMB has maintained its ‘neutral’ rating on the telecommunication sector due to fixed-broadband services better revenue growth prospect and more benign competition under the National Digital Network Plan (Jendela).

In a note, the research house said the Malaysian Multimedia Communications Commission (MCMC) views that current mobile and fixed retail broadband prices are reasonable and acknowledges the need to balance affordability versus incentivising investments to achieve equitable network coverage.

“MCMC gave credit to industry players for working hard on rolling out wider coverage and upgrading their quality of service to meet the Jendela Phase 1 targets (by end-2022), which remains unchanged.

“We view this positively, as it suggests the government/regulator is not looking to impose any drastic measures to push prices significantly lower,” it said.


The research house noted that key developments to watch in the next six to 12 months are the issuance of the final mandatory standard access pricing (MSAP) review and the award of Jendela1 contract winners, which may garner more investor interest in telco contractors.

Meanwhile, AmInvestment Bank maintains its ‘overweight’ rating on the sector, given the consolidation synergies for two cellular operators which could partly alleviate intense price competition and 5G cost escalations from Digital Nasional Bhd’s (DNB) wholesale arrangement.

“While 5G wholesale rates are still currently being evaluated by the MCMC, its chairman (Dr Fadhlullah Suhaimi Abdul Malek) affirmed that the MSAP between DNB and telco operators will lead to retail prices that are at least equal or lower than 4G rates per Mbps.

“For consumers, this could mean that the all-in prices of mobile plans are likely to remain largely unchanged.”

It added that telcos are likely to face a flattish revenue trajectory while bearing the additional wholesale charge from DNB, partly offset by leasing income from the operator’s existing network infrastructure that will be needed for 5G connectivity.

In the meantime, both research houses reiterate ‘buy’ call for Telekom Malaysia Bhd ™, which has shown significant cost improvements and compelling dividend yields, while maintaining ‘hold’ call for Maxis Bhd.

At 11am, TM share price stood at RM5.95 per share, while Maxis share stood at RM4.80 per share. — Bernama


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