A Maxis-Astro merger makes sense, says analyst

PETALING JAYA: A merger between Maxis Bhd and Astro Malaysia Holdings Bhd is a rational option in view of intense market competition, according to AmInvestment Bank.
Should it materialise, it would create a merged entity with a market capitalisation of RM53 billion against RM44 billion for Maxis. The combined net profit meanwhile, stands at RM2.6 billion.
A local daily reported that tycoon T. Ananda Krishnan is contemplating consolidation of Maxis and Astro in line with the global trend of amalgamation of content and connection providers.
Astro has been in the news recently with the resignation of current CEO Datuk Rohana Rozhan, to take effect on Jan 31, 2019 and prior to that, a resurgence of news that Ananda is moving to privatise the group which was re-listed in 2012 after taking a break from the stock exchange in 2010.
In a research note today, AmInvestment Bank said it expects merger synergies to come from the convergence of Maxis and Astro’s services.
“For example, Maxis mobile and Home Fibre plans could be repackaged with Astro IPTV offerings, which could also be streamed to mobile devices.”
The research house opined the merger would be merely a rear guard manoeuvre to prevent revenue erosion from declining average revenue per user and subscriber attrition.
“As such, we maintain Maxis’ forecasts pending further official announcement.” It reiterated a “hold” call on Maxis with a fair value of RM5.76.
AmInvestment Bank said while Maxis currently endures increasingly competitive plans from rivals, over-the-top players like iflix and Netflix and other pay TV options such as unifi’s HyppTV have driven down Astro’s ARPU and erode its subscription base, and consequently, advertising revenues.
In Q1 FY18, Maxis’ postpaid ARPU fell RM4/month to RM92/month with active postpaid base declining 59,000 to 2.9 million.
Maxis is also planning to arrest the declining prepaid base and improve its blended ARPU of RM51/month with the new Hotlink plans.
However, the research house sees a likelihood of an acceleration of prepaid migration to the new more affordable flexi plans due to their similar price points with the group’s prepaid ARPU of RM35/month currently.
Maxis shares closed 8 sen or 1.4% lower at RM5.57 today, while Astro gained 7 sen or 4.4% to RM1.67.