PETALING JAYA: Analysts are cautious over the telecommunications sector with intensifying competition and escalating capex requirements against the backdrop of the National Fiberisation and Connectivity Plan (NFCP) as the main concerns for the sector’s outlook.
AmResearch highlighted that Celcom and Maxis recently introduced unlimited prepaid data plans at RM35/month and RM12/week with speeds capped at 3Mbps, which competes head-on with U Mobile.
“As a comparison, U Mobile offers unlimited data capped at 3Mbps at a price which is lower by RM5/month at RM30/month. However, the weekly option is the same at RM12/week although it also offers 3GB hotspot,” it said in a report.
Furthermore, U Mobile also currently offers a slightly higher plan at RM35/month with speed caps of 6Mbps and 6GB of hotspot sharing.
Meanwhile, Digi has yet to announce an unlimited prepaid plan, with its Cili Padi XL currently offering 3GB internet, unlimited Facebook, Twitter and Instagram at RM15/month and add-ons for unlimited internet can be purchased at RM8/day.
“Given that the 1Q’20 prepaid average revenue per users (ARPU) were slightly lower at RM32/month for Maxis and Celcom vs their new plans, we do not expect their revenues to be significantly impacted even though network utilisation is likely to escalate from higher data traffic,” said the research house.
On the postpaid front, it expected Celcom to introduce unlimited data plans for the segment as its existing customers could migrate to the lower priced prepaid segment.
Currently, Celcom’s first quarter 2020 postpaid ARPU of RM85/month is 2.7x its prepaid RM32/month.
AmResearch pointed out that U Mobile and Digi are the only celcos offering unlimited postpaid data plans for now.
“As such, we expect new prepaid plans from Digi as well as postpaid packages being launched by Maxis and Celcom over the next few months in tandem with the escalating cellular wars,” it said.
For the quarter, CGS-CIMB noted that Celcom has lost 1.1% quarter-on-quarter (q-o-q) revenue market share (RMS) to 30.0%, which has benefited Maxis whose RMS rose by 0.5% and 0.7% qoq to 38.5% and 31.5% respectively.
“This was thanks to Celcom staging the largest q-o-q decline in mobile service revenue among the Big Three during the quarter,” it said.
However, the research house also highlighted that Maxis gained 2.3% q-o-q ebitda market share (EMS) to 40.1% during the quarter at the expense of both Celcom and Digi, whose EMS has dipped 2.3% and 0.1% qoq to 33.0 and 26.8%.
It explained that this was due to Maxis being the only Big Three telco that recorded q-o-q ebitda growth during the quarter.
“1Q’20 mobile industry service revenue continued to fall 4.4% yoy (-5.5% qoq), due to lower wholesale and roaming (Covid-19 travel restrictions) revenue, interconnection rate cut and stiff competition,” said CGS-CIMB.
Overall, it remained neutral on the sector citing weak revenue growth prospects, data monetisation and industry revenue growth will remain challenged in FY20-21F.
The research house has identified mergers and acquisitions as key upside risk for the sector and high upfront fees for the 700MHz/3.5GHz spectrum, more intense competition and adverse new regulation as key downside risk.
Similarly, AmResearch maintained its neutral outlook for the sectors given the rising mobile competition amid escalating capex requirements against the backdrop of the NFCP agenda to improve national connectivity and affordability. “Our only buy currently is Axiata, given its low EV/Ebitda valuations and rising prospects for monetisation of its multiple businesses.”
