AmBank Research has maintained a “neutral” call on the telecommunications sector given the continued intense competition in both the mobile and fixed broadband markets.
“We have ‘hold’ calls on Axiata Group Bhd, Telekom Malaysia Bhd (TM) and Digi.com Bhd while Maxis Bhd is underweight due to its premium valuations despite its FY19 guidance for an ebitda decline amid additional capex for fiberised solutions, digitalisation and productivity capabilities,” the research house said in report today.
It said the telco sector’s Q4 18 results were somewhat mixed as normalised earnings of Digi and Axiata came in within expectations while TM did not suffer a profit erosion as bad as it had expected from the Mandatory Standard Access Pricing regime and repriced Unifi options.
Time dotcom Bhd’s results were stronger than expectations with its H2 earnings coming in above management’s guidance due to continued fixed broadband growth in the wholesale, retail and enterprise markets. Maxis underperformed due to additional costs for productivity enhancement and marketing for its fiberised solutions targeting the enterprise segment.
AmBank Research said as Communications and Multimedia Minister Gobind Singh Deo recently indicated that high-speed broadband prices will not be cut this year, TM earnings prospects have stabilised for now with around 90% of TM’s Streamyx and Unifi existing customers having been upgraded to faster speed packages while experiencing minimal downtrading activities together with manageable revenue declines in FY18.
Cellular operators’ (celco) Q4 18 net profit fell 30% quarter-on-quarter (q-o-q) and year-on-year (y-o-y) to RM790 million largely even though revenue improved, up 1% q-o-q and 5% y-o-y, from higher average revenue per user (ARPU) and postpaid subscribers for Celcom and Digi. The lower bottom line stemmed from a 6 percentage-point q-o-q decline in net profit margin to 13% from Maxis’ additional marketing/operational costs and Celcom’s higher depreciation and tax charges.
Digi continued to command the largest subscriber market share at 37% versus Maxis’ 34% while Celcom remained a distant third at 29%.
Since the middle of 2018, no celco has launched a comparable package to counter U Mobile’s prepaid GX30 which offers unlimited data with speeds up to 3Mbps for just RM30/month. Recall that U Mobile also launched postpaid GX50 which provides unlimited voice and data with speeds up to 5Mbps for RM50/month.