KUALA LUMPUR (Oct 5): Amid lower profit margins and intense competition, the telecommunications sector still has room for a further decline in prices, according to PublicInvest Research (PIVB).

"We are of the view that overall average revenue per user (ARPU) is not likely to improve but instead, may continue its downward trend, either due to market forces or regulatory pressure," the research house said in a note today.

PIVB had downgraded the sector to 'underweight', saying the operating landscape for telecommunication companies (telcos) is expected to remain challenging.

It lowered its rating on Maxis Bhd and DiGi.Com Bhd to 'underperform' and 'neutral' respectively. The research house revised Maxis' target price to RM5.18 and DiGi's to RM4.80.

Although Maxis and DiGi have proven track records in cost management, there could be limited scope for either player to extract greater cost efficiency going forward, PIVB said.

"Our 'neutral' calls for Axiata Bhd and Telekom Malaysia Bhd remain unchanged but with target prices reduced to RM4.54 and RM3.40 respectively," the report said.

"We note that there is downside to Axiata should it engage in a bidding war for its associated company in Singapore (M1 Ltd)," PIVB added.