Thursday 28 Mar 2024
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Telco sector
Overall, service revenue growth for the mobile industry is relatively flat (0.8% year-on-year [y-o-y]) for the first quarter of calendar year 2015 (1QCY15):
The strong growth of data revenue was offset by falling voice and short messaging system revenues.

Maxis and DiGi achieved 4.4% and 2.2% y-o-y growth, respectively, largely at the expense of Celcom (down 4.4%) again. Celcom continued to suffer from unresolved information technology issues and weak distribution channels in 1QCY15.

Competition among the Big Three telcos has intensified since April, when Celcom introduced a new entry-level postpaid plan which significantly undercut all its competitors’ plans, offering promotional 3GB data at RM38 per month.

It also recently slashed its 1GB mobile Internet plan to RM25 per month (from RM28 to RM30) after refreshing its prepaid plan. Celcom’s new data plans are disruptive in a few ways. First, it is an outright reduction in pricing. Second, the pricing of its new data plan is considerably lower, not only when compared with Maxis and DiGi, but to U Mobile as well. And lastly, Celcom now allows unutilised data to be carried forward for all its prepaid and postpaid plans, the first telco in Malaysia to do that.

To reflect lower data pricing and a reversal in goods and services tax treatment for prepaid revenue, we cut forecast financial year 2015 (FY15F) to FY17F earnings of mobile operators by 2% to 9% after lowering average revenue per user assumptions.

We remain cautious about mobile operators as a further decline in data pricing could pose a risk to earnings as well as capital expenditure, especially as Telekom Malaysia Bhd (TM) will also launch its wireless services in the next 12 months.

However, we remain optimistic about the eventual roll-out of high-speed broadband 2 (HSBB2), sub-urban broadband (SUBB) and wireless services that will drive further growth for TM.

We upgrade TM to “buy” from “hold” as the recent correction in its share price should have priced in the near-term drag on earnings due to slower turnaround of the P1 operation. — AllianceDBS Research, June 11

Telecommunications

This article first appeared in The Edge Financial Daily, on June 12, 2015.

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