This article first appeared in The Edge Financial Daily, on April 25, 2016.

KUALA LUMPUR: Competition in Malaysia’s mobile telecommunication space shows no signs of abating, even as two of the three biggest telecommunication companies (telco) here are getting concerned that the situation is getting “irrational”.

Celcom Axiata Bhd chief executive officer (CEO) Datuk Seri Shazalli Ramly told newsmen last Thursday that Celcom intends to remain rational and not let itself be drawn into a “spiralling price war” — possibly a hint that he was growing weary of all the undercutting.

Instead, Shazalli, who admitted profit margin erosion is inevitable with the current situation, intends to focus on “smart spending” and “cost saving” measures, to support the group’s bottom line.

The following day, Maxis Bhd CEO Morten Lundal also voiced his concern about the “increasingly irrational competition among telcos”, a situation which he believes, if prolonged, would see both telcos and consumers they serve equally disadvantaged.

“In the mid-term aspect I am a bit concerned, because if everybody is asking for a lot of data, for very low prices, the industry is going to have less money to invest back in network,” he told The Edge Financial Daily after the launching ceremony of the new set of MaxisONE plan last Friday.

Lundal said Malaysia’s telco operators were able to pour high investments back into network upgrades and expansions in the last few years because of appropriate pricing strategies, which brought in healthy profits.

“So we hope it (competition) does not get worse from here, because the most important thing is high quality [service],” he added.

Lundal also said the company is targeting to spend RM1.3 billion on capital expenditure this year, the bulk of which is slated to modernise Maxis’ fourth-generation (4G) Long-Term Evolution (LTE) network, which now has a population coverage of 74% in Malaysia.

“The most important thing to us is to keep our current customers happy with their experience,” he said.

But whether they like it or not, with mobile penetration in Malaysia at over 155% now, and a newcomer in the form of Packet One Networks (M) Sdn Bhd’s (P1) Webe making its debut soon to wrangle a slice of the market from established players, the price war the market has seen so far may just be heating up.

When contacted, JF Apex Securities Bhd analyst Lee Cherng Wee said operators are going to face more pressure in 2016, and with consumer sentiments at their weakest levels, customers are now more price-driven than ever when it comes to spending.

“ARPU (average revenue per user) will be under pressure, as they are offering more to customers. But whether there will be another price war like last year, that depends on what kind of product P1 comes up with,” he said.

However, P1 CEO Puan Chan Cheong has been keeping mum on the launching date of the company’s services.

An analyst, who declined to be named, said the industry has a phobia of newcomers, as these are the players that usually disrupt the industry with the low prices of their products.

“Fortunately, for now, the situation is not as bad as last year’s. At least they are still holding on to the current price range and just adding more Internet quota and bundle with other freebies like subscription to online media application and international roaming services. It is more rational this way,” he said.

“This year, competition has largely remained in the post-paid segment, [but] bear in mind that this segment only represents about 20% of total subscribers in the industry,” he added. In other words, there’s still plenty to fight over.

Axiata closed three sen or 0.51% lower at RM5.85 last week, valuing it at RM51.61 billion, while Maxis also fell by two sen or 0.34% to RM5.93, giving it a market capitalisation of RM44.54 billion.