WITH the Government reverting to status quo by maintaining the implementation of Malaysia’s 5G network roll-out via the single wholesale network (SWN) model, the actual timeline of 5G roll-out in the country could be dragged further, according to UOB-Kay Hian Research.
“That the Government is now offering equity participation to the telcos means that earlier discussions and agreements between mobile network operators (MNOs) and Digital Nasional Bhd (DNB) may have to go back to the drawing board in order to reach a deal that is mutually agreed,” opined analysts Chong Lee Len and Chloe Tan Jie Ying in a telco sector update.
“Moreover, the pricing mechanism and details of the wholesale agreements remain vague, hence we expect a further delay in the actual implementation of 5G in Malaysia.”
Nevertheless, Malaysia’s major MNOs – namely Celcom Axiata Bhd, DiGi.Com Bhd, Maxis Bhd and U Mobile Sdn Bhd – welcome the Government’s decision to continue with SWN model as well as the offer for MNOs to take up a stake in DNB.
In a joint statement yesterday (March 16), they said they would engage with the Government and key industry players on further details on implementation of the model, including the proposed shareholding offer and transaction process.
Concerned over their potentially losing the spectrum ownership and eventually losing their grip on premium customers, the MNOs had earlier mooted the dual wholesale network (DWN) model as an alternative to DNB’s SWN model.
After a prolonged discussion and a debate over a potential DWN model, the Government yesterday (March 16) decided to forge ahead with the SWN model. The key change, however, is that the DNB will offer 70% of equity holding to all MNOs with this proposed equity participation targeted to be finalised by June 30.
The target of having 80% of the country’s population covered with 5G network by 2024 remains unchanged with 5G supplied at a wholesale price of less than 20 sen per GB (gigabyte) which is lower than the current cost to supply 4G.
In light of the latest development, UOB-Kay Hian Research has turned “neutral to slight negative” on the MNOs.
“As spectrum ownerships are critical assets for MNOs to maintain their long-term competitive advantage in terms of quality or price, the confirmation of a SWN model in Malaysia would pose higher risk to telcos that have invested heavily in network quality of service over the past years which is Maxis in this case,” noted the research house.
“Nevertheless, with the expectation of further delay in the 5G roll-out, MNOs could continue to focus on 4G network and quality, expanding fibre broadband coverage, and enterprise business to sustain their business growth.”
On the contrary, UOB Kay-Hian is “neutral to slight positive” on Telekom Malaysia Bhd as the implementation of a SWN model will mandate telcos to sign new long term wholesale contracts with the national telco utility for its fibre backhaul infrastructure.
All-in-all, the research house reiterated its “market weight” rating on the telco sector. “We deem the current valuation fair in view of pedestrian earnings for 2022. We prefer the fixed players over wireless,” UOB-Kay Hian pointed out.
“Our top picks are TIME dotCom Bhd for its good growth prospects and earnings upside from the roll-out of Phase 2 Data Centre, and Axiata Group Bhd for its depressed valuation and synergy creation from the upcoming Celcom-DiGi merger.” – March 17, 2022
