MAXIS Bhd – the only telco which has yet to ink its 5G access agreement (AA) with Digital Nasional Bhd (DNB) – will likely have to pay higher capacity commitment than the five telco pioneers consisting of Telekom Malaysia, Digi, Celcom, YTL Communications and U Mobile.
According to UOB Kay Hian Research, all five telcos who have signed the AA would enjoy lower minimum capacity commitment (ie 800Gbps (gigabits per second)/month) while the minimum commitment goes up to 1,000 Gbps/month for those who join later (until December 2023).
“After 2023, the minimum requirement is 1,200Gbps/ month. As such, the cost for providing 5G for Maxis is expected to be higher than the five telco pioneers,” projected analyst Chong Lee Len in a telecommunication sector outlook. “Based on the pricing offer, it costs telcos’ 10-13 sen/GB for the 5G capacity.”
In a Bursa Malaysia filing yesterday (Nov 2), Maxis said it will be seeking shareholders’ approval in respect of the proposed 5G AA with DNB. The telco intends to complete the approvals process by Jan 23 prior to commercially launching its 5G-related products and services soon after.
All the five telcos signed a standard AA (ie pricing and capacity requirement) which appears to be below UOB Kay Hian’s initial expectation. To recap, the research house had initially expected annual 5G single wholesale network (SWN) fee of RM432 mil (or 1,200Gbps/month commitment) vs actual wholesale fee of RM288 mil (or 800Gbps/month commitment).
“Naturally, we expect higher usage – perhaps from year five onwards – and this means higher wholesale fee (which is part of telcos’ opex),” suggested the research house.
“We estimate that the minimum commitment (of 800Gbps/month) can support about 75% of current usage if 5G was offered to both prepaid and post-paid customers. We do not expect the five telcos to pay more than the RM288 mil 5G wholesale fee in 2023.”
All-in-all, UOB Kay Hian Research reiterated its “market weight” on Malaysia’s telecommunication sector by preferring fixed over wireless.
“We note that the sector has underperformed the FBM KLIC by 6% year-to-date (YTD). This is led by Axiata Group Bhd (-24% YTD), Maxis (-12% YTD) and Digi.com Bhd (-3% YTD),” opined the research house.
“We believe current valuation and share price underperformance have partly reflected (i) the adverse impact from a single wholesale network model for 5G in Malaysia; (ii) the big telco players – Digi Celcom and Maxis – losing their superior network coverage, and (iii) intensifying competition for mobile incumbent mobile players in Malaysia.” – Nov 3, 2022
