Robust Earnings for Malaysian Telco Sector, Say Analysts
The telecommunications industry shares have performed well this year, with $OCK(0172.MY$ being the top gainer, rising 42.76%, and $TM(4863.MY$ rising 13.37%. Kenanga's latest report maintains a positive outlook on the industry and recommends investors increase their holdings. What has driven the industry's rise and gained favor from analysts?
Malaysia May Announce Official 5G Dual-Network Policy in 24Q2
In the second quarter of 2024, the government may announce Malaysia's official 5G dual-network policy. Under this policy, several major telecommunications companies will jointly own two entities, A and B. Entity A will take over the existing first 5G network owned by Digital National Berhad (DNB), while entity B will develop a new second 5G network. In December 2023, major telecommunications companies ( $CDB(6947.MY$ , $MAXIS(6012.MY$, TM, $YTLPOWR(6742.MY$, and U Mobile) signed conditional share subscription agreements (SSA) with the Ministry of Finance and DNB. This will result in the telecommunications companies owning 70% of DNB's shares jointly.
This policy benefits the telecommunications companies involved in 5G development and operation. It will provide more commercial opportunities and growth space for these companies as they will own more 5G network resources and operational rights. In addition, telecommunications companies' investments are expected to have higher returns, with the opportunity to share in the profits of these entities.
Operators Improving 5G Plans to Encourage Users to Switch to 5G Packages
5G access applicants are required to pay a significant target capacity fee to Digital National Berhad. However, regulatory requirements prohibit telecommunications companies from charging additional access fees for 5G services. Mobile operators will improve their 5G plans, including tiered speed and data caps, 5G data quotas, and policies that throttle speeds when limits are exceeded. This may force customers to upgrade to more expensive plans to access faster speeds. ARPU is expected to recover or at least remain stable in 2024, particularly for postpaid customers as affluent customers who can afford higher Average Revenue Per User (ARPU) fall into this category.
In the long-term, telecoms can offer more 5G value-added services to plans, leading to sustained ARPU growth.
Long-term Opportunities for 5G Development in the Enterprise Sector
Telecom companies are making efforts to encourage enterprises to implement systems utilizing 5G. CDB recently announced a strategic partnership with Japan's SoftBank Corp and SC-NEX (part of Sumitomo Corporation) primarily involving agricultural technology: using drones for operations and safety in plantations, as well as smart cities: deploying integrated building management software and IoT sensors to control access and security of buildings. 5G, as a faster and more reliable network technology, can support these solutions to achieve more efficient data transmission and processing.
Can Unifi Mobile Secure a Place in Malaysia's Telecom Market?
Although Unifi Mobile, the mobile business brand launched by TM, has lower monthly fees than the other three telecommunications companies, according to OpenSignal's September 2023 ranking of Malaysia's true wireless experience, Unifi Mobile has gained praise in terms of consistency quality and on-site video experience, and has also been recognized in 5G download speed and 5G coverage. These factors may make Unifi Mobile a market disruptor, taking some market share from Umobile, while potentially impacting the market share of the top three telecommunications companies.
Here Are Kenanga's Top Picks in Malaysia's Telecom Industry
Sources: Kenanga, Bloomberg, MarketWatch, moomoo
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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