KUALA LUMPUR: The telecommunications sector will likely see more collaboration and consolidation among its players as demand for digital efficiency becomes rampant in the next few years, Telekom Malaysia Bhd said.
Fitch Ratings, meanwhile, said the proposed merger of Axiata Group Bhd and Telenor ASA's Malaysian mobile operations highlighted the pursuit of scale to drive cost efficiencies amid subdued growth and high investment cost in the telecom sector.
Such pursuit had raised the prospects for mergers and acquisitions in Asia Pacific, the rating agency added.
TM group chief executive officer Imri Mokhtar expects industry collaboration to not just involve telecommunication service providers, but other related technologies as well.
"The demand for technology is growing now more than ever and I think it has been advanced by at least three to five years.
"Some people coined this as an area of coopetition, where you cooperate and compete in some areas. This is the reality of the digital ecosystem today.
"We expect a lot more to happen with other technology companies in the near future," Imri told reporters after the launch of TM Cloud and cybersecurity services for the government here today.
Axiata and Telenor announced on April 8 plans to merge Celcom Axiata Bhd and Digi.Com Bhd.
Both companies will have an equal ownership of 33.1 per cent each in the listed merged entity, to be called Celcom Digi Bhd.
The merger discussion involves only the Malaysian operations, in contrast to the attempt in 2019 to combine their regional mobile operations.
Analysts seen the merger as positive, saying it should lead to healthier market rivalry, improved operational leverage, effective capital expenditure (capex) spending and more procurement bargaining power.
Fitch said in the absence of scale, it would be challenging for smaller Indonesian telcos, including Axiata's 65 per cent-owned mobile subsidiary PT XL Axiata Tbk to absorb 5G investment cost without an immediate return on investment.
State-owned PT Telekomunikasi Indonesia Tbk dominates the local market with over 50 per cent of mobile revenue through its wider nationwide network.
Fitch said the Celcom-Digi merger was likely to drive strong synergies and scale advantages to compete on data pricing, spectrum holding and network capabilities, ahead of Malaysia's 5G national plan.
The government unveiled its 5G national plan in February to establish a wholesale network, through a state-owned special-purpose vehicle (SPV).
"The SPV will own crucial spectrum and the nation's 5G core infrastructure and sell wholesale bandwidth to all operators, a move that we expect to intensify rivalry among mobile operators.
"The focus of competition will shift from infrastructure to services, as seen in the national fixed-broadband networks in Malaysia, Australia and Singapore," Fitch said.
The firm said the merged entity would become the largest domestic wireless operator, with a mobile revenue share of over 50 per cent and a 34 per cent share of total domestic telecom services, fixed and mobile, surpassing fixed-line operator TM.
The three major mobile operators in Malaysia - Maxis Bhd, Celcom and DiGi - currently have almost equal share of the market.