KUALA LUMPUR: The signing of new commercial wholesale agreements between Digital Nasional Bhd (DNB) and telecommunication companies (telcos) and consequent clarity on access cost impact will be a key re-rating catalyst for the sector.
Renewed retail competition with lower access cost have been a key overhang for the sector according to RHB Research. Based on the July reference access offer (RAO) document, wholesale access prices (Layer 3 Service Gateway) for the incumbent fixed line operator are 9-60 per cent lower across tiers vs the previous RAO (2018) with a mean reduction of 3 per cent.
The difference in cost per Mbps between the lowest and highest speed tier is 68 per cent (2018: 55 per cent).
Most telcos achieved results in line with expectations for the June quarter, with Axiata Group Bhd being the sole loser.
RHB Research expects no let-up in mobile competition moving forward, with policy-induced acquisitions and pre-to-post conversion activities – the latter helping to mitigate average revenue per user (ARPU) pressure.
"The inking of new access agreements may compel access seekers to up the ante on fibre broadband offerings, but the impact is likely manageable, with the converged value propositions," it said in a note today.
RHB Research has maintained its "Neutral" call on telco sector, with a preference for fixed line plays.
Its top picks are Time dotCom Bhd and OCK Group Bhd.
Adding further, RHB Research said the competition in the telco sector will remain tight, due to policy-induced acquisition campaigns such as Pakej 5G Rahmah, the upselling of entry-level postpaid plans, and the cross-selling of home fiber bundles.
It added that the telcos were already locked-in tactical price/data aggression since the start of the year, with benchmark per gigabyte (GB) data prices falling under RM1.
"Maxis' launch of new 5G plans on August 15 further pushed the envelope on data allowances, with 5G subs gaining up to 2.5 times more data for a six to 11 per cent increase in monthly subscriptions vs previous 4G/LTE plans," it said.
It noted that the industry mobile service revenue (big-two telcos) ticked up by a marginal 0.6 per cent year-on-year YoY in the second quarter of 2023 (2Q23), spearheaded by the postpaid segment while the prepaid segment narrowed further to -1.6 per cent (YoY).