Research houses maintain ‘neutral’ stance on telco sector

KUALA LUMPUR – Research houses have maintained their “neutral” call on the telecommunications (telco) sector despite the government’s launch of the MyDIGITAL initiative and the accelerated roll-out of the Fifth Generation (5G) network.

CGS-CIMB said equal wholesale access under the Digital Economy Blueprint implies that there would be no 5G network differentiation among the telcos, although the big three telcos will still have better overall network quality in the initial years as subs will fall back on 4G in non-5G areas.

“Over the longer run, smaller players may be able to bridge the gap with the big three, potentially putting downward pressure on retail prices. However, we think this will be offset by the benefits of lower capital expenditure and operating expenditure for operators through this shared infrastructure mode,” it said in a note.

On the government’s special purpose vehicle (SPV) plan to invest RM15 billion to roll out 5G in stages from end-2021 ahead of the earlier target for Jalinan Digital Negara (Jendela) – the digital infrastructure plan aimed at addressing arising needs and demand for better quality for fixed and mobile broadband coverage due to Covid-19 pandemic and the movement control order – the research house said the SPV would resolve the previous network infrastructure company consortium’s issue of having too many shareholders and may facilitate quicker rollouts.

Echoing the view, Kenanga Investment Bank Bhd reiterated its neutral call on the sector.

It noted that unlike the traditional model of telco owned-spectrum, the SPV model reduces the opportunities for telcos to differentiate themselves from one another in their 5G offerings, while possibly enabling new entrants to tap into the network, laying the grounds for continued price competition in the mobile space.

The research house said the government-SPV ownership of the 5G spectrum came as a surprise but ensures affordability and timely 5G rollout.

“(We also) note that the RM15 billion investment budgeted to the SPV over a period of 10 years will likely draw focus to the more densely populated city areas in its early stages, with the goal of having 5G rolled out across all high-density areas by 2023,” it added. – Bernama, February 22, 2021