May­bank IB: Not good time for M&As among play­ers

New Straits Times - - Business | News -

KUALA LUMPUR: The cur­rent op­er­at­ing en­vi­ron­ment is not con­ducive to kick-start merg­ers and ac­qui­si­tions (M&As) among telecom­mu­ni­ca­tions play­ers, says May­bank In­vest­ment Bank Bhd (May­bank IB).

Spec­u­la­tion has been rife that a po­ten­tial M&A could be on the cards in the Malaysian mo­bile space ever since Ax­i­ata Group Bhd spoke in broad terms of be­ing open to in-coun­try con­sol­i­da­tion.

“Un­de­ni­ably, five op­er­a­tors in the fre­quency divi­sion du­plex space is a crowd. How­ever, we do not view the cur­rent op­er­at­ing en­vi­ron­ment as be­ing con­ducive for M&As to be kick-started.

“We do not ex­pect de­vel­op­ments on in­dus­try con­sol­i­da­tion in the near-term, as po­ten­tial ben­e­fits re­main too skewed to sell­ers,” said May­bank IB.

“The Big Three are nei­ther in need of spec­trum nor sub­scribers to ini­ti­ate an ac­qui­si­tion.

“In all our hy­po­thet­i­cal per­mu­ta­tions, the ini­tia­tor of an M&A would likely be seen in a neg­a­tive light,” it added.

The firm said lo­cal tel­cos’ share prices were up slightly year-to­date, thus vin­di­cat­ing its rel­a­tively less bear­ish view on the sec­tor. Nev­er­the­less, a sus­tained ap­pre­ci­a­tion was un­likely given the lack of pos­i­tive cat­a­lysts.

“The Big Three’s ser­vice rev­enues grew for the sec­ond con­sec­u­tive quar­ter at 1.4 per cent, thus al­le­vi­at­ing the year’s de­cline of 4.7 per cent year-on-year, with last year be­ing the third (and worst) year of de­cline,” it added.

The pre­paid seg­ment is a tad more com­pet­i­tive, with Maxis hav­ing gained rev­enue share at the ex­pense of Digi and Cel­com in the fourth quar­ter of last year.

“Ris­ing de­pre­ci­a­tion was one of the main rea­sons be­hind earn­ings misses in the re­cent quarters, for Ax­i­ata in par­tic­u­lar.

“For the mo­bile op­er­a­tors, cap­i­tal ex­pen­di­ture in­ten­sity has been ris­ing as op­er­a­tors ac­cel­er­ate their long term evo­lu­tion (LTE) roll­out.

May­bank IB said the Big Three tel­cos would likely be­gin amor­tis­ing their 900/1800MHz spec­trum fees to­talling RM148 mil­lion an­nu­ally.

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