‘FIBRE DEAL MAY HURT PROFITABILITY’
But Celcom, Digi, Maxis stand to benefit from reduced capex, says Kenanga Research
THE 20-year joint fibre rollout and sharing agreement by mobile network operators (MNOs) Celcom Axiata Bhd, Digi.com Bhd and Maxis Bhd could weigh on their profitability, said Kenanga Investment Bank Bhd (Kenanga Research).
The agreement was aimed at developing and sharing fibre infrastructure to prevent duplicating capital expenditure (capex) and infrastructure, it said.
Although the MNOs could benefit from reduced capex, analyst Lim Khai Xhiang said continued price competition in mobile offerings, particularly if the network quality was similar, could weigh on their profitability.
“We were not surprised as it is common for MNOs to share infrastructure. In fact, the trio has been sharing fibre cable since 2010. It does not make economic sense for each MNO to roll out their own fibre cables and compete,” said Kenanga Research in a report yesterday.
“Therefore, the collaboration is a step towards achieving the National Digital Network connectivity goals and allows the MNOs to expand fibre into less-profitable rural areas.”
Kenanga Research said expanding the fibre network was key for Malaysia’s fifth-generation mobile technology (5G) rollout as this infrastructure was necessary to speedily handle the large amount of data from subscribers.
“While the 5G spectrum has been handed to the Finance Ministry-owned special purpose vehicle, Digital Nasional Bhd, it would still require the expertise and capex of MNOs.”
The agreement was also aimed at improving the fibre backhaul to complement existing microwave technology, while allowing the industry to extend its 4G mobile backhaul to support 5G new sites and fibre-to-home expansion.
The MNOs could continue with the initial capex but invest in different areas, thus collectively having three times the coverage with their combined fibre networks, it said, adding that subsequently, they might be able to marginally reduce their capex and expand into unique areas for greater coverage.
“Regardless of which pans out, the MNOs stand to benefit from lower costs and/or wider fibre coverage. We like that they are collaborating as this not only makes financial and operational sense, but also benefits society,” it added.