‘Digital Nasional likely to gain RM1.4b to RM2.7b in 2025’

KUALA LUMPUR: Digital Nasional Bhd is expected to rake in between RM1.4 billion and RM2.7 billion in revenue in 2025, and subsequently RM2.1 billion and RM3.9 billion in 2030 from Malaysia’s 5G deployment.

This is based on a five per cent project internal rate of return, according to analysts.

Digital Nasional is the specialpurpose vehicle (SPV) set up to undertake the deployment of the 5G infrastructure and network nationwide.

The SPV is expected to spend RM15 billion over 10 years, with telecommunication companies (telcos) being allowed to access the network through regulated wholesale arrangements.

Handing over the 5G deployment solely to Digital Nasional, however, could spell a margin squeeze for telcos, analysts said.

Maybank Investment Bank Bhd (Maybank IB) estimated the 5G wholesale cost to account for six to 11 per cent of Celcom Axiata Bhd’s and Digi.com Bhd’s pre-5G revenue, and four to eight per cent of Maxis Bhd’s revenue in 2025.

“These wholesale arrangements would either depress earnings before interest, taxes, depreciation and amortisation (Ebitda) margins or inflate balance sheets (depending on whether the accounting standard for leases, or MFRS 16, is applicable). Thus, telcos would have to grow revenue or further optimise costs.”

On the other hand, 5G deployment should boost demand for passive infrastructure, with Telekom Malaysia Bhd (TM) being a notable beneficiary, said Maybank IB analyst Tan Chi Wei.

AmInvestment Bank Bhd analyst Alex Goh said TM, like other telcos, will not be burdened by the 5G capital expenditure.

Being the owner of the nation’s high-speed broadband fiberised network, AmInvestment Bank believes this is a positive for TM and, to a lesser extent, Time dotCom Bhd, in providing the critical backhaul backbone system for 5G networks.

Tan said telcos would need to grow their revenue by four to 11 per cent to preserve Ebitda margins, assuming 5G wholesale costs are recognised entirely as telcos’ operational expenditure on the profit and loss.

“This is potentially challenging for the telcos, in our view, with the big three (Celcom, Digi and Maxis) having already experienced seven years of revenue decline. Growth would thus have to come from new 5G use cases.”