Telco earnings could possibly see cut if intense competition heightens
KUALA LUMPUR: Telco sector players could see their company earnings being cut, especially if incumbents continue to exacerbate the already-intense competition for market share.
Analysts at AmInvestment Bank Bhd (AmInvestment Bank) saw that players continued to lower the prices of its package offerings. One such example is Maxis Bhd (Maxis) who was reducing the price of its home fibre services by RM20 per month to RM119 per month for the group’s 10 megabits per second (Mbps) option which offers unlimited voice calls to all mobile and landlines for a limited time as part of its year-end sales campaign from November 14 until December 31, 2017.
“For Maxis’ 30Mbps option -which comes with complimentary unlimited iflix access, free Maxperts consultation with end-toend-setup, unlimited voice calls to all mobile and landlines, and free home phone -- the price is reduced by RM40 per month to RM139 per month,”AmInvestmentBanksaid in a report on the sector.
“For Maxis’ 50Mbps and 100Mbps, prices remain at RM219 per month and RM299 per month respectively. A 24-month contract apply and after that subscription will revert to normal retail pricing of RM139 per month for 10Mbps and RM179 per month for 30Mbps.
“Maxis said existing fibre customers who have completed their 24-month contract term may subscribe to this new promotion. Additionally, existing MaxisOne Home Broadband customers who introduce a new fibre customer will enjoy a RM10 rebate for 12 months for each successful signup.”
Existing Maxis fibre subscribers who terminate their contracts to enjoy the new offer would be imposed a RM500 penalty, it added.
Meanwhile, Telekom Malaysia Bhd’s (TM) has reintroduced the group’s UniFi 10Mbps at RM129 per month while UniFi 30Mbps has been reduced to RM139 per month, UniFi 50Mbps at RM189 per month and UniFi 100Mbps at RM239 per month.
TM has one million UniFi users versus Maxis’ 163,000 home fibre customers, it said, who are leased on TM’s network.
Meanwhile, Time dotCom Bhd (Time) is also offering 100Mbps at RM149 per month, 300Mbps at RM189 per month and 500Mbps at RM299 per month.
“While Time’s pricing per Mbps remains the cheapest at RM0.60 per Mbps to RM1.49 per Mbps compared to Maxis’ RM2.99 to RM11.9 per Mbps and TM’s RM2.39 per Mbps to RM12.9 per Mbps, its service is largely confined to high-density population centres such as high-rise buildings, malls, offices and condominiums.
“However, Maxis’ and TM’s lower price per package for the 10Mbps segment may also draw the low-to-mid-income segment,” the research firm said.
AmInvestment Bank recalled during the 2017 Budget announcement last year, the prime minister had indicated the government’s intentions to doubled fixed broadband speed and halve its prices within two years.
Hence, the research firm expected further pricing revisions to this segment next year.
AmInvestment Bank pointed out that competition in the mobile segment remained intense, as total subscribers had fallen by 3.9 million or 11 per cent since the first quarter of 2013 (1Q13), wholly due to the decline in the prepaid segment.
In the research firm’s view, near-to-medium-term earnings catalysts appeared weak given the likelihood of further intensification in the celco wars with U Mobile Sdn Bhd’s unlimited data option at RM78 per month plus free data roaming versus webe’s RM79 per month.
“AsTMcontinuestopromoteits webe service, we do not discount the possibility of sector earnings cuts if incumbents further exacerbate the already intense competition for market share,” AmInvestment Bank said.
Hence, the research firm remained convinced that sector consolidation is impending, which is likely to be spearheaded by the re-merger of Axiata Group Bhd (Axiata) and TM.
“Main synergistic benefits from an Axiata-TM merger are the complementary suite of services which Axiata’s mobile services can integrate into TM’s fixed line operations to draw further mobile market share from Maxis, Digi.Com Bhd (Digi) and U Mobile.
“However, the more immediate earnings impact from an Axiata-TM merger will be cost efficiencies from the reduction in redundancies for head office expenses, network operating centres, marketing costs and procurement management.”