New spectrum price higher-thanexpected, financial impact minimal
KUALA LUMPUR: Details of the prices of the new spectrum assignment of various bandwidths from the Malaysian Communications and Multimedia Commission (MCMC) were higher than expected but analysts believe that it would have minimal financial impact on major cellular communication players (celcos) in the long run.
According to the research arm of but Kenanga Investment Bank Bhd (Kenanga Research) the assigned 2100MHZ spectrum price was 40.5 per cent higher than the 1800MHZ band as the latter is generally valued higher due to its wider coverage and better indoor signal strength.
However, it also noted that this could suggest that there is higher capital expenditure (capex) savings.
“Nevertheless, despite the relatively higher price tag for the 2100MHz spectrum, we do understand that network service providers require a combination of higher and lower frequency bands to provide better network coverage and capacity.
“Besides, the said spectrum has a lower required up-front cost in terms of the percentage out of the total spectrum fee charges as compared to the previous 700, 900, and 1800MHz bands, thus providing better cash flow and balance sheet management to the Celcos,” guided the research arm.
Similar to the 900 and 1800MHZ spectrums, celcos are expected to amortisethespectrumcostthrough its usage life span, it added.
Factoring in an annual spectrum amortisation cost of RM57.4 million for the 2100MHZ spectrum; Kenanga Research said it lowered its FY18E PATAMI for Maxis Bhd, Axiata Group Bhd and Digi.com Bhd by 1.6, one and 0.9 per cent respectively.
“Our FY17E PATAMI, however, remain unchanged given the renewed said spectrum is only effective from April 2, 2018 onwards,” added the research arm.
Overall, Kenanga Research is ‘neutral’ on the telecommunication sector but is is continuing to favour fixed-line over mobile names as the latter’s earnings are set to be affected by further increases in competition.