Axiata expects minimal earnings from webe over the medium term
KUALA LUMPUR: Axiata Group Bhd (Axiata) will likely see minimal earnings contribution from webe digital Sdn Bhd (webe) given its low subscriber base, analysts observed.
Of note, Axiata, via its whollyowned subsidiary, Celcom Axiata Bhd (Celcom), secured an award from Telekom Malaysia Bhd (TM) to provide 2G, 3G and 4G connectivity for voice, short messaging and data services to TM's subsidiary; webe under its 4G multi-operator core network (MOCN) system for a period of three years.
According to Axiata in its filing on Bursa Malaysia, the rationale for the 4G MOCN was to enhance the current collaboration between Axiata and TM by offering a complete (2G, 3G, and 4G) wholesale services to webe and in return, this is expected to accelerate webe's ongoing effort of a continuous and rigorous roll-out of its long-term evolution (LTE) services nationwide via Celcom's network.
“While some revenue will be generated from utilising Celcom's network, we expect minimal earnings contributions from webe over the medium term given its low subscriber base relative to the four main cellular operators currently contending for market share.
“Hence, we are neutral on this development,” said the research team at AmInvestment Bank Bhd (AmInvestment).
It noted that this expected development is part of Axiata's earlier domestic roaming collaboration with TM, which was signed back on January 2016.
“Recall that Axiata's whollyowned Celcom, TM and Packet One Networks (Malaysia) Sdn Bhd (renamed webe digital services) have signed three core agreements – TM nextgen backhaul, high speed broadband (HSBB) access and domestic roaming services – to leverage each other's existing infrastructure and optimise asset utilisation for cost efficiencies,” it explained.
It also pointed out that the announcement did not provide the estimated value of the arrangement, which will be determined by usage at the agreed rates.
Additionally, it highlighted that the government's intention to reduce Khazanah Nasional's GLC holdings casts possibilities of a share overhang over the medium term and it also noted impairments amid deteriorating overseas risk profile from Nepal's additional capital gains tax charge on NCELL acquisition and intense competition from both local and overseas mobile operations constrain upside momentum.