Telcos remain cautious on further stresses during MCO 2.0
KUALA LUMPUR: As the second Movement Control Order (MCO) has been imposed for two weeks from January 13 to 26, analysts see that cellular operators (celcos) remain cautious on further stresses on small-medium businesses amid declining overall disposable income from the lockdowns and slower economic activities.
According to AmInvestment Bank Bhd (AmInvestment Bank), the reimposition of MCO on Wednesday could have a partly mitigated impact on cellular operators (celcos), which experienced lower prepaid subscriber acquisitions with the temporary closure of physical outlets and suspension of postpaid accounts for nonpayment back in March to April last year.
The research firm recalled that this partly contributed to celcos’ revenue contracting quarter on quarter (q-o-q) by 8.7 per cent in the second quarter of 2020 (2Q20) and 7.5 per cent in 3Q20 before recovering six per cent in 3Q20 with the relaxation of movement restrictions.
“From our channel checks, operators remain cautious on further stresses on smallmedium businesses amid declining overall
disposable income from the lockdowns and slower economic activities,” AmInvestment Bank said.
“However, celcos are more prepared this round and also hopeful for a partly mitigated impact from subscriber renewals and subscriptions as the previous lockdown had encouraged more consumers to embrace digital platforms and online payment channels.
“Additionally, this MCO 2.0 is less onerous given the imposition on less states versus the first lockdown while the free 1GB data offer for productivity and education has been extended indefinitely since last month.
“This is unlikely to significantly increase operators’ cost structure while driving higher work-from-home data usage.”
In AmInvestment Bank’s view, the larger concern for operators is the unrelenting competition in mobile and fixed line business.
The research firm gathered that currently, U Mobile Sdn Bhd offers the most competitive plan with a RM30 prepaid package, which offers unlimited data and 6GB hotspot with speed cap of 6Mbps together with RM5 per month top-up for unlimited calls.
“Meanwhile, Digi.Com Bhd’s (Digi) current entry-level plans for prepaid packages at RM15 per month and postpaid at RM38 per month are gaining traction even with limited data quotas.
“In the fibre broadband market, Telekom Malaysia Bhd’s (TM) unifi has been aggressively competing for market share with recent promotions of free 42-inch Sharp TV sets and redemption of the RM500 penalty fee for switching from Maxis Home Fibre.
“In Peninsular Malaysia, Celcom Axiata Bhd and Digi have begun to target selectively market segments in the Klang Valley for their fibre-to-home offerings.”
On another note, AmInvestment Bank believed that consolidation is still in play in the telecommunication sector.
As the research firm highlighted on August 11, 2020, declining data yields, new 5G spectrum fees and capital expenditure (capex) pressures are likely to drive players to seek consolidation amongst themselves to reduce costs, secure economies of scale and reduce rivalry.