Maxis to see weaker 2H on U Mobile RAN termination impact
KUCHING: Analysts project for Maxis Bhd ( Maxis) to see weaker second half of financial year 2018 (2HFY18) earnings on the back of impact from U Mobile Sdn Bhd’s 3G radio access network ( RAN) arrangement with the group.
AmInvestment Bank Bhd (AmInvestment Bank) recalled that U Mobile will be terminating Maxis’ 3G RAN arrangement over an 18month period, ending on December 27, 2018.
“However, the impact has been minimal over the past four quarters since Maxis’ announcement in June last year, as U Mobile was fully utilising the RAN arrangement up to the second quarter of FY18 ( 2QFY18),” AmInvestment Bank noted.
“We understand that the impact will be more noticeable in 3QFY18 and increasingly substantive in 4QFY19.”
It further noted that management hopes to mitigate the full FY19F impact by expanding Maxis’ home fibre business and fixed enterprise solutions, which rely on Telekom Malaysia Bhd’s (TM) High Speed Broadband network.
“Even if the group could ramp up revenue growth from the home fibre and fixed enterprise segments, we do not expect the lower margin from these operations to be able to offset the immediate loss in the RAN roaming revenue.”
According to AmInvestment Bank, these margins are also being squeezed even more as fixed broadband prices have been cut against the backdrop of the government’s agenda to “double the speed at half the price”.
The research firm highlighted that while Maxis’ mobile revenue growth trajectory remains flattish given the intense price war being waged by the group’s peers, Maxis’ reliance on TM’s network exposes its vulnerability in home fibre and fixed enterprise solutions.
“Beginning last month, Maxis lowered its fibre broadband prices for both consumers and businesses by 36 per cent- 65 per cent and offered speeds of up to 100Mbps under the new packages,” the research firm recapped.
“Maxis offers these new deals even though the Mandatory Standard on Access Pricing ( MSAP) structure, which will reduce wholesale fibre prices for thirdparty operators, has yet to be finalised.
“With the new MSAP prices, management affirms that the home fibre business remains value-accretive.”
Nevertheless, AmInvestment Bank expected higher downtrading activities as customers opt for the lower priced packages at these new higher speeds amid an increasingly competitive fixed broadband market.