Maybank IB: Not good time for M&As among players

KUALA LUMPUR: The current operating environment is not conducive to kick-start mergers and acquisitions (M&As) among telecommunications players, says Maybank Investment Bank Bhd (Maybank IB).

Speculation has been rife that a potential M&A could be on the cards in the Malaysian mobile space ever since Axiata Group Bhd spoke in broad terms of being open to in-country consolidation.

“Undeniably, five operators in the frequency division duplex space is a crowd. However, we do not view the current operating environment as being conducive for M&As to be kick-started.

“We do not expect developments on industry consolidation in the near-term, as potential benefits remain too skewed to sellers,” said Maybank IB.

“The Big Three are neither in need of spectrum nor subscribers to initiate an acquisition.

“In all our hypothetical permutations, the initiator of an M&A would likely be seen in a negative light,” it added.

The firm said local telcos’ share prices were up slightly year-todate, thus vindicating its relatively less bearish view on the sector. Nevertheless, a sustained appreciation was unlikely given the lack of positive catalysts.

“The Big Three’s service revenues grew for the second consecutive quarter at 1.4 per cent, thus alleviating the year’s decline of 4.7 per cent year-on-year, with last year being the third (and worst) year of decline,” it added.

The prepaid segment is a tad more competitive, with Maxis having gained revenue share at the expense of Digi and Celcom in the fourth quarter of last year.

“Rising depreciation was one of the main reasons behind earnings misses in the recent quarters, for Axiata in particular.

“For the mobile operators, capital expenditure intensity has been rising as operators accelerate their long term evolution (LTE) rollout.

Maybank IB said the Big Three telcos would likely begin amortising their 900/1800MHz spectrum fees totalling RM148 million annually.