malaysiang
KUALA LUMPUR, CIMB Securities Sdn Bhd expects the Malaysian Communications and Multimedia Commission (MCMC) to announce the winner of the spectrum for the second 5G network (under Entity B) next week, two months after the telcos’ submission of applications on July 31.
In a note today, CIMB Securities said it believes CelcomDigi Bhd (CDB), Maxis Bhd and U Mobile Sdn Bhd to be the final contenders.
‘As telecommunications (telcos) submitted standalone applications (given the tight one-month deadline), we expect MCMC to announce a sole winner.
‘However, soon thereafter, we expect the winning telco to enter into equity partnership, or long-term lessor-lessee arrangement, with other telcos,’ it said.
It said this will enable the winning telco to share the cost of rolling out the second 5G network, and aligns with its belief that the government aims for Digital Nasional Bhd (DNB) and Entity B to handle roughly equal portions of 5G traffic.
‘At present, our base case is that Maxis would emerge as the winner, as we theorise that the government may want a government-linked company, namely CDB, to lead DNB,’ it added.
On the share price movement, CIMB Securities said a kneejerk reaction may appear following MCMC’s announcement, with the winning telco’s share price rising, while the losing telco may see the opposite reaction.
‘This is because the second 5G network is expected to have better quality of service versus DNB, as the roll out will be largely mapped to the winning telco’s existing network grid, allowing for more seamless handovers when subs move between 2G/4G/5G networks.
‘In addition, investors may also see the winner as having a cost advantage over telcos that stay on with DNB,’ it said.
Meanwhile, CIMB Securities believes that DNB has room to rationalise cost and may receive either wholesale fees from Entity B to lease part of its network in the more rural areas, or government grants/tax incentives.
It noted that the upcoming announcement from MCMC will mark the end of the Single Wholesale Network saga and remove regulatory uncertainties that have plagued the sector over the past three years.
‘Next, we expect the Ministry of Finance (MoF) and exiting telcos to sell their stakes in DNB to telcos that stay on, with DNB redeeming MoF’s special share 24 months after that.
‘This will see DNB and Entity B function as network sharing vehicles that are fully commercially run and owned by the telcos,’ it said.
Overall, CIMB Securities maintained its ‘overweight’ call on the telco sector with CDB and Maxis as top picks.
Source: BERNAMA News Agency
