Four mobile network operators have executed share subscription agreements (SSAs) to collectively take up a 65% stake in Digital Nasional Bhd (DNB).
The SSAs give the MNOs a 65% equity stake in DNB — Celcom Axiata (12.5%), Digi Telecommunications (12.5%), YTL
Communications (20%), and TM (20%). The government retains the remaining 35% stake and holds a golden share, which
grants various rights and privileges, as well as covers areas such as ownership, sale, or transfer of shares on the part of the
government. Digi has stated that its equity stake in DNB will increase to 17.5% in the event the proposed merger between Celcom and Digi is not completed by mid-2023, with the MoF’s equity stake decreasing to 30%.
This announcement confirms the MNOs’ decision to accept the proposed equity offer in DNB and was also reported last weekend following the announcement on the SSAs that all four signatory parties including Maxis and U Mobile have executed their respective AAs with DNB to lease the latter’s 5G network.
It is understood that this surprisingly speedy conclusion is due to the initial commitment of 10 years being reduced to 3, and the initial 1,200 Gbps commitment is also likely lowered. The recent Budget 2023 announcement, which stated that the government is targeting a 70% populated area coverage by 2023, will accelerate 5G subscription in the immediate term and shore up the MNOs’ bottom line.
Meanwhile, MCMC has released a public inquiry paper seeking to review access pricing which it last conducted in 2017. This paper seeks to regulate a new set of pricing for services provided by the telco industry comprising fixed services, 4G mobile services, 5G mobile services, infrastructure sharing and digital terrestrial broadcasting & multiplexing service for the period 2023−2025. This proposal will have a positive impact on the MNOs as 5G access pricing will substantially be reduced, thus boosting their bottom line. The paper also seeks to cut prices on other services, significantly impacting TM’s wholesale pricing. Kenanga sees the proposal having minimal impact, offset by increasing wholesale demand from the 5G rollout and the expanded network coverage under Jendela 2.
Kenanga notes a positive impact on OCK as the paper proposed to increase prices on telco tower sharing. The research house reiterates its OVERWEIGHT call on the sector with top picks including DIGI and TM. DIGI for its superior EBITDA margin at 47%−48% vs. the industry average of 41%, and the merger with Celcom, which will give birth to a new mobile market leader with a combined market share of 44%. TM for the positive tailwinds on the digital space as economies reopen and the enhanced network coverage nationwide boosts internet demand from both the public and businesses
