RHB Research has projected an 8-15 per cent core earnings dilution for telecommunication companies (telcos) for the financial years 2023-2024 following the revised wholesale terms for Malaysia’s 5G roll-out plan.
The research house also reduced the target prices of these telcos by 2-8 per cent.
The estimate is based on the revised higher wholesale rates levied by Digital Nasional Bhd (DNB). The earnings impact looks to be tempered but dilutive in the medium term, nonetheless, it said in a note today (Nov 1).
Hence, the research house said it has lowered the target prices of Digi.Com Bhd, Maxis Bhd, and Axiata Group Bhd to RM3.65, RM3.60, and RM3.66 respectively.
We see the overall impact on TM as net positive as revenues from DNBs fibre backhaul should more than offset higher wholesale fees incurred, Bernama reported the research house adding.
CGS-CIMB said the signing of the access agreements (AA) by five telcos with DNB has provided further clarity on the 5G situation in Malaysia and helped dispel investors’ fears.
We gather from speaking to our industry sources that the minimum volume commitment (MVC) under the coverage fee component has been reduced from 1,200 Gbps (upon reaching 80 per cent coverage by end-2024) previously.
However, the exact MVC may differ between telcos, based on their commercial discussions with DNB, it said.
CGS-CIMB said all access seekers will have to pay the coverage fees, despite some market talk earlier that smaller mobile players (eg: Telekom Malaysia Bhd and YTL Communications Sdn Bhd) will be charged entirely on a pay-per-use basis.
Overall, the sector stays overweight as the potential earnings hit from 5G wholesale fees have already been factored into the telco’s share prices, which are down by an average 17 per cent year-to-date, it said.
At 11 am, Maxis was down 6.0 sen to RM3.79, Digi was flat at RM3.79, Axiata lost 2.0 sen to RM2.83 and TM eased 0.05 sen to RM5.51.
