The Communications and Digital Minister on Aug 7 announced that civil servants will enjoy a monthly rebate of RM10 for their respective postpaid mobile package under the RAHMAH Civil Servants Postpaid Incentive effective 31 Aug 2023.
CGS-CIMB estimates a worst-case negative impact of RM47m or equivalent to 1.6%/1.5%/1.2% of their aggregate core profit forecasts for Maxis and Celcom in FY23F/24F/25F.
The firm thinks it is unlikely that all 1.7m civil servants are currently on a postpaid plan. On the assumption that the proportion of civil servants on a postpaid service is similar to the overall industry as at end-1Q23, 30% or about 510k civil servants are on a postpaid plan and are entitled to the rebate.
CGS-CIMB believes this will cost the entire sector up to RM47m p.a. in profit after tax (24%).
Moves to upgrade users from prepaid or lower priced postpaid plans could mitigate the profit erosion.
The 5G RAHMAH package announced by the government is at best neutral on industry profits, CGS-CIMB said in a statement today (Aug 9).
The RM60/month for 60GB package is available to all Malaysians who sign up for a new plan and offers subscribers the option to purchase a Samsung A14 5G or an Honor 90 Lite 5G for as low as RM240. The firm notes that Maxis currently offers the Samsung A14 5G for RM219 on a 24-month contract on its Hotlink Postpaid 60 plan, which bundles 60GB/month of data, while DiGi offers 60GB/month for RM50/month without a device.
From discussions with industry players, CGS-CIMB understands the vendors named in the announcement are most likely carrying the cost of the added RM120 discount handed to the first 100k sign-ups on the 5G RAHMAH plan from B40 households, totalling c.RM12m.
Readthrough to fibre broadband pricing?
This announcement will certainly raise the question of cheaper fibre broadband prices, which are due to be announced in Sep 2023.
CGS-CIMB said that broadband price points would be reduced by a similar magnitude to the shift in prices as per the MSAP (Mandatory Standards on Access Pricing), which was announced in Feb 2023.
“In our estimates, the price reduction is c.RM8/month for a 100Mbps service. The government could announce a rebate for civil servants as it did for mobile postpaid services but its reach may be limited given the narrower adoption of fibre broadband vs. mobile services.
“We do believe a more likely outcome is the introduction of a 50Mbps service, which could replace the current RM89 30Mbps service.”
The firm maintains a Neutral stance on the overall Malaysian telecoms sector based on their country strategy view, with Telekom Malaysia as their top pick and CelcomDigi being their pick in the mobile segment. Regulations remain the key upside/downside risks for the sector.
