There is a lack of awareness on 5G’s capabilities amongst the business community in Malaysia, and monetization of 5G will take time when awareness, consumer offerings and coverage are ramped up.
This is the view of Kenanga Research, after CelcomDigi’s MY5G conference and showcase, according to its Company Update note today (Oct 26).
“We feel largely neutral on 5G mobile technology in Malaysia at this juncture,” it said.
Kenanga said while it commends CelcomDigi’s effort to promote knowledge on 5G applications to businesses via this conference and other initiatives, it believe that currently, industries and commercial enterprises are the early beneficiaries of 5G, ahead of individual consumers.
“Nevertheless, monetization of 5G will take time, as reflected by its subdued take-up rate. Evidently, only 15% of the telco subscribers have signed up for 5G, and out of this, merely 11% are active users,” it said.
The research house maintain its OUTPERFORM call, with TP of RM5.07 based on 12 time FY24 EV/EBITDA, and no adjustment based on ESG for given a 3-star rating.
he research house said the conference reinforced the role of telco companies as an enabler of advanced technologies via 5G infrastructure, which include the equipment, devices and solutions require high-speed 5G networks to transmit large amounts of data at ultra-low latency.
“Modern devices and machinery that utilize advanced artificial intelligence (AI), internet of things (IoT), among others, are unable to function effectively on legacy 4G networks,” it added.
It noted that however, there is a copious and diverse applications of 5G technology for industries and enterprises including automation via drones and robots and remote surveillance that result in the transformation of business processes that enable organizations to scale up, enhance efficiency and achieve breakthrough innovations.
“One of the example, an AI autonomous inventory system at DHL’s Integrated Logistics Centre in Shah Alam that boosted efficiency by 20-fold following application and enhanced precision following the elimination of human errors,” he said.
As for consumers, Kenanga said that applications that currently require 5G services include interactions within the metaverse, high-speed
streaming services for gaming, virtual reality experiences, and autonomous driving for passenger vehicles.
“Nevertheless, we believe that consumer applications will progressively expand as hardware, software and content developers harness 5G’s capabilities,” it said.
It added that based on remarks by Huawei Technologies’ advisor to president and former chief technology officer, Kees Lemmens, understand that the greatest challenge for 5G currently is the lack of awareness on its potential and benefits and view that 5G is here to stay until 2030 at the least.
Meanwhile, SK Telecom’s (SKT) head of strategy believes that 5G adoption is still at its infancy in Korea despite SKT having first commercialized 5G back in Jan 2019.
That said, the research house like CelcomDigi for merger synergies are expected to amount to NPV of RM8 billion over 5 years, emanating from network (RM5.5 billion), IT (RM1.1 billion) and others (RM1.4 billion).
“The group’s robust FCF yield of more than 6% in FY23F−24F implies capacity to pay steady dividends, and leading subscriber base share of 39% and 20% in the postpaid and prepaid segments, respectively, translating to pricing power and economies of scale,” it added.
Kenanga said its risks to call include slower-than-expected realization of merger synergies, unfavourable outcome to the implementation
of the dual wholesale network by the government, and competition between telco players turns irrational.
