Analysts believe stock valuation and sentiment for mobile players will recover once the government announces the 5G Dual Network policy directive. Following this, lingering concerns about earnings, capex, and dividends is expected to finally resolve.
As understood, the government may finally unveil the official 5G Dual Network (DN) policy directive in the remaining months of 2024. This may reveal the equity stake for each mobile player in either entity A or B.
To recap, the said entities will be set up to facilitate Malaysia’s transition from the 5G Single Wholesale Network model to DN. Entity A will take over the existing 5G network (NW1) owned by Digital Nasional Berhad (DNB), whilst B will develop the new 5G network (NW2) from scratch.
Analysts speculate that entities A and B will each be spearheaded by a single major telco leading a consortium of other smaller players. Additionally, there should not be a significant disparity between the collective subscriber base of the telco owners in each entity, so that one does not have an unfair advantage over the other. Also, the 5G traffic would be evenly distributed between both networks.
The government revealed that entity B has two years to progressively reach 80% population coverage. If this term prevails, entity B’s shareholders will continue to pay for 5G access from entity A during the initial stage. As such, both entities may continue to offer 5G services until entity B’s network achieves sufficient capacity.
Meanwhile, for fixed line operators, earnings boost is anticipated, driven by the ongoing influx of investments in data center (DC), cloud and AI infrastructure in Malaysia. This growth is supported by increasing demand for managed wavelength and wholesale bandwidth services, which enable data transmission between DCs and public or private cloud infrastructure, as well as between hyperscale DC to DC.
Kenanga Research maintains its OVERWEIGHT call on the telecommunication sector in view of the emerging growth in data transmission.
Analysts’ top pick for the sector is Telekom Malaysia (TM) with a target price of RM7.53 set by Kenanga, and RM8.40 set by RHB Research.
As at 5pm on Wednesday, the stock of Telekom Malaysia traded at RM6.60. (Stock updates from www.klsescreener.com)
