Investment Highlights

• First unlimited data plan from Celcom at RM98/month. Axiata Group’s wholly-owned Celcom has finally introduced a postpaid plan with unlimited data with its MEGA product launch. While the base MEGA postpaid plan at RM80/month does have a 30GB Internet quota and unlimited calls to all networks, Celcom offers add-ons with Unlimited Mobile Internet or Lightning Mobile Internet speed options.

By paying an additional RM18/month to RM98/month, Celcom offers unlimited data for the Unlimited Mobile Internet option. However, this has a hotspot quota of 5GB/month. For an additional RM50/month to RM148/month, the hotspot quota rises to 10GB with full HD video streaming.

For the Lightning Mobile Internet Speed option, Celcom offers 10GB quota at RM98/month, 30GB at RM148/month and 70GB at RM188/month. The key feature of this option is that unused Internet quota can be traded-in for cashback at RM5 for 10GB equivalent via Boost’s e-wallet. It also offers free roaming in 12 countries on its highest plan at RM188 (70GB + 30GB).

• U Mobile prepaid doubles speed cap for RM5/month. U Mobile has launched a new GX38 prepaid plan which offers unlimited data at a promotional price of RM35/month with a speed cap of 6Mbps, compared with 3Mbps for its existing GX30 plan priced at RM30/month. Both include a hotspot quota of 3GB/month.

U Mobile also introduced a new GX68 plan at RM58/month for life if subscribers signed up during the promotional period. This offers unlimited data, speed and calls with 6GB of hotspot data. The company still offers GX50 which offers unlimited data at speeds limited to 5Mbps and unlimited calls together with 5GB of hotspot data.

• Expect remaining players to raise the ante. For comparison, Digi currently has the Infinite online plan which offers unlimited data and calls at RM100/month while Unifi Mobile is priced at RM99/month. Maxis currently does not have an unlimited data plan, with the highest MaxisOne quota of 60GB priced at RM188/month.

Given Celcom’s new plans, we expect the remaining players to introduce similar products against the backdrop of the industry’s declining subscribers. Recall that total mobile subscriber trajectory returned to its downward trajectory in 3Q2019 after a brief uptick in the previous quarter, highlighting that cellular price war competition remains intense.

Mobile subscribers decreased by 46K QoQ as prepaid declines of 226K were only partially offset by postpaid additions of 180K. Only Maxis registered a 141K increase while Celcom dropped by 153K and Digi by 34K. In 4Q2019, Digi resumed its decline in subscribers, falling 0.4mil QoQ to 10.9mil.

• Growing postpaid segment stabilising service revenue. Notwithstanding the declining subscriber trends, cellular operators 3Q2019 service revenues largely stabilised QoQ due to the higher value postpaid segment growth, further supported by average revenue per user (ARPU) rising slightly QoQ to RM47.70 as average postpaid ARPU rose by RM1/month to RM71/month.

• Maintain NEUTRAL outlook on the sector given the escalating capex requirements against the backdrop of governmenttargeted fiberised ARPU reductions under the National Fiberisation and Connectivity Plan (NFCP). Our only BUY currently is Axiata, given its low EV/EBITDA valuations and rising prospects for monetisation of its multiple businesses.

• Sector can be de-rated on resumption of revenue declines against the backdrop of escalated mobile price war intensification and sharp drops in fixed broadband prices next year, driven by NFCP prerogatives. We are also cautious on possibilities of higher-than-expected increase in operating and capital cost requirements as operators need to further upgrade their network infrastructure for 5G rollouts.

• Sector can be upgraded on renewed consolidation prospects amongst the current 6 main cellular operators which could lead to a moderation in mobile price competition, indefinite suspension of the MCMC’s plans to reduce broadband prices this year and significant contraction in operating costs from increased infrastructure-sharing arrangements amongst operators.

Source: AmInvest Research - 13 Feb 2020