Investment Highlights

• Maxis introduces unlimited prepaid data. Maxis has just launched a new Hotlink Prepaid Unlimited plan offering unlimited internet and local calls for the first time at RM35/month, RM12/week and RM3/day with speed limited to 3Mbps. Hotlink offers another package at RM45/month at speeds of up to 6Mbps. These plans include Viu free access and offer add-ons with unlimited data speeds at RM1/hour, RM3 for 3GB/day and RM10 for 5GB/week. New prepaid packs cost RM10, and offer a 5-day credit of RM5 and 500MB basic internet, while voice calls are charged at 60 sen/minute and SMS at 15 sen/each. Existing Hotlink Red customers may upgrade to the new plan with a RM5 fee via the Hotlink mobile app.

• Nearly meets U Mobile’s price point. As a comparison, U Mobile offers unlimited data capped at 3Mbps for RM30/month and RM12/week. However, it also offers 3GB hotspot. U Mobile currently offers a slightly higher plan at RM35/month with speed caps of 6Mbp and 6GB of hotspot sharing.

Digi’s Cili Padi XL offers 3GB internet, unlimited Facebook, Twitter and Instagram at RM15/month. Add-ons for unlimited internet can be purchased at RM8/day.

Axiata’s Celcom currently offers an Xpax prepaid package at RM10 with a preloaded credit of RM6 which is valid for 60 days but restricted to basic internet at 1GB/month, calls at 30 sen/minute and 15 sen/SMS. It also offers a 10GB free data quota for Facebook, Instagram and Games Walla.

• Unlimited postpaid data may be on the way. We expect Maxis to introduce unlimited data plans for the postpaid segment as well, otherwise its existing customers could migrate to the lower priced prepaid segment. Currently, Maxis’ 1Q2020 postpaid average revenue per user (ARPU) of RM81/month is 2.5x its prepaid’s RM32/month.

For now, U Mobile and Digi are the only celcos offering unlimited postpaid data plans. U Mobile’s GX50 postpaid plan offers unlimited data and calls plus 5GB of hotspot sharing at a discounted RM40/month (from RM50/month). Digi currently offers its Infinite online plan with unlimited data at speeds up to 10Mbps and calls at RM100/month while Unifi Mobile is priced at RM99/month.

Unifi Bebas prepaid plans offer 4GB data at RM30 with no validity period but RM7/hour for voice calls. Meanwhile, Maxis’ lowest postpaid plan is currently RM98/month with unlimited calls and data quota of 40GB while Celcom offers unlimited calls at RM80/month with data quota of 30GB.

As such, we expect new plans being introduced as competition escalates over the next few months given that the market leader has opened up another front in the intensifying cellular wars.

• Total subscriber trajectory continued its downward trend after a brief uptick in 2Q2019 amid the still intense mobile competition. Mobile subscribers decreased by 580K QoQ as prepaid declines of 704K were only able to be partially offset by postpaid additions of 124K. Only Maxis registered a 91K net increase while Celcom declined by 390K and Digi by 281K.

• Maxis remains the market leader. Since 1Q2016, Digi has held the leading subscriber market share due to its strength in the prepaid segment, underpinned by the migrant population. However, Maxis’ postpaid subscriber focus and convergence strategy with its fibre broadband services appear to be working out better than Digi and Celcom’s. In 1Q2020, Maxis’ subscriber market share of 37.2% has finally overtaken Digi’s 36.4% while Celcom remained a distant third at 26.4%.

Additionally, Maxis remains the leader in the postpaid segment with an ARPU and subscriber base which are higher by 23% and 24% respectively compared to Digi’s. While the postpaid segment accounts for 34% of Maxis’ subscriber base, it makes up 58% of the group’s 1QFY20 group service revenue. As a comparison, Digi’s postpaid segment accounts for 28% and 47% of its subscriber base and group service revenue respectively in 1QFY20.

• Maintain NEUTRAL outlook on the sector given the rising mobile competition amid escalating capex requirements against the backdrop of the National Fiberisation and Connectivity Plan (NFCP) agenda to improve national connectivity and affordability. Our only BUY currently is Axiata, given its low EV/EBITDA valuations and rising prospects for monetisation of its multiple businesses.

Source: AmInvest Research - 5 Jun 2020