Investment Highlights

• Home fibre promotion for 10Mbps and 30Mbps. Maxis is now lowering the price of its home fibre services by RM20/month to RM119/month for its 10Mbps option which offers unlimited voice calls to all mobile and landlines for a limited time as part of its year-end sales campaign from 14 November until 31 December 2017. For its 30Mbps option, which comes with complimentary unlimited iflix access, free Maxperts consultation with end-to-end-setup, unlimited voice calls to all mobile and landlines, and free home phone, the price is reduced by RM40/month to RM139/month.

• No change for higher speeds. For Maxis’ 50Mbps and 100Mbps, the prices remain at RM219/month and RM299/month respectively. A 24-month contract apply and after that subscription will revert to normal retail pricing of RM139/month for 10Mbps and RM179/month for 30Mbps. Maxis said existing fibre customers who have completed their 24-month contract term may subscribe to this new promotion. Additionally, existing MaxisOne Home Broadband customers who introduce a new fibre customer will enjoy a RM10 rebate for 12 months for each successful sign-up. However, existing Maxis fibre subscribers who terminate their contracts to enjoy the new offer would be imposed a RM500 penalty.

• TM also raising the ante. As a comparison, Telekom Malaysia’s has reintroduced its UniFi 10Mbps at RM129/month while UniFi 30Mbps has been reduced to RM139/month, UniFi 50Mbps at RM189/month and UniFi 100Mbps at RM239/month. TM has 1mil UniFi users vs. Maxis’ 163,000 home fibre customers, who are leased on TM’s network.

• Time’s still the value-for-money broadband. Time dotCom offers 100Mbps at RM149/month, 300Mbps at RM189/month and 500Mbps at RM299/month. While Time’s pricing per Mbps remains the cheapest at RM0.60/Mbps – RM1.49/Mbps compared to Maxis’ RM2.99-RM11.9/Mbps and TM’s RM2.39/Mbps-RM12.9/Mbps, its service is largely confined to high-density population centres such as high-rise buildings, malls, offices and condominiums. However, Maxis’ and TM’s lower price per package for the 10Mbps segment may also draw the low-to-mid-income segment.

• Part of government’s initiatives to lower connectivity costs. Recall during the 2017 Budget announcement last year, the prime minister had indicated the government’s intentions to double fixed broadband speed and halve its prices within 2 years. Hence, we expect further pricing revisions to this segment next year.

• Persistent cellular pricing intensity. Competition in the mobile segment remains intense, as total subscribers has fallen by 3.9mil or 11% since 1Q2013, wholly due to the decline in the prepaid segment. In our view, near-to-medium-term earnings catalysts appear weak given the likelihood of further intensification in the celco wars with U Mobile’s unlimited data option at RM78/month plus free data roaming vs. webe’s RM79/month.

• Rising need for consolidation. As TM continues to promote its webe service, we do not discount the possibility of sector earnings cuts if incumbents further exacerbate the already intense competition for market share. Hence, we remain convinced that sector consolidation is impending, which is likely to be spearheaded by the re-merger of Axiata and TM. Main synergistic benefits from an Axiata-TM merger are the complementary suite of services which Axiata's mobile services can integrate into TM's fixed line operations to draw further mobile market share from Maxis, Digi and U Mobile. However, the more immediate earnings impact from an Axiata-TM merger will be cost efficiencies from the reduction in redundancies for head office expenses, network operating centres, marketing costs and procurement management.

• Our Top BUYs remain Axiata and TM due to the game-changing merger likelihood which will significantly enhance their earnings and market share trajectory while Maxis and Digi are HOLDs due to the resistance in gaining traction in revenue growth.

Source: AmInvest Research - 15 Nov 2017