- Celcom has entered into a tie-up with Syed Mokhtar’s Altel Communications Sdn Bhd (formerly known as Puncak Semangat Technology Sdn Bhd).

- Salient points from the agreement are:

- (1) The respective parties will pool their 2x10MHz allocation of the 2.6GHz spectrum for the establishment, deployment, building, construction, operation and maintenance of a wireless business running on LTE technologies;

- (2) Altel will “consider” sharing its remaining 2x10 MHz block with Celcom – recall that Altel was awarded 2x20MHz of the 2.6GHz spectrum while the other seven telcos, including Axiata, were awarded 2x10Mhz blocks of the spectrum each;

- (3) Celcom appointed as exclusive infra and wholesale provider of MVNO services to enable Altel to operate as an MVNO in Malaysia. As part of the arrangements, Axiata will provide Altel domestic roaming services and RAN sharing arrangements.

- The deal is subject to further negotiations, but we view what has transpired so far positively as the larger spectrum would allow for better service quality and more efficient infra utilisation. Recall that Maxis has already entered into infra and spectrum sharing arrangements with its “neighbouring” spectrum holder, Redtone for 4G rollout in July last year.

- Specifically, Celcom should benefit from incremental revenues from the provision of roaming and MVNO services to Altel (MVNO services currently contribute c.5.4% to Celcom’s revenue).

- As a recap, Celcom has allocated RM450mil for LTE rollout this year to hit 1200 sites by 2Q14, which will cover 60% of its “targeted” population. Maxis is guiding for RM500mil capex on LTE while Digi has allocated RM600mil for its LTE rollout this year.

- Maintain BUY on Axiata at unchanged fair value of RM7.30/share. Our numbers are maintained pending further details on potential revenues from the arrangement.

Source: AmeSecurities