• Positive growth in subscribers attributable to higher demand from consumers and enterprises.

• Second 5G network could disrupt the existing monopolistic structure within the local telecommunications sector, resulting in reduced fees and increased options for 5Grelated services.

• Maintain OVERWEIGHT recommendation on Telecommunications Sector given positive advancements on the 5G rollout in Malaysia, anticipation of steady recovery in roaming contributions as a result of an increase in migrant workers & tourist as well as an expectation of steady earnings growth due to sustained high adoption rate for e-commerce.

The number of subscribers has experienced positive growth. In terms of subscriber growth, the majority of companies under our coverage showed a decent improvement, except for Axiata, which experienced a decline due to the deconsolidation of Celcom. Moving ahead, we anticipate a higher number of subscribers among telco players, supported by better accessibility of affordable mobile devices, advancements in mobile technology (such as the introduction of 5G networks), effective marketing campaigns as well as a growing prevalence of digital literacy.

Maxis still out of the picture. Maxis (HOLD, TP: RM3.95) stands out as the sole industry player that has yet to enter into equity or wholesale agreement with Digital Nasional Berhad (DNB). Nonetheless the group has expressed a keen interest in participating once they secure an equitable agreement that are mutually beneficial for both Maxis and DNB. It is worth to note that Maxis has already offered 5G services with their roaming partner in Singapore, Thailand and Indonesia. Aside to that, Maxis 5G Alliance Programme is expected to create a powerful ecosystem and eventually unlock the value of Industry Revolution 4.0 technologies. However, we anticipate a relatively stagnant earnings growth for Maxis and reiterate our concerns regarding its short-term outlook due to challenging financial performance and uncertainties surrounding the resolution of 5G-related issues. The unresolved issue of Maxis' accessibility to the 5G network could potentially impact investor sentiment in its share price.

In regards with 5G phase 2... We anticipate this development will significantly enhance the capabilities of local MNOs in two key areas namely (i) formulating a more practical 5G roadmap and (ii) developing 5G-related products that align with their specific areas of expertise. We are positive on the implementation of a dual network model for 5G deployment in the near future. The introduction of a second 5G network has the capacity to disrupt the existing monopolistic structure within the local telecommunications sector, resulting in reduced fees and increased options for 5G-related services.

Maintain OVERWEIGHT. We maintain our optimistic stance on the telecommunication sector for several reasons namely (i) positive advancements in the 5G rollout in Malaysia, (ii) a gradual recovery in roaming contributions as a result of an increase in migrant workers and tourist prepaid SIM card usage following the reopening of international borders, (iii) a favorable outcome from CelcomDigi merger, and (iv) local telecommunications companies’ steady earnings growth thanks to high adoption rate of e-commerce. Maintain a BUY call on (i) TM (TP RM7.58), (ii) TIME (RM6.65) and (iii) Axiata (RM3.78).

Source: BIMB Securities Research - 19 Jul 2023