ARPU remains flattish in the near term. Fixed broadband operators, Unifi, which targets the mass market (with an ARPU of RM130), experienced a slight revenue decline or -2.7% YoY in 1Q24 due to significant reduction in voice and mobile services contribution despite stagnant subscriber growth (+1.8% YoY in 4Q23). Meanwhile, CelcomDigi (CDB) Home Fibre continues to show robust subscriber growth, maintaining over 20% growth due to attractive product offerings and reasonable pricing. However, CDB Home Fibre recorded a lower ARPU in 1Q24 at RM112 compared to RM126 in 1Q23. Based on current trends, we anticipate ARPU to remain flat in the near term. Additionally, Malaysia is reviewing its government subsidy program to better support the low-income groups, which may lead to further price adjustments. As a result, consumers might need to tighten their belts, leading to increased living costs and reduced discretionary spending. This could decrease demand for premium telco services, with consumers opting for basic packages to prioritize essential expenses, potentially impacting ARPU for telco players in the near term. Nonetheless, telecommunications sector is expected to experience minimal impact, as its services are widely considered essential for modern living.
Enhanced focus on enterprise and high-value post-paid segments to boost ARPU growth. In the medium term, we anticipate telco players will focus on enterprise and high-value post-paid segments to support stable ARPU. According to BMI, high-value post-paid data services are expected to provide significant upside potential to our 10-year ARPU forecast in Malaysia, with ARPU levels projected to grow from an average of MYR44 in 2024 to MYR53.50 in 2033. On top of that, the rise in data center investments in Malaysia is set to expand data center capacity. This is particularly beneficial for businesses using data-heavy applications across various sectors. We anticipate that this infrastructure development will boost 5G monetization within the enterprise segment and potentially drive higher earnings for telco players.
Maintain OVERWEIGHT. Maintain an Overweight call on telecommunications sector, driven by (i) positive developments in the 5G network rollout in Malaysia, (ii) better 5G monetization due to certainty on the final structure for Malaysia's 5G network, supported by attractive 5G-related bundling packages, (iii) higher investment in data centers, which will enhance 5G deployment and increase monetization opportunities for data-intensive businesses in the enterprise segment, (iv) anticipation of higher 5G adoption rate as well as (v) expectations of gradual recovery in roaming contributions due to increased usage by migrant workers and tourists, as Malaysia's tourism sector aims to welcome 27.3mn tourists in 2024. Our top picks are (i) TM (BUY, TP RM7.77) – the main beneficiary in providing services for both public and private sectors, and (ii) TIME (BUY, RM6.09) with positive long-term business outlook and strong demand for data and data centres.
Source: BIMB Securities Research - 17 Jul 2024
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TMCreated by kltrader | Dec 12, 2024