KUALA LUMPUR (Nov 1): RHB Research has projected an 8% to 15% core earnings dilution for telcos for the financial years 2023-2024 following the revised wholesale terms for Malaysia’s 5G. It also reduced by 2%-8% the target prices (TPs) of telcos.

The estimate is based on the revised higher wholesale rates levied by Digital Nasional Bhd (DNB).

"The earnings impact looks to be tempered but dilutive in the medium term, nonetheless," it said in a note on Tuesday (Nov 1).

Hence, the research house said it has lowered the TPs of Digi.Com Bhd to RM3.65, Maxis Bhd to RM3.60, and Axiata Group Bhd to RM3.66.

“We see the overall impact on TM (Telekom Malaysia Bhd) as net positive as revenues from DNB’s fibre backhaul should more than offset higher wholesale fees incurred," it said in a note.

CGS-CIMB said the signing of the access agreements by five telcos with DNB has provided further clarity on the 5G situation in Malaysia and helped dispel investors’ fears.

“We gather from speaking to our industry sources that the minimum volume commitment (MVC) under the coverage fee component has been reduced from 1,200 Gbps (upon reaching 80% coverage by end-2024) previously.

“However, the exact MVC may differ between telcos, based on their commercial discussions with DNB," it said.

CGS-CIMB said all access seekers will have to pay the coverage fees, despite some market talk earlier that smaller mobile players (eg TM and YTL Communications Sdn Bhd) will be charged entirely on a pay-per-use basis.

Overall, the sector stays “overweight” as the potential earnings hit from 5G wholesale fees has already been factored into telcos’ share prices, which are down by an average 17% year-to-date, it said.

At 11am, Maxis was down six sen to RM3.79, Digi was flat at RM3.79, Axiata lost two sen to RM2.83, and TM eased five sen to RM5.51.