A local news daily reported that Altel Communications, a subsidiary of Puncak Semangat, expects to launch its prepaid products in August 2013, while postpaid/LTE plans would be released by end-2013. The company’s subscription target is understood to be at least 150k (focusing on the enterprise segment) within its first year of operations, and would be investing more than RM1bn over 5 years for 4G LTE network deployment. On base station rollouts, Puncak Semangat expects to have 500 LTE base stations in its first year, and 2,100 in its third year, comprising its own as well as shared infrastructure.

Puncak Semangat’s business plan to break into the enterprise market (as a key focus) would likely impact Maxis Bhd (FULLY VALUED, RM5.65 TP) the most, as corporate/enterprise accounts continue to be one of Maxis’ strongholds. Overall, the company’s entry into the market is expected to dilute market shares further, which would put further pressure on incumbents to grow revenues (from a subscriber acquisitions perspective) in an environment where data pricing is already constrained. On the flip side, Puncak Semangat’s expectation of blended ARPU consistent with the industry of RM47-50 suggests that it may not aggressively price its products to undercut the competition. In addition, driving data usage on the existing customer base (especially prepaid users) should still preserve revenue gains for the mobile operators. We maintain our underweight view of the Malaysian telecoms sector due to average earnings growth as well as premium valuations. Our top pick is DiGi.Com (HOLD, RM4.95 TP), for its higher capacity for growth (coverage expansion, lower data revenue base) and potential value (debt light and relatively unutilised balance sheet) to be unlocked through a business trust.

Source: HwangDBS Research - 1 Aug 2013