Affin Hwang Capital Research Highlights

Telco: Reload for prepaid mobile subject to GST; broadband rates to fall

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Publish date: Fri, 03 Apr 2015, 04:48 PM
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This blog publishes research highlights from Affin Hwang Capital Research.

Top-ups for prepaid mobile services will be subject to GST upon activation, the  Communication  and  Multimedia  Consumer  Forum  (CFM)  declared yesterday, after a meeting between the consumer forum and the Customs Department  to  seek  clarity  on  the  implementation  of  GST  on  prepaid services.  CFM  added  that  as  a  transitional  measure,  the  telcos  would provide customers who reload RM5 and above, a value which is higher than the  GST  addition  in  the  form  of  free  minutes  and  SMS,  for  a  period  of  3 months. (Source: The Edge Daily)

Separately,  Communications  and  Multimedia  Minister  Datuk  Seri  Ahmad Shabery  Cheek  said  that  there  would  be  an  announcement  on  lower broadband rates this month, which is expected to decline by more than 6%. (Source: The Star)

Comments:  This should finally resolve the confusion among the telcos on GST  implementation  on  the  prepaid  segment  and  paving  the  way  for  the telcos to pass on the “tax element” to the consumer instead of absorbing it previously.  Near  term  however,  with  the  increased  freebies  given,  any positive impact should be muted. Beyond the 3 months , and depending on demand elasticity, it remains to be seen whether demand will remain strong with the higher prices. The lower broadband rates should however mitigate some of this effect and hence keep demand for telco services firm. Maintain Neutral on the sector with DiGi (BUY; TP: RM7.05) as our top pick.

Source: Affin Hwang Capital Research - 3 Apr 2015

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