Journey to Wealth
Maxis - 4G tie-up with REDtone
News Maxis and REDtone have entered into an infrastructure and spectrum sharing agreement to fast track their rollout of 4G networks throughout the country.
4G LTE services are targeted to be launched by both companies early next year in selected areas of the Klang Valley.
The combined spectrum will allow both companies to offer the fastest 4G broadband speed in the country of up to 150Mbps.
Comments We view this as a win-win situation for both parties. Maxis will receive a new source of revenue, although we are unable to gauge the quantum at this juncture, and further enhance the utilisation of its network in areas that are currently underutilised. For REDtone, the collaboration will enable the company to accelerate its rollout to cover 50% of the country's population.
Although the authority has yet to conclude the allocation for the 4G spectrum, the collaboration has enhanced both parties' chances in securing the license given that the authority has set network collaboration as one of the several conditions that each party need to comply with before any licences are issued to them.
Outlook Maxis remains as a solid high-yield play given its firm 40.0 sen DPS in the next 1-2 years.
However, its ability to maintain its market share remains doubtful at this juncture in our view.
There could also be a potential erosion in its EBITDA margin as a result of an aggressive rollout of its FTTH plan.
Forecast No changes in our FY12-FY14 earnings forecasts.
Rating Maintain MARKET PERFORM
The company's current strategy in focusing on customers retention instead of maintaining its margin may add pressures to its near term financial performance.
Valuation Maintaining Target Price at RM6.76 based on a targeted FY13 EV/forward EBITDA of 11.4x (+1.5SD).
Risks Higher than expected margin pressure. Continuing loss in market share to its peers.
Source: Kenanga
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