THE BUZZ  

Maxis has raised the price of its Home fibre broadband service to slightly under Unifi's entry level plan. At the same time, it cut the price of its 30Mbps plan to RM248/mth and introduced a 20Mbps plan for RM198/mth.   

OUR TAKE  

The  gap  narrows.  The  move  to  raise  the  price  of  its  entry  level  fibre  broadband  plan effectively  narrows  the  pricing  gap  with  Unifi  to  just  0.7%  (RM1)  from  7.4%  in  July (RM11) and 20.8% in March (RM31). The 10Mbps package is now retailed at RM148 for a  Maxis  postpaid  mobile  user  (RM168  for  non  Maxis  customers).  This  represents  a RM10  increase  over  the  previous  retail  price  (RM138)  introduced  in  July  and  a  RM30 increase  over  the  price  offered  six  months  ago  when  it  went  on  the  offensive  to create awareness  of  its  fibre  product.  We  believe  Maxis  is  re-pricing  its  plans  ahead  of  fresh packages  to  be  unveiled  over  the  next  few  months  which  will  incorporate  IPTV.  While fibre  revenue  contribution  remains  small,  the  re-pricing  of  its  packages  should  help Maxis to better monetize and improve the profitability of its fibre service.

Still giving more for less. The key value proposition for a customer remains the bigger bandwidth  offered  by  Maxis  compared  to  similarly  priced  plans  on  Unifi  (see  Table  1). Maxis has cut the price of its 30Mbps plan by 38% to RM248/mth, slightly below Unifi's equivalent plan (RM249) for 20Mbps. At the same time, it introduced a new 20Mbps plan priced  at  RM198  which compares with Unifi's 10Mbps plan at RM199. The pricing strategy and additional bandwidth are carrots dangled to attract customers who may not be  keen  on  IPTV  and  to  encourage  more  users  to  trade  up  to  higher  tier  plans.  We expect Maxis to offer attractive bundled services (voice+broadband+IPTV) to lock-in an estimated  1m  customers  that  its  sister  company  Astro  has  within  the  fibre  footprint  of 1.2m premises.

Unifi  remains  unfazed  by  competition.  Despite  Maxis'  aggression,  TM  has  maintained  the subscription  prices  of  its  Unifi  service  offered  since  Day  1.  We  note  that  the  number  of  IPTV channels offered on Unifi's IPTV (HyppTV) service  has  increased  by  more  than  threefold  from  the launch of its service in March 2010 to 95 currently. In addition to the higher number of free channels, TM  also  introduced  pay-per  view  packages  to  boost  its  ARPU.  We  think  Unifi  still  commands  the strongest appeal and top of mind share for users looking to upgrade their broadband plans to fibre given its strong distribution network of resellers and brand profile. 

Time  and  P1  playing  a  different  niche.  P1  launched  its  fibre  broadband  service  which  rides  on TM's high speed broadband network in April. Our channel checks revealed that the take-up  of  its plans has been lukewarm. This does not come as a surprise as there is little marketing visibility of its service. P1 appears to be focusing more on the business segment where it currently has the lowest priced enterprise fibre plans in the market. It offers  four business plans (5Mbps, 10Mbps, 20Mbps, 30Mbps)  priced  at  RM99-RM429 while Unifi's plans for businesses are retailed at RM199-RM359. Meanwhile, though Time currently has the fastest fibre broadband plan of 100Mbps, its coverage is limited and confined to multi-dwelling units and office towers. 

Keen  on  P1?  We  gather  from  industry  sources  that  Maxis  is  among  the  few  telcos  that  are  also keen on P1. It is eyeing P1's WiMAX and the 2.6GHz/LTE spectrum although we think there could be  regulatory  hurdles  as  Maxis  is  already  collaborating  with  U  Mobile,  another  LTE  spectrum recipient.

Maintain NEUTRAL. We are maintaining our NEUTRAL recommendation on Maxis based on FV of RM6.50  (WACC:  8%,  TGH:  1.5%).  The  slide  in  its  voice  revenue  market  share,  higher  A&P  and rising  subscriber  acquisition  cost  remain  overriding  concerns  although  the  stock  is  benefitting  from investors' affixation over yield plays given the macro headwinds. Maxis' steady dividend yield of over 5% provides good share price support. 

Source: OSK