Under the new Pakej P-hailing Rahmah plans, P-hailing workers may subscribe for special data packages from as low as RM33, with data quotas of at least 40GB. This new Rahmah series of plans are offered by telcos in collaboration with 16 participating P-hailing platform providers. In the worst-case scenario, we estimate immaterial (less than 0.5%) FY24F topline erosion of RM53m and RM15.8m for CDB and MAXIS, respectively. In the broader context, we believe that regulatory pricing pressure on telco services remains mild at this juncture. This is because discounted plans for the smallish base of targeted segments appear manageable for now. Evidently, Rahmah plans that were introduced previously had negligible impact to earnings and ARPU. Maintain OVERWEIGHT on the sector.

More Madani goodies for targeted segments. Communications Minister, Fahmi Fadzil announced that under the new Pakej P-hailing Rahmah plans, P-hailing workers may subscribe for special data packages from as low as RM33, with data quotas of at least 40GB. Telco providers that offer these packages include CDB, MAXIS, U Mobile, TM (Unifi Mobile) and YTL Communications (YES). Meanwhile, there are 16 participating P-hailing platform providers, which include Grab, FoodPanda, Lalamove, Shopee, and Lazada Logistics, Bungkusit, Halo Delivery, iHantar, MatDespatch, Parcel365, RideRunner, Fasz Food, Belibeli, iGoGet, GoGet and GoLog. Approximately 200k P-hailing riders and drivers are expected to benefit from this offering, which is available for subscription until 23 April (subject to extension).

P-hailing riders get cheaper plans or rebates. Eligible P-hailing delivery workers may opt for postpaid or prepaid plans that are either bundled with subsidized devices or SIM-only plans. To-date, P-hailing Rahmah data plans revealed by the telcos.

As an added bonus for P-hailing workers, telcos that offer monthly rebates for selected existing postpaid enterprise plans include U Mobile (RM5-RM10 over 12 months) and Maxis (RM10-RM20 over 24 months).

Expansion of Rahmah series of discounted plans. To recap, P-hailing services include the delivery of food, drinks and parcels using motorcycles. This new P-hailing mobile plan comprises part of the Rahmah series of packages that were first introduced by the government in Dec 2022. This is to alleviate the financial burden of targeted segments, including individuals in the B40 income bracket, youths, senior citizens, disabled individuals and veterans. Additionally, recall that the government also implemented the Rahmah Civil Servants Postpaid Incentive for government staff, which offered monthly postpaid rebates of RM10 for a period of 12 months. Meanwhile, the various Rahmah plans that were launched include Pakej 5G Rahmah, Pakej Perpaduan Prepaid, and Pakej Perpaduan Jalur Lebar. Aside from lower price points, these plans also include subsidized bundled smart phones (for postpaid plans).

Rahmah packages have been benign so far. Based on our observations, the previous Rahmah packages had a benign impact on ARPUs for Celcom, Digi and MAXIS. This is reflected in resilient blended sequential ARPUs over 9MCY23 for all three players. Whilst there was weakness in CDB’s postpaid ARPUs during this period, it was attributed to the dip in interconnect rates and slower traction for on-demand offerings. Moreover, according to the telco players under our coverage, sales volumes for Rahmah packages are negligible when compared to their total subscriber base of 32m (CDB) and 12m (MAXIS).

Immaterial earnings impact from P-hailing plans. As a result of these new P-hailing plans, in the worst-case scenario, we estimate FY24 topline erosion of RM53m and RM15.8m for CDB and MAXIS, respectively. This translates to immaterial (less than 0.5%) revenue impact for both players in FY24. Our underlying assumptions include: (i) share of p-hailing user base matches current postpaid market share of 47% for CDB, and 33% for MAXIS, (ii) existing entry level CDB postpaid users downgrade to Rahmah P-hailing plans, and (iii) all new subscribers that signed up for MAXIS’ P-hailing packages opt for plans that offer higher rebates of RM20 per month. In the broader context, we believe that regulatory pricing pressure on telco services remains mild at this juncture. This is because discounted offerings for a smallish base of targeted segments appear manageable for telcos at this stage. Evidently, Rahmah plans that were introduced previously had negligible impact on earnings and ARPUs.

We maintain our OVERWEIGHT recommendation on the sector as we are cautiously optimistic that earnings and dividends for
telco players will remain intact post implementation of 5G Dual Network model. Our sector top picks comprise CDB and TM.

Source: Kenanga Research - 24 Jan 2024