DIGI reiterated its guidance for RM8bn savings (in NPV) from the merger synergy. On potential cuts in telco service prices mooted by the new government, DIGI holds that view that telco services are already highly affordable currently, and the deterrence to subscription comes largely from the lack of coverage and poor network quality in certain remote areas. BUY with a TP of RM4.69.

Recent statement by Communications and Digital Minister Fahmi Fadzil prices of telco services may be reviewed, CELCOMDIGI said that the ministry had been made aware that: (i) telco service prices are already highly affordable, manifested in sustained industry subscriber growth in both the postpaid (+2% YoY) and prepaid (+9% YoY) segments in 3QCY22; (ii) the reason for the low telco subscription among certain segments of the population is not because of the price but rather the lack of coverage and poor network quality in certain remote areas.

The merged entity will be officially knowns as CELCOMDIGI by Feb 2023. Services have been streamlined as of 14 Dec but the full network integration is expected to be completed in 24 to 36 months. The two entities will maintain their respective products and services in the next 2 years as each caters for different segments of the market. During this 2-year duration, CELCOMDIGI also expects to innovate and introduce new products and services. The MCMC has set a target for CELCOMDIGI to position itself under a single corporate band within 2 years.

The key strength for CELCOMDIGI is the ability to tap into new growth areas and diverse communities given its in-depth and wider coverage. CELCOM’s key points are its network capacity with wider coverage while DIGI has in-depth coverage with an emphasis on urban areas. CELCOM’s 4G and 4G+ cover 96% and 90% of the population respectively while DIGI’s 4G and 4G+ are at 95% and 80%. Their combined 12k retail touchpoints and 500 branded outlets will be repurposed to support and strengthen the business.

Source: Rakuten Research - 19 Dec 2022