KUALA LUMPUR: The telecommunications sector's core results for the second quarter (Q2) of 2024 remained steady, supported by strong cost management, improved synergies from the CelcomDigi Bhd merger, and tight competition.

RHB Research observed that mobile network operators (MNOs) are aggressively competing in the fibre-mobile bundle market, resulting in lower average revenue per user (ARPU) from entry-level plans.

"We lifted our forecasts on CelcomDigi and Maxis Bhd post results while estimates were lowered for OCK Group Bhd. 

"Key risks are competition, weaker-than-expected earnings, and regulatory setbacks," it said in a note.

According to RHB Research, Axiata Group Bhd was the sole outperformer in the June reporting season, while OCK fell short of our and consensus numbers. 

It said Axiata's earnings were bolstered by the strong operating performance of its mobile assets in Jeffrey Tan Indonesia, Bangladesh, Cambodia, and its towerco unit (edotCo), with the first half of 2024 (1H24) earnings before interest and taxes (EBIT) growth of 40 per cent being ahead of 2024 KPI of mid-teens growth. 

"OCK's earnings were crimped by weaker billings from the engineering/contracting segment due to the uncertainties on the 5G second network process, with the earnings slack to be partly made up for in 2H24. 

"Overall sector core earnings fell 5.4 per cent year on year (YoY) in 2Q24, mainly due to the high base of Telekom Malaysia's earnings in FY23 from tax credits and down a marginal 0.4 per cent quarter on quarter (QoQ)," it said.

On the second 5G network evaluation, RHB Research said dour MNOs have submitted their tender for 5G spectrum (TM, Maxis, CDB, and U Mobile). 

It said the outcome is expected by Q4 2024, with spectrum to be awarded on an apparatus assignment basis. 

"We see Maxis as a front-runner for the second 5G network. With TM's share subscription agreement for Digital Nasional Bhd (DNB) terminated, it is likely that TM's tender submission will be disqualified. 

"Management believes it can still play a significant role in the nation's 5G eco-system by being a 5G access seeker. 

"TM's non-participation in DNB's equity and/or the second 5G network is not a concern, as it would be better off providing wholesale 5G fibre backhaul access to 5G network owners, in our view.

"Overall, we maintain 'Neutral' on the sector," it added.

https://www.nst.com.my/business/corporate/2024/09/1101022/rising-trend-telco-sector