Rumour has it that the government may have finally decided to allow telecommunications companies (telcos) to pass on the six per cent service tax to prepaid subscribers, HLIB Research says.

"It is understood that the Malaysian Communications and Multimedia Commission (MCMC) has issued a memo to all the industry players instructing the telcos to be technically prepared for the launch on July 1," said the research
house today.

"Coupled with the broadband tax incentive implemented last year, this will further enhance telcos' earnings in the longer term," it said, maintaining a neutral rating on the telecommunications sector.

The research division of Hong Leong Investment Bank (HLIB) said it expected DiGi to benefit the most if this rumour was to materialise considering that it had the highest proportion (86.6 per cent) of prepaid users to total subscribers base, compared to Maxis (74 per cent) and Celcom (77.2 per cent).

Based on its estimation, DiGi, Maxis and Celcom would enjoy earnings uplift of six per cent, four per cent and two per cent respectively, provided competition and usage remain status quo. -- Bernama