KUALA LUMPUR, April 5 ― Kenanga Research has maintained its ‘Overweight’ call on the telecommunications services sector as it has evolved into a basic and yet vital necessity of modern life, underpinning the earnings resilience of players.

The research house said that the government’s commitment to bridge the digital divide and push Industrial Revolution 4.0 will further boost investment and demand for the telecommunications services with wider coverage, better affordability and faster speed are set to boost subscription and average revenue per user.

In a note today, it said that the protracted saga of the Single Wholesale Network (SWN) and its owner Digital Nasional Bhd (DNB) appears close to a resolution.


It said the new government seemed to rally firmly behind the DNB-led SWN with the emphasis on an expeditious rollout of 5G in preparation for the impending 6G in the coming years, with the review of the rollout by DNB looking heavily to favour the telecommunications companies (telcos) in terms of costs and rollout mechanism.

“We view the prospective earnings of telcos to remain resilient as telecommunications have evolved into a necessity of modern life.

“Inflation is not seen as a major threat in the telco space as seen in the regional markets, in fact subscribers remain robust as digital applications such as short messaging, virtual meeting, electronic cash payment, e-hailing, online shopping, and online food and grocery delivery become entrenched in everyday life as consumers look for ways to reduce costs and time consumption.


“With the introduction of the Unity package and revision of the Mandatory Standard on Access Pricing (MSAP) recently, consumers can enjoy attractive prices for their telecommunication needs and at the same time churn out higher subscription for the telcos based on needs, speed and affordability,” Kenanga said.

The research house noted that its sector top picks are CelcomDigi Bhd and Maxis Bhd.

It likes CelcomDigi because it is the new market leader in the mobile market with a combined market share of 43 per cent on the heels of the merger of Celcom and Digi.

“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 per cent and 90 per cent of the population, while Digi’s 4G and 4G+ are at 95 per cent and 80 per cent, respectively.

“CelcomDigi also has competitive pricing and attractive bundling to attract migrant, domestic customers and the B40 group, superior earnings before interest, taxes, depreciation, and amortisation margins above the industry average of 41 to 42 per cent, while its rollout of 5G will boost subscribers given the absence of Maxis’ presence in this space currently,” it shared.

The research firm is also positive on Maxis, given the telco’s strong branding and customer loyalty, especially in the premium segment.

Maxis enjoys resilient demand for its services as it is ahead of its competitors in terms of putting up new 4G towers, fiberisation of premises and upgrading of existing towers, thus boosting its business to business revenue as both corporates and small and medium enterprises continue to upgrade their digitalisation, it added. ― Bernama