KUALA LUMPUR (March 10): CGS-CIMB Securities said that the fixed-to-mobile segment for the telecommunication (telco) industry has better revenue growth prospects, more benign competition and better valuation. 

The research house observed that during the period from December 2022 to February 2023, competition has tightened for the low-end postpaid segment while the prepaid segment remained competitive in the industry. 

In a sector note on Thursday (March 9), CGS-CIMB said it downgraded the telco sector to “neutral” with upside risk being more favorable 5G policy changes and downside risk being more intense competition.

“Mobile network operators (MNOs) raised quotas on low-end postpaid plans but removed rebates on most mid-to higher-end offers. Prepaid promotions were largely extended,” it said. 

For the fourth quarter of 2022 (4Q22), CGS-CIMB saw that the industry’s mobile revenue rose 0.9% quarter-on-quarter (q-o-q) and rose 2.4% year-on-year (y-o-y) due to progressive recovery in roaming revenue and the return of some tourists and foreign workers. 

“Maxis gained further revenue market share (RMS), up 0.2% point q-o-q to 39.5% at the expense of Celcom, while Digi’s RMS was flat q-o-q at 29.3%,” it pointed out. 

Also in 4Q22, CGS-CIMB said fixed revenue slid 6% q-o-q. It said Telekom Malaysia’s revenue slid 5.5% y-o-y and slid 5.7% q-o-q due to a fall in lumpy submarine cable capacity sales, international voice and ICT revenue.

In terms of share prices, the research house said MNOs’ share prices were up 21% to 38% since their lows in mid-2022, which it said fairly reflected the more favourable 5G developments and the industry’s future growth outlook.