Appointment of new directors to DNB board brings Malaysia one step closer to second 5G network

NST Fri, Apr 26, 2024 11:57am - 2 months View Original

KUALA LUMPUR: The appointment of new directors to the board of Digital Nasional Bhd (DNB) brings Malaysia one step closer to having a second 5G network.

RHB research in a note today said the appointment of nominees from the five Mobile Network Operators (MNO) is part of the ongoing process of the recapitalisation of DNB.

In December 2024, five MNOs inked conditional share subscription agreements to acquire a combined 70 per cent in the entity.

One of the conditions of the deal is for it to be completed 20 business days following a board meeting to be convened.

The equity injection is a pre-requisite for a second 5G network.

The regulator would also need to revoke the Ministerial Direction issued in 2021 which grants 5G spectrum exclusivity to DNB.
In our view, Maxis remains a frontrunner for the second consortium, with the telco affirming its readiness to build a second network. We believe it could work alongside a consortium partner with significant backhaul connectivity to defray the cost of rollout," RHB research said.

Meanwhile, the firm said industry mobile service revenue (MSR) growth is expected to remain subdued in the second half of 2024 (2H24) with monetisation of 5G impeded by large 4G data quotas and the dearth of retail use cases.

"Overall industry MSR is projected to grow by 1-3 per cent in 2024 (2023: +1.3 per cent), driven by prepaid-to-postpaid conversion and fixed-mobile bundled services, " it said.

The note said 5G wholesale chargers are set to increase this year from higher traffic.

It said mobile operators incurred minimal 5G wholesale charges last year but higher traffic will push charges higher this year.

The overall quantum should however still be below the mandated charges under the initial wholesale agreements inked which is RM288-RM360 million per annum for a base capacity of between 800 and 1200 gigabit per second.

The firm said structural drivers such as cloud services, enterprise digitalisation and managed services will fuel the growth of fixed line and telco infrastructure-centric players.

RHB research believes the evolving 5G developments could present some trading opportunities, with Axiata Group Bhd as a tactical exposure with balance sheet repair as the key thesis.

"We also like OCK Group Bhd as a mid-cap proxy to 5G network expansion and and exposure to digitalisation projects.

RHB research has a "Neutral" call on the telecommunications sector.

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