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Telecommunications Industry Results In Line With Expectations
Malaysia Perspective | 26 September 2012

By Cecilia Kong

The second quarterly performance of the telecommunications industry as a whole, including major players like Maxis, DiGi and Celcom, are in line with what brokers were expecting. What surprised everyone was the success that smaller players like U Mobile had in signing up more subscribers.

In its report, brokerage Affin Investment Bank pointed out that the turnover of the telecommunications industry as a whole slipped 0.2% in the second quarter of 2012 quarter-on-quarter, while net profit also tumbled 6.2% quarter-on-quarter.

“The slowdown in turnover was due mainly to a decline in Maxis’ mobile phone sales (falling by RM 66 million in Q2). On the other hand, turnover in DiGi and Celcom were up 0.7% and 0.6% respectively.”

After discounting Maxis’ one-time assets write-off during the second quarter, net profit of the telecommunications industry as a whole rose 2.7% on a quarterly basis. Affin Investment Bank said, “Apart from the one-time write-off, there weren’t any particularly alarming developments in the industry during the second quarter, and the results were also consistent with what Affin Investment Bank and other brokerages expected.”

From an operational perspective, the telecommunications industry signed up a total of 1.4 million new subscribers during the second quarter, which is a record take-up rate since the last quarter of 2010. This also means that Malaysia’s overall mobile phone penetration rate rose from 128.7% in Q1’12 to 133.3%, which translates to a total of 38.4 million mobile phones in circulation in the Malaysian market.

Affin Investment Bank pointed out that what surprised everyone was the biggest beneficiaries of this increase in subscribers were not the big three telcos; instead they were the smaller market players. “Our guess is they are U Mobile and other mobile virtual network operators (MVNO).”

These smaller telcos had successfully secured 968,000 new subscribers in total, while DiGi took second position with 293,000 new sign-ups.

“More importantly, among the big three telcos, the market shares of DiGi and Celcom both increased by 0.3%, and they are definitely eating into Maxis’ market share.”

Despite the fierce competition within the industry, the average revenue per user (ARPU) of the telecommunications industry remains stable, demonstrating that certain sectors of the market demand are still positive.

“Non-voice turnover continued to offset the decline in ARPU. After discounting mobile phone sales (in which Maxis recorded a significant decline), the proportion of non-voice turnover rose to 43.6%, compared to 41.1% in Q1. This can be attributed to an increase in the market penetration of smartphones.”

Affin Investment Bank believes that the telecommunications industry will continue to outperform the market as a whole, because of its stronger-than-market defensive position and dividend yield. “We believe that the valuation of the telecommunications industry will remain high, even rising beyond our basic target prices.”

Affin Investment Bank gave the overall telecommunications industry an “Outperform” investment rating.

Source: Affin Investment Bank.

Source: Affin Investment Bank.

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