KUALA LUMPUR: Kenanga Investment Bank Bhd (Kenanga IB) expects the government to announce the 5G dual network policy directive in the second quarter (Q2) of this year.

In a note today, the research house said this announcement is expected to clarify the final equity stakes for each telecommunication company (telco) in either entity A or B.

“To recap, these entities will be established as part of Malaysia's transition from the 5G single wholesale network model to the dual network model,” it said.

Kenanga IB said that entity A would assume control of the existing first 5G network owned by Digital Nasional Bhd (DNB), while entity B would develop the new second 5G network.

“In December 2023, major telco players like CelcomDigi, Maxis, Telekom Malaysia, YTL Power and U Mobile have entered into conditional share subscription agreements (SSAs) with the Ministry of Finance and DNB.

“The SSAs are targeted for completion by April 2024, which will result in the telcos collectively owning a 70% stake in DNB,” it said.

Meanwhile, Kenanga IB anticipated that 5G monetisation would provide support to weak average revenue per user (Arpu) trends.

“Moving forward, given that mobile service providers are now required to pay 5G access charges, we believe they are exploring ways to monetise 5G.

“To recap, 5G access seekers are required to pay a target capacity payment of RM288 million annually, and RM360 million annually in the case of Maxis to DNB,” it said.

Conversely, Kenanga IB said, regulatory requirements would inhibit telcos from imposing additional access charges for 5G services.

“Hence, mobile players have tweaked their 5G plans to derive higher Arpu from high-net-worth retail customers with strong spending capacity.

“We are optimistic about Arpu recovery or at least stable Arpu in 2024, following a weak showing in 2023, particularly in the postpaid segment, which largely caters to affluent customers capable of affording higher Arpu,” it said.

Kenangan IB posited that investors were less wary of 5G as monetisation opportunities from enterprise and high-net-worth clients loom on the horizon.

“Moreover, investors are optimistic that earnings and dividends for telco players will remain intact given a milder and more accommodative regulatory environment,” it said.

The research house maintained an “overweight” recommendation on the telecommunication sector with their top picks being Telekom Malaysia and CelcomDigi. – Bernama

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