It said in a research note today that the sharing of network infrastructure would expedite site deployments, allowing population coverage targets to be met more swiftly.
“While U Mobile has yet to unveil its rollout plans, we gather from industry sources that it could potentially deploy 5,000-7,000 5G sites nationwide via the upgrades of existing/brownfield 4G sites and new builds,” it said.
Following the selection, U Mobile’s founding investor and major shareholder, Singapore Technologies Telemedia, which is linked to Temasek, has sold its stake to a local entity controlled by Vincent Tan, U Mobile’s other key shareholder.
U Mobile inked memoranda of understanding in July 2024 with four network infrastructure providers, including Bullish Aim, OCK Group, Edgepoint Towers and Naza Communications to facilitate site deployments.
“We believe a combination of vendor financing, deferred payment option, and debt funding are being explored to fund the network expansion,” it added.
For 2025, the investment bank said it expects nominal mobile service revenue growth as usage and spending propensity may be crimped by the secondary effects of further subsidy rationalisation.
“Coupled with 5G monetisation challenges, mobile average revenue per user may continue to reel under pressure,” it said.
“We see the sustained competition in the fixed broadband (FBB) segment as mobile network operators continue to peddle FBB-mobile packages to drive customer retention,” it said.
Meanwhile, it said the burgeoning demand for data centres (DCs) should continue to benefit fixed integrated telecommunications (telcos).
“We note the completion of Telekom Malaysia Bhd’s (TM) new cable landing station in Morib would allow it to better serve the connectivity needs of new DCs sprouting up in the south of the Klang Valley,” it said.
RHB IB said TM’s ownership of core digital infrastructure assets makes it an indispensable connectivity play.
“We project a respectable financial year (FY) 2024-2026 forecast earnings compound annual growth rate of 11.7% driving return on invested capital expansion.
“We also like Axiata Group Bhd for its earnings recovery and balance sheet deleveraging thesis, helped by macroeconomic tailwinds and continued operational improvements,” it said.
Meanwhile, the investment bank sees CelcomDigi Bhd as a value play, being a key sector laggard.
“Stronger merger synergies in FY2025-2026 should drive a re-rating of the stock,” it said.
According to RHB IB, Malaysian telcos saw a 5% share price return in 2024 (2023: +0.3%), with TM outflanking (+25%) the mobile network operators (-5 to -9%).
Excluding TM, telcos delivered a 2% lower return.
“We see another year of stock picking, noting that regulatory risks (drawn-out 5G policy saga and possible review of access prices by year end) may continue to cast a pall on overall sector outlook (reflected in valuations).
“We maintain a ‘neutral’ rating for the telco sector,” it said.