In a note today, CIMB Securities said it believed CelcomDigi Bhd (CDB), Maxis Bhd, and U Mobile Sdn Bhd were the final contenders.
“As the companies submitted standalone applications (given the tight one-month deadline), we expect MCMC to announce a sole winner.
“However, soon thereafter, we expect the winning company to enter into equity partnerships, or long-term lessor-lessee arrangements, with other companies,” it said.
It said this would enable the winning company to share the cost of rolling out the second 5G network, and that this aligned with its belief that the government aimed for Digital Nasional Bhd and Entity B to handle roughly equal portions of 5G traffic.
“At present, our base case is that Maxis would emerge as the winner, as we theorise the government may want a government-linked company, namely CDB, to lead DNB,” it said.
CIMB Securities said a knee-jerk reaction in share prices might appear following MCMC’s announcement, with the winning company’s share price rising and the losing companies possibly seeing the reverse.
“The second 5G network is expected to have better quality of service than DNB, as the roll-out will be largely mapped to the winning company’s existing network grid, allowing for more seamless handovers when subscribers move between 2G/4G/5G networks.
“In addition, investors may also see the winner as having a cost advantage over telcos that stay on with DNB,” it said.
CIMB Securities believes DNB has room to rationalise costs and may receive either wholesale fees from Entity B or government grants/tax incentives to lease part of its network in more rural areas.
It said the upcoming announcement from MCMC would mark the end of the single wholesale network saga and remove regulatory uncertainties that had plagued the sector over the past three years.
“We expect the finance ministry and exiting companies to sell their stakes in DNB to those that stay on, with DNB redeeming the ministry’s special share 24 months after that.
“This will see DNB and Entity B function as network-sharing vehicles that are fully commercially run and owned by the telcos,” it said.
Overall, CIMB Securities maintained its “overweight” call on the telecommunications sector with CDB and Maxis as top picks.