Maxis not impacted by India’s Aircel’s fallout

Soft sentiment in the overall telco industry will be the main threat to Maxis’ share price, says an analyst


Aircel Ltd business fallout and bankruptcy filing in India had not shaken sentiments in billionaire Tan Sri T Ananda Krishnan’s another telecommunication (telco) business, Maxis Bhd.

News of Aircel filing for protection from creditors has reverberated concerns whether the business failure will impact sentiments in Ananda’s other businesses, especially in Malaysia.

Maxis, which recently recorded the highest after tax profit in four years for its 2017 financials, saw its share price only dropping one sen to RM5.90 yesterday despite reaching a day’s low of RM5.79.

Maxis, which is majorityowned by the billionaire, still has a market value of RM46.08 billion.

Ananda who owned 70% of Aircel stake, filed for bankruptcy protection.

An industry source said Maxis share price is not expected to experience immediate sharp declines as institutional fund managers are not likely to react to news like retail investors.

“If it does come around, the downward trend on the telco giant’s share price would likely trickle downward over the next few days.

“General market movement would also be the main factor to drive the share price down. However, the Aircel scandal is not the sole contributor for any downward revision,” the analyst told The Malaysian Reserve (TMR).

The analyst said perception would be largely impacted as both Maxis and Aircel have a common shareholder.

But, the analyst said the soft sentiment in the overall telco industry would be the main threat to Maxis’ share price.

Bloomberg’s report suggested that Ananda was poised to lose a total of about US$7 billion (RM28 billion) from the Aircel business fallout, citing people familiar with the matter.

The analyst said the telco industry has been subjected to slower growth year-on-year (YoY) mainly on the average subscriber expenditure, declining subscription-based metrics and lack of transparency in the actual active subscriber numbers.

“Consumers are also burdened with additional levy on the new spectrum’s, which is further draining their cashflow,” the source said.

However, Maxis has remained resilient in recording an above average annual growth despite the overall soft market sentiment and challenging operating environment.

“This would be an impetuous for Maxis to continue sustaining positive momentum moving forward,” the analyst said.

TMR recently reported that the telco and Internet service provider posted a 10.7% YoY jump in net profit to RM559 million for the fourth quarter ended Dec 31, 2017, as higher contribution from the postpaid business and cost-cutting measures held up margins.