Maxis expects to see reduced earnings ahead


Maxis Bhd is expected to see a reduction in earnings in its third-quarter (3Q) results due to the loss of U Mobile Sdn Bhd’s roaming revenue, which contributed an annual revenue of RM300 million previously.

Mobile operator U Mobile will be terminating Maxis’ 3G radio access network (RAN) arrangement over an 18-month period, which will be ending on Dec 27, 2018.

In a research statement yesterday, AmBank Research reduced Maxis’ financial year 2019 forecast (FY19F) to FY20F earnings by 4% on expectation of a more significant impact from the loss of U Mobile’s roaming revenue.

“Our new FY19F to FY20F are now 10% to 14% below consensus. However, the impact has been minimal over the past four quarters since Maxis’ announcement in June last year as U Mobile was fully utilising the RAN arrangement up to 2QFY18,” it stated.

AmBank Research added that the impact would be more noticeable in 3QFY18 and increasingly substantive in 4QFY19, where Maxis is hoping to mitigate the full FY19F impact by expanding its home-fibre business and fixed-enterprise solutions, which rely on Telekom Malaysia Bhd’s high-speed broadband network.

“Even if the group could ramp up revenue from the home-fibre and fixed-enterprise segments, we do not expect the lower margin from these operations to be able to offset the immediately loss in the RAN roaming revenue.

“Additionally, these margins are being squeezed even more as fixed-broadband prices have been cut against the backdrop of the government’s agenda to ‘double the speed at half the price’,” it stated.

The research outfit expects Maxis’ mobile revenue growth trajectory to remain flat given the intense price war waged by its peers.

Maxis has lowered its fibre-broadband prices for both consumers and businesses by 36% to 65% in September, while offering speeds of up to 100Mbps under the new packages.

“Maxis is offering these new deals even though the Mandatory Standard on Access Pricing structure, which will reduce wholesale fibre prices for third-party operators, has yet to be finalised.

“We expect higher downtrading activities as customers opt for the lower-priced packages at higher speeds amid an increasingly competitive fixed-broadband market,” it stated.