Maxis revenue to stay flat on U Mobile RAN termination


MAXIS Bhd’s earnings for the fourth quarter ending Dec 31, 2019 (4Q19), are expected to be flattish, as it continues to be affected by the cessation of its 3G radio access network (RAN) lease agreement with U Mobile Sdn Bhd in June.

The telecommunications company’s (telco) net profit fell 30.2% to RM358 million in 3Q19 from RM513 million in the previous corresponding quarter, it said in a statement last Friday.

This was driven by the loss of a wholesale agreement and an increase in investment for growth in enterprise, fibre, and customer experience.

Revenue for the quarter was slightly higher at RM2.28 billion, from RM2.26 billion in 3Q18.

A third interim dividend of five sen was declared, due payable on Dec 27, 2019.

AmInvestment Bank Bhd maintained its ‘Hold’ recommendation on the telco, with a target price of RM5.50.

“As U Mobile contributed revenue of RM20 million in 3Q19 and RM122 million in the nine months ended Sept 30, 2019. Maxis is likely to continue to experience flattish 4Q19 revenue as the wholesale arrangement lapsed in June this year against management guiding for a mid-single-digit normalised decline in 2019 earnings before interest, tax, depreciation and amortisation (Ebitda),” it wrote in a recent note.

Maxis and U Mobile entered into the network sharing and alliance agreement on Oct 21, 2011, enabling U Mobile to offer voice and data services to its subscribers via Maxis’ network.

The RAN share with Maxis infrastructure deal, which was supposed to last for 10 years, was initially slated to end by December 2018.

However, both operators agreed to extend the network sharing agreement by another three months for Peninsular Malaysia and by six months for Sabah and Sarawak.

In May this year, Maxis CEO Gokhan Ogut was reported as saying the group’s Ebitda would see a single-digit decline, but the overall performance would remain solid following the conclusion of the agreement.

“The impact (of the RAN share exit) would be mitigated in stages by the performance of our core segments, which are postpaid and prepaid, as well as the growth of convergence or fibre,” he said.

AmInvest said Maxis’ 3Q19 normalised net profit slid by 8% quarter-on-quarter (QoQ) to RM361 million also due to lower contribution from U Mobile’s wholesale arrangement and higher traffic costs.

“QoQ, Maxis’ overall subscribers rose by 141,000 as the 143,000 increase in postpaid users to 3.6 million was partly offset by a 2,000 decrease in the prepaid segment to 7.5 million.

“This overall trend appears to be steady, as the group’s subscriber base has increased by 234,000 yearon-year,” the research house said.

Maxis HomeFibre’s recent bundling arrangement with Astro Malaysia Holdings Bhd’s RM99 Family Pack+30Mbps fibre plan is likely to sustain the segment’s growing subscriber base, AmInvest added.

In a statement last Friday, Ogut said the telco is “already forging ahead” in 5G readiness, and is committed to deploying as soon as the spectrum is made available.

Malaysia’s 5G spectrum will be made commercially available through telcos in the second-half of 2020, Malaysian Communications and Multimedia Commission chairman Al-Ishsal Ishak said last month.

Shares of Maxis closed 1.09% lower at RM5.44 last Friday, valuing the company at RM42.54 billion.