Research houses maintain “neutral” call on telco sector

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KENANGA Research has maintained a neutral view on the telecommunication sector as the necessity of 5G in the National Digital Infrastructure (JENDELA) initiative in the country might not be urgent at the moment.

In a note today, Kenanga said building a stronger backbone would enhance the national 5G preparedness and enable a more seamless adoption.

“As network capabilities become more all-encompassing, it is possible that we could see greater converged offerings in the future.

“For the time being, the industry is challenged by affordability being a pressing concern for consumers and loss of customers, namely enterprises, which could be a result of slowing economic activity,” it said.

Telekom Malaysia (TM) remains Kenanga’s favourite pick for the sector, as the fixed-line/broadband space stands on firmer ground against heavy price competition in the mobile space.

“TM could play a meaningful role in the eventual deployment of the 5G network on the back of its extensive fibre network to support its backhaul,” it said.

Meanwhile, CGS-CIMB Research also reiterates its neutral rating on local telcos as it sees weak data monetisation and revenue growth prospects for mobile operators in FY20-21F.

“Further cuts to Mandatory Standard on Access Pricing (MSAP) wholesale rates may be unlikely, as the Malaysian Communications and Multimedia Commission’s (MCMC) is happy with the current affordability of fibre broadband services.

“We believe MCMC’s pragmatic approach in JENDELA is positive for Malaysians telcos,” it said.