Local telcos show solid results for 2Q

The stricter movement restrictions in place could have affected channel activities since May 2021


LOCAL telecommunication companies (telcos) have been showing decent results for the second quarter of 2021 (2Q21) despite expected pressure on earnings due to the stricter movement restrictions being in place and thus possibly affecting channel activities since May 2021.

Maybank Investment Bank Bhd research analyst Tan Chi Wei noted that Digi.Com Bhd and Maxis Bhd have reported decent results for the quarter and it’s likely Celcom Axiata Bhd via Axiata Group Bhd will follow suit.

“We prefer Axiata, which is rated ‘Buy’ among the mobile telcos, with a current price of RM3.71 and target price (TP) of RM4.40.

“Our overall sector pick is Telekom Malaysia Bhd, also rated ‘Buy’ with a current price of RM5.95 and TP of RM7.40,” he said in a note yesterday.

He said the stricter movement restrictions in place could have affected channel activities since May 2021, while concerns have emerged over possible earnings pressure for 2Q21.

“So far, both Digi and Maxis have reported decent results for 2Q21, underpinned by healthy postpaid subscriber momentum on the back of strong take-up for their respective Prihatin plans and bundles.

“We expect Celcom (through Axiata) to follow suit, which is tentatively scheduled to report 2Q21 earnings on Aug 27,” he said.

The Prihatin plans, called the Jaringan Prihatin programme, was launched in May 2021 to assist

the bottom 40% segment, comprising 8.4 million eligible individuals to bridge the digital divide present in the country.

Eligible subscribers would be required to register with their telco of choice to claim between RM180 of bill rebates or RM300 of device rebate, initially slated to end in July 2021 but was subsequently extended to August 2021.

Among the mobile telcos’ contribution to the programme involves offering a complimentary 2GB per day quota to eligible subscribers for 12 months, while having the flexibility of deciding which plans to be made eligible for the subsidy.

The programme aided in boosting adoption of telcos’ apps.

Tan added there was no notable increase in bad debt provisions for both Maxis and Digi in 2Q21.

“In our view, with the strict movement restrictions having only started in May 2021, 2Q21 has probably ended too early for any bad debt issues to manifest.

“With Covid-19 cases still high and movement restrictions still in place today, we believe it is premature to dismiss the possibility of bad debt provisions flaring up in 3Q21,” he said.