The investment bank reiterated that a second 5G network by Entity B would likely be superior, cheaper, have more compatibility and seamless, leading to a faster rollout and go-to-market strategy.
"Besides 5G, we expect exponential fibre demand will be coming from the booming data centre industry over the next three years. The impact of the new Mandatory Standard on Access Pricing (MSAP) price revision is expected to be mild and likely to be offset by ever-increasing consumption," it said in a research note today.
However, HLIB opined that telecommunications (telco) dividend yields are not attractive enough relative to the risk-free interest rate to spur domestic and foreign interests.
It said fibre's role as backhaul to transfer data at the speed of light has become ever more critical and a mandatory prerequisite in broadband/5G builds.
"Demand spike will not only be in terms of capacity but also coverage in order to compensate for 5G spectra (especially millimetre wave) shortcoming in propagation," it said.
HLIB said exponential fibre demand is expected to come from Malaysia's booming data centre industry, especially in the southern region, over the next three years, and a surge in wholesale bandwidth demand willboost margins even under the MSAP regime.
"New fibre rollouts were commercially negotiated (price not regulated), and fixed telcos would command more lucrative returns.
"We are not overly concerned about the new MSAP price revision. The impact is not as severe as the previous 'double the speed, half the price' objective and is expected to be offset by the ever-increasing consumption over time," it added.
HLIB expects the US dollar to be stronger in 2024, averaging RM4.74 per US dollar, up from the previous RM4.44 per US dollar, compared to 2023's average of RM4.56 per US dollar.
"This may lead to higher international direct dialling (IDD) traffic costs and foreign debt financing. Time dotCom's global bandwidth sale and leasing proceeds will be higher as the majority are US dollar dominated," it added.
On another note, HLIB said business as usual as the big three telcos remain disciplined and cost-focused.
"With the amalgamation of Celcom and Digi, we expect healthier market rivalry with lesser price undercutting for market share gain while pre-to-postpaid migration continues to be motivated by voice-to-data substitution," it added.
HLIB's top pick remained Telekom Malaysia (TM) with a "buy" call on the back of a higher discounted cashflow-derived target price to RM7.91 from RM7.21.
"We are particularly positive on its cost optimization measures which are now yielding an impactful outcome. Leveraging on its extensive fibre reach, TM is perceived to be the critical fundamental building block of national 5G DWN and data centre deployments," it said.
Furthermore, HLIB noted that TM is well positioned as the sole Malaysian Cloud Service Provider when sovereignty is of the utmost importance in dealing with the government's data.
-- BERNAMA
