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All telcos post positive earnings for March reporting quarter, says RHB Research

RHB Research sees fixed-line operators, such as Telekom Malaysia Bhd, sustaining their earnings momentum on structural demand and policy initiatives.

KUALA LUMPUR: All telcos within RHB Research's coverage, including an infrastructure services company, delivered in-line core earnings for the March reporting quarter except for mild earnings from Digi.Com Bhd.

The firm said aggregate sector earnings improved by 2.8 per cent year-on-year (YoY) in the first quarter ended March 31, 2022 (Q1 FY22), with fixed-line earnings outdoing its mobile peers again, at +5.3 per cent versus +1.5 per cent.

RHB said aggregate FY22 sector core earnings are estimated to decline by nine per cent (FY21: +12 per cent) due mainly to Cukai Makmur – but should rebound by about 16 per cent in FY23.

"We see fixed-line operators sustaining their earnings momentum on structural demand and policy initiatives.

"Telekom Malaysia Bhd's Q1 FY22 core earnings grew three per cent YoY (including an RM105 million voluntary separation scheme cost), while Time dotCom Bhd's core earnings rose 16.1 per cent YoY.

"Aggregate fixed-line earnings before interest, taxes, depreciation and amortisation (Ebitda) was steady, with good cost discipline and opex (operating expenditure) restraint," it said in a note.

Meanwhile, on 5G, RHB said that after over two months since the government's decision to retain the single wholesale network (SWN) and the publication of the reference access offer document by Digital Nasional Bhd (DNB), there is still no certainty that the Big-4 telcos would ink 5G wholesale agreements or acquire individual stakes in DNB by the stipulated end-June deadline.

"Key areas of discontent are the prohibitive wholesale pricing structure (10-year agreement), the ability to 'influence' decision-making and justify their investments without a majority stake in DNB.

"At its Q1 FY22 results call, Axiata Group Bhd said it should be able to meet the deadline.

"It is also uncertain if the government would relent on the proposal by the telcos for majority control of DNB, with the Communications and Multimedia Minister saying that the matter has yet to be decided upon.

"The stalemate on the SWN continues to be a key sector overhang, with Malaysian telcos being the worst performers among the Asean-4 telcos year-to-date," it said.

RHB has maintained its 'Neutral' call on the telecommunications sector.


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