KUALA LUMPUR: Maxis Bhd, Digi.Com Bhd, Celcom Axiata Bhd, U Mobile Sdn Bhd and YTL Communications Sdn Bhd have a better chance of getting a fair portion of the coveted 700 megahertz (MHz), premised on the rollout of mobile services on 2,600Mhz.
In a research report today, MIDF Research said Maxis and Celcom may bid for one block of 2x5Mhz while Digi and U Mobile may bid for two blocks of 2x5Mhz to compensate for the shortfall in 900Mhz.
Based on the current allocation of 900Mhz, Maxis and Celcom have 2x10Mhz each while Digi and U Mobile have 2x5Mhz each.
MIDF Research said taking cue from the current allocation of 2,600Mhz, a total of eight mobile telecommunication service providers could be bidding for the 700Mhz spectrum.
These include Maxis, Digi, Celcom, U Mobile, Webe, Altel, Redtone and YTL Comm (YES).
Nonetheless, Maxis and Celcom may bid for one block of 2x5Mhz while Digi and U Mobile may bid for two blocks of 2x5Mhz to compensate for the shortfall in 900Mhz.
Assuming that each bidder bids for one or two blocks of the frequency band, Maxis, Digi, Celcom, and YTL Communications have sufficient cash reserve to fund the bidding, MIDF Research said.
From the available payment options, MIDF Research said the first option – of a total spectrum amount of RM215 million with a payment tenure of one year, at an average annual fee of RM215.25 million – would be the most viable.
However, it said there is a possibility that the bidders may also opt for the instalment term.
“This is in view of the annual maintenance fee and more importantly, the capital expenditure (capex) required to efficiently rollout the services on the 700Mhz frequency band.
“Note that the mobile telecommunication service providers may balance between the allocation of the spectrum band and the capex required for the infrastructure.
“Nonetheless, we view that should Digi bid and opt for a lump sum payment for two blocks of the 700Mhz spectrum, it could affect its dividend payment ability, where Digi typically pays 100 per cent of its net earnings,” it said.
Meanwhile, MIDF Research said given that the successful bidders would need to pay a hefty sum for the 700Mhz next year, there is a possibility that the spectrum allocation for much awaited 2,300Mhz and 2,600Mhz could be postpone further.
This would provide more time for the telcos to strengthen their respective financial position.
The Malaysian Communication and Multimedia Commission (MCMC) announced the 700Mhz frequency band available from January 1, 2019, will be assigned via tender.
To participate, telcos will need to submit a five-year detailed business plan based on 2x5Mhz spectrum block.
A total of eight spectrum blocks will be made available and each bidder may only apply up to four spectrum blocks.
MCMC provides several payment options for the bidders with payment terms of up to 15 years which would raise the spectrum cost up to RM417.1 million from RM215.5 million.
In addition, successful bidders have to pay an annual fee of RM18.5 million for each year of the 15 years of spectrum for each of the 2x5Mhz spectrum block.
MIDF Research reiterated its neutral stance for the sector.
“Competition remains intense as mobile players are constantly solidifying its market position.
“On another note, the hefty cost of acquiring and maintaining new spectrum allocation serves as a challenge to local mobile players.
“To seek refuge from the competitive mobile landscape, we advise investor to shift the telecommunication portfolio to fixed line players such as Telekom Malaysia Bhd who control the majority of the fixed line market,” it said.