Kelly Choos 
PETALING JAYA: Is there a possibility that the late June deadline for telecom operators to take a stake in Digital Nasional Bhd (DNB) will be extended to give the parties involved more time to negotiate a deal?
Or will the delay remain as telecom players wait for changes to be made to the existing reference access offer (RAO) dated end of March for the provision of wholesale 5G access services?
“A typical M&A deal is likely to take at least a few months, as it involves an agreed term sheet, the need to undertake due diligence, finalizing the agreements and, subsequently, entering into the agreement. OK.
“In between there is also internal governance for all potential investors such as board meetings and necessary approvals and that is why the end of June deadline seems almost impossible,” an official said. telecommunications.
There is also talk in the industry that the percentages of the sale of DNB’s stake offered to telcos might not be large enough to account for equity.
The government is said to be offering the nine invited players around 7.8% stake each in DNB, which totals 70%. The government will own the remaining 30% in DNB.
However, if a player does not take the stake in DNB, then it will be offered to the remaining investors but up to a maximum of 20% each, the executive said.
Without the changes to the RAO, players are unlikely to make a deal as their concerns are plentiful. Topping the list are high wholesale access prices that will translate into higher prices for consumers.
Telcos are also unwilling to commit to a 10-year access agreement. Their argument is that this is too long a period to stay in a deal for a rapidly changing industry.
More so, the cost of wholesale access over a decade could be around RM8bil per telco depending on each player’s usage patterns.
At this rate, their argument is that it makes more sense for them to build and run their own network instead of renting space from DNB, according to reports.
“Keep in mind that the RM8bil does not include the cost of buying a stake in DNB and the whole transaction, including DNB’s stake, could cost significantly more than building their own networks.
“The question is, does it make economic sense to buy stakes and pay high wholesale 5G access prices and possibly pass the cost on to consumers?” an industry executive asked.
These are some of the questions being asked across the industry as players await a revised ROE and pricing structure for their next move.
“The RAO is an important document and the longer this case drags on, the more uncertainty there will be and it will not bode well for the stock price of telecom operators,” he said.
Mobile players (Celcom Axiata Bhd, Digi.com BhdMaxis Bhd
and U Mobile) had on April 8 said that “the RAO in its current published form will not enable affordable and quality 5G services for the rakyat and businesses in Malaysia, and will hinder the acceleration of 5G services and the penetration in the country”. ‘
DNB reportedly provided verbal information about potential changes to the RAO, but this has yet to be documented.
CGS-CIMB Research in its recent note said “a deadline of late June has been set by the Ministry of Finance but given the complexity of the issues, there is a risk that it may need to be extended, in our view” .
It has an “underweight” rating on the Malaysian telecom sector. This is pending the conclusion of negotiations on the sale of DNB’s stake and the signing of wholesale access agreements.
“We believe that telecom carriers’ share price performance may continue to be lackluster as investors become concerned about potential negative outcomes,” the report said.
In addition, CGS-CIMB said the big three services revenue (Celcom, Digi and Maxis) are expected to grow by low single-digit year-over-year (yoy) growth in 2022, driven by a recovery. of homelessness and migrants/tourists. sales of prepaid SIM cards as Covid-19 declines.
This is partly offset by lower revenues, driven by initiatives led by Prihatin in 2021.
He said competition could also be more stable in 2022, with potentially stronger consumer spending power and the Celcom-Digi merger easing some price pressure.
However, he doesn’t expect a major market repair, as U Mobile will likely want to keep growing its revenue ladder to achieve a sustainable net profit and decent return on equity, while the Big Three may continue to s engage in subscriber acquisition and retention initiatives in a mature country. mobile market.
CGS-CIMB is more optimistic about the revenue growth of the Fixed line business due to structural demand and relatively more favorable competition.
