Published: Monday June 18, 2012 MYT 10:27:00 AM
Telekom Malaysia remains as top pick for CIMB Research
KUALA LUMPUR: CIMB Research remains Neutral on the mobile telecommunications sector, and said it rmained cautious on DiGi.Com Bhd given that the migrant market contributes to a hefty 20% of its revenue. Maxis has said it will not let up until it captures its fair share of the market.
"Telekom Malaysia is our top pick as it is largely spared from the tussle in the mobile space," said CIMB Research.
The research unit pointed out that DiGi cut its IDD rates in mid-April including that to the key migrant countries by up to 77%, but left SMS rates to these destinations unchanged. However, its rates are still higher than that of Maxis for calls to China, Indonesia, Myanmar and Nepal.
CIMB Research opined that Maxis's rate cut earlier this year is beginning to bite into DiGi's market, and the latter had to respond to protect its share.
"DiGi had earlier brushed off Maxis's threat by saying that there is no need to respond. We believe Maxis will continue to aggressively address the large and growing migrant market as part of its strategy to recoup the slide in voice market share. This market contributes to an estimated 5% of Maxis's revenue."
CIMB Research said in its view, there could be a small impact on Celcom, as the IDD segment contributes to about 9% of its revenue.
"We believe there is still some price elasticity left in this price-sensitive migrant market, and the price cut will spur greater usage. But margins will be squeezed." CIMB Research said it continued to avoid DiGi (Underperform) given that the IDD segment, which contributes to a hefty 20% of its revenue, is vulnerable to competition.
Maxis remained a Neutral, thanks to its attractive dividend yields.
Telekom is largely unaffected by the price war in the IDD space and remains as CIMB Research's top pick given its strong growth.