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2009-07-08

Broadband excitement

Broadband excitement
  1. Excitement over wireless broadband, sparked by the launch of Digi’s maiden 3G services and Maxis’ iPhone plans.
  2. Competition in the voice segment is more subdued.
  3. TM is our top pick for committed 7% net dividend yield.
Digi launched 3G services. Its three plans are priced at RM58-188 a month without modems (which can be purchased separately). There is no commitment for the broadband services. Digi will focus on improving service quality, not growing subscriber base. This is the right strategy to build consumer confidence in Digi, and thus draw more customers.

Maxis’ iPhone 3G plan. We estimate that its low commitment voice plan of RM100/month is more attractive because the free minutes that come with it are for domestic calls only. IDD and international roaming as well as (basic) SMS are additional. However, the low-commitment plan creates a high
barrier because users have to pay RM1.5k-RM2.3k to purchase the handset.

Celcom is trying not to lose out by focusing on the Blackberry Storm, which we think is more of a business tool compared to the iPhone. It is the right move by Celcom to focus on the business/corporate segment instead of competing head-on with Digi and Maxis.

New prepaid plans are unattractive. Maxis’ new plans appear cheaper but it charges on larger blocks of 60-second vs. 30-seconds previously. Meanwhile, Celcom’s fine print states that other than the 15 regularly called numbers (at 12sen/minute), charges are very expensive (at 180-510 sen/minute),

Dividend (defensive) play. TM is our preferred pick in the Malaysian telco sector for its committed 20sen/share DPS or 7% net yield. Catalyst for rerating TM includes significant contracts for its HSBB. We also like Digi for its 5% dividend yield and strong
management, but we are concerned about the risk of Axiata’s net gearing rising again in view of its appetite for M&A.

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