The long-term collaboration between Axiata Group Bhd and DiGi.Com Bhd is expected to be the first of more network sharing agreements, according to analysts.
“This kind of partnership will have implications for the long-term. Although competition has intensified in the sector, the players are slowly starting to recognise the benefits of collaborating on each other’s infrastructure. Not only does it lessen operating expenditure, it also allows a faster time to market, which is crucial,” says an industry observer.
According to reports, the tie-up between Axiata’s Celcom and DiGi would result in cash savings of over RM2.2 billion in the next 10 years. This finalisation of the agreement, from when the memorandum of understanding was first signed in October, put to rest fears that the deal would fall through with both telcos not being able to agree on the terms.
Under the agreement, both parties will collaborate on sites, access transmission, aggregate transmission and trunk fibre transmission. By 2015, the number of sites for consolidation and upgrading would increase to 4,000.
“Incremental savings are expected as early as 2012, which will gradually ramp up to an average annual combined savings of RM150 million to RM250 million after 2015,” said OSK Research.
Both Axiata and DiGi have seen their share prices perform favourably this week.
Axiata started the week on a high, closing at its 32-month high of RM4.92 on Monday, according to data services.
It closed at RM4.89 on Wednesday. The majority of analysts have a “buy” call on Axiata, with target prices ranging from RM5.20 to RM6.25.
DiGi’s share price started out the week at RM25.30 and then subsequently rose 1.1% to close at RM25.58 on Wednesday.
Analyst views on the country’s third largest telco are decidedly mixed, with an equal number of “hold” and “buy” calls on the counter, with fair values ranging from RM26.35 to RM27.50.
While most analysts are expecting this deal to have a bigger impact on DiGi, most still await the company’s fourth quarter results that are due in the coming weeks.
“We estimate savings of RM50 million to RM130 million between 2012 and 2015, or 5% to 13% of the combined net profit of Celcom and DiGi. We believe the savings in terms of opex would be more apparent for DiGi given that network cost constitutes 12% of DiGi’s revenue versus 10% for Celcom,” said OSK.
However, the implications from the tie-up go beyond just the savings in numbers. Already Maxis Bhd has signed an agreement with Telekom (M) Bhd to lease some of its high-speed broadband network.
For Axiata, the company has not turned down the notion of more co-investments in backhaul and then outsourcing its network maintenance function in the longer term, according to OSK.
“A directional trend for the group would be the sharing of towers, which has been successfully executed by 65.6%-owned XL Axiata,” said OSK.
Ultimately, it could translate into better service for customers as more opt for data heavy services given the increase proliferation of smartphones and other devices. The big three telcos as well as the other players have been relentless in their pursuit for spectrum as the traffic starts to pick up.
“The last allocation for spectrum by the Malaysian Communications and Multimedia Commission (MCMC) was back in October and that was for the 2600 MHz band, or better known as 4G. Other than that, there is still other spectrum, which has yet to be decided how it will be parcelled out,” says an industry player.
DiGi submitted a detailed business plan to MCMC in early January on its 2600 MHz application.
Other companies that had received the spectrum included Celcom, Maxis, U-Mobile, YTL, Packet One, Asiaspace, Redtone and privately held Puncak Semangat.
At the moment, companies such as P1, which is under listed Green Packet Bhd, are still testing the waters in regards to the spectrum.
It is becoming clear that partnerships between the telcos are becoming more frequent. The question now becomes, who will be the next to team up? - by Nadia S Hassan, theedgemalaysia.com
No comments:
Post a Comment