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Monday, 17 July 2017 | MYT 8:20 PM

Celcos remain resilient amid introduction of spectrum assignment fees

KUALA LUMPUR:  The financials of Malaysian cellular companies (celcos) have remained resilient as the debt-to-operating profit before depreciation, interest, and taxes (OPBDIT) ratios of all incumbent celcos rose to 1.81 times from 1.53 times recorded last year.

In a statement, RAM Ratings Services Bhd said this was despite the introduction of spectrum assignment fees for 900 megahertz (MHz) and 1800MHz bands last year.

RAM’s co-head of infrastructure and utilities ratings, Davinder Kaur Gill, said in a maturing and slower growth environment, the leverage indicators of incumbent celcos were expected to gradually deteriorate, depending on factors such as intensity of competition in the industry and the magnitude of any larger-than-expected capital expenditure, in addition to impending spectrum fees.

The rating agency also expected a mild contraction in the mobile industry’s revenue growth in 2017 while profitability and margins were anticipated to stay flattish.

Meanwhile, the fixed-broadband space continues to hold prospects for growth given the ongoing roll-out of the high-speed broadband2 (HSBB2) and suburban broadband (SUBB) projects.

“Although we observed a slowdown in the growth trajectory of Telekom Malaysia Bhd’s fixed-broadband base, which stayed flat year-on- year in 2016 and first quarter of 2017, substitutions of the lower-speed Streamyx for UniFi remained encouraging,” Davinder added.

From a regional perspective, Malaysian celcos continue to fare well against leading regional peers. 

Despite stiff competition, the profitability of incumbents remains superior to that of players in neighbouring countries the Malaysian average industry OPBDIT margin of 44.3% is among the highest in the region.

“While incumbents have resorted to trimming costs via digitalisation and other cost optimisation means to weather tough times, cost management strategies may, in our view, be limited and fully exhausted over a longer period,” she said. - Bernama