Axiata Group Bhd
(Sept 2, RM5.45)
Maintain buy with an unchanged fair value of RM6.45 per share. The group’s wholly-owned Celcom Axiata Bhd has launched the prepaid Xpax Turbo which offers up to 10GB free Internet Burung Hantu per month from 1am to 7am, as long as customers remain subscribers.

For more Internet quota, Xpax customers can select five Internet plans which offer free Facebook and YouTube ranging from RM5 to RM80.

The plans include a three-day plan at RM5 with 300MB data, weekly plan at RM10 with 1.5GB data, and monthly plan at RM30 for 4GB, RM50 for 9GB and RM80 for 15GB. 

As a comparison, U Mobile’s RM30 unlimited mobile Internet plan offers 2.5GB Internet plus 2.5GB Video-Onz, while Digi Prepaid Live offers an Internet plan at RM28 for 2GB. Maxis’ Hotlink offers a RM30 monthly pass for 2GB plus 2GB YouTube.

For first-half of financial year 2016, Celcom was impacted by revenue contraction from value-added services by 39% and overseas foreign workers by 26% against the backdrop of a 841,000 subscriber drop to 11.2 million.

This stemmed from the prepaid segment which had lost 897,000 subscribers quarter-on-quarter (q-o-q) and 2.2 million since the second quarter of 2014 (2Q14) as Celcom’s information technology (IT) infrastructure revamp delays had prevented the launch of new products as quickly as its competitors. 

In comparison, Maxis lost 61,000 net subscribers q-o-q while Digi gained 10,000 in the same quarter.

Among the three main celco (cellular network services provider) players, Celcom’s subscriber market share has slid to 31%  from 33% in 1QFY16.

With its IT issues now largely resolved, Celcom’s launch of new prepaid packages are milestones to watch out for in the ongoing struggle for mobile market share.

We expect the industry to continue to raise the ante as competition continues to elevate against the backdrop of a matured domestic market and declining voice revenues.

For Axiata, we expect the recent commencement of Nepal-based Ncell Pvt Ltd to mitigate the margin pressures in Malaysia while Celcom’s domestic roaming arrangement with Telekom Malaysia Bhd will enable the group to offer a more converged and unified package to customers.

Axiata currently trades at a bargain FY17 enterprise value per earnings before interest, taxes, depreciation and amortisation of six times, below its two-year average of 8.6 times. Additionally, dividend yields are attractive at 3.8%. — AmInvestment Bank, Sept 2