This article first appeared in The Edge Financial Daily on January 3, 2018 - January 9, 2018

KUALA LUMPUR: Some quarters think that the price war among telecommunication companies (telcos) abated somewhat last year when compared to 2016, but analysts believe otherwise. The competition has been no less intense, they say.

The difference is the gradual shift of the battlefield from pricing to customer experience, MIDF Research analyst Martin Foo told The Edge Financial Daily when contacted.

“Not to say that the industry has been boring last year (2017). Competition is still there, and partly, they have been preparing for this year (2018). To differentiate themselves, telcos’ current key focus is customer experience — their service quality — more than just networks,” he said.

“If we look at the second half [of 2017], the launches or revision of packages were slowing down. Even the latest one that Maxis Bhd did, they were just adding another 10GB to their plan — it was not something like a redesign of the entire package. Even DiGi.Com Bhd’s Infinite Plans have got nothing surprising,” he commented.

Meanwhile, RHB Research analyst Jeffrey Tan predicts that telcos will continue to differentiate and innovate via customer service and lifestyle propositions, to position themselves as their customers’ key digital lifestyle partner.

“The focus will continue to be on wallet share. Competition has remained tight in 2017, although the competitive intensity has moderated somewhat. The industry continues to be impacted by SIM consolidation and the sluggish prepaid market, with telcos striving to more effectively drive mobile Internet take-up and monetisation opportunities,” he said in an email response.

Among the three public-listed mobile network operators (MNOs) in the telco segment, Foo said Maxis would be the relatively stable one in 2018 in terms of financial performance, despite an upcoming change in chief executive officer (CEO).

In early November last year, Maxis announced that its CEO Morten Lundal will be leaving the group upon the expiry of his contract on March 31, 2018.

“As long as they (Maxis) execute their strategy as it is, they will be okay. In terms of improvement, Celcom Axiata Bhd made the most improvement in 2017,” Foo said.

“If you look at the revenue for the third quarter ended Sept 30, 2017 (3QFY17), Maxis and Celcom’s have gone up, only DiGi’s fell. Perhaps because of that, DiGi recently increased their entry point for post-paid: their lowest entry last year was about RM50, but that has been changed to RM58, to defend their average revenue per user (Arpu),” he added.

Over the cumulative nine months ended Sept 30, 2017 (9MFY17), Maxis has maintained its post-paid Arpu at RM102, while DiGi’s post-paid Arpu has slid 4.94% from RM81 to RM77 in the same period. Celcom’s, on the other hand, rose 5% from RM80 to RM84.

While DiGi did not seem to shine in 2017, JF Apex Securities Bhd’s research analyst Lee Cherng Wee said the group is beginning to focus on growing its post-paid segment.

“Having said that, Maxis remained a post-paid stronghold. Consumers know them for having a reliable network. You can see from their number of subscribers that despite DiGi gaining market share in the post-paid segment, Maxis’s subscribers have still increased,” he said.

In 9MFY17, Maxis’ postpaid subscriber base grew by 3.43% to 2.81 million subscribers, while DiGi’s post-paid customers climbed 14.1% to 2.4 million subscribers. In comparison, Celcom appeared to be on the losing end, as its post-paid subscriber base fell 3.28% to 2.86 million subscribers in 9MFY17.

Nevertheless, in his research report dated Dec 4, AmInvestment Bank research analyst Alex Goh said DiGi retained its top spot with the biggest subscriber market share at 36%, ahead of Maxis’ 34%, while Celcom remained in third place at 29%.

“DiGi’s pole position stemmed largely from its strength in the prepaid segment, underpinned by the migrant population. As such, DiGi’s revenue market share is only 29% versus Maxis’ 41% and Celcom’s 30%,” he said.

While there is no disclosed data about U Mobile Sdn Bhd’s subscriber base, JF Apex’s Lee said that the fourth largest mobile network operator in Malaysia is unlikely to initiate a price war in 2018 just for the sake of market share.

“We don’t think there will be a crazy price war like from end-2015 to 2016. Because if any of them start the fire now, it will burn down the whole village (industry). We don’t think anyone would risk that, including U Mobile,” Lee said.

In his note to investors dated Dec 5, CIMB Research analyst Foong Choong Chen also observed that competition among telcos has been stabilising, with some aiming at the higher Arpu segment.

“Post-paid market activity levels picked up between September and November, with several attractive new promos from Celcom and U Mobile, but they were aimed at the higher-Arpu segments. The prepaid market stayed active, with some new headline-grabbing products and plan enhancements and tweaks. However, competition did not substantially intensify,” Foong said.

JF Apex’s Lee, meanwhile, said his top pick for the overall telco sector for 2018 would be Telekom Malaysia Bhd (TM), due to its dominant position in the broadband market.

“They are relatively stable because their exposure to price war is not high, plus there will be population growth and existing customers might upgrade their packages — these could be TM’s growth driver,” he said.

MIDF’s Foo concurred, as he noticed that TM’s marketing campaign has been more aggressive since the change in leadership.

RHB’s Tan, on the other hand, said 2018 will be a year of execution for TM.

“Brand consolidation is almost done (webe to be fully rebranded as UniFi Mobile by the first quarter of 2018 [1Q18]) and its network coverage should be on a par with peers. They will look to accelerate their convergence or bundling aspirations via a single brand (UniFi) and step up the enterprise business (TM One),” he said.