Maxis Bhd
(Nov 11, RM5.82)
Maintain reduce call with an unchanged target price of RM5.20: Maxis Bhd has upgraded its MaxisONE plans for the second time this year. From Nov 18, all subscribers will get 2.5 times to four times more monthly data quota for the same price, on a permanent basis. Similar to peers, Maxis has split the data quota equally between all-day and weekend (4G only) usage. Still, the all-day data quota is larger than before by 25% to 100%. This is in reaction to Celcom and DiGi’s postpaid plan upgrades in October, which saw them generously hike their monthly data quotas by two times to three times.

The MaxisONE plan upgrades do not come as a total surprise to us. We believe as the Malaysian market moves closer towards network parity, it will be difficult for Maxis to sustain its large price premiums over peers. Post-revision, Maxis’ post-paid plan prices are still more expensive than peers. For example, its MaxisONE 98 plan is priced at RM98 per month for 20Gb, or 22.5% higher than similar data quota plans from Celcom and DiGi. Nevertheless, the price differential has significantly narrowed.

Given the narrower price premium and its still superior 3G/4G mobile network, we believe Maxis will be able to largely defend its post-paid subscription base from here. However, we believe it will see higher-end MaxisONE plan subscribers trade down to the MaxisONE 98 plan as their existing two-year contracts expire over time. With an average post-paid data usage of 3.6Gb per month in the third quarter of 2016 (3Q16) (4G: 4.4Gb per month), the majority of its post-paid subscribers will not need more than 20Gb of monthly data quota, in our view. Maxis has already started to see some post-paid subscribers trade down in 3Q16 (average revenue per user: down 2% quarter-on-quarter) after its earlier MaxisONE plan revisions in May.

Maxis’s total data traffic rose exponentially by about 60% in just the last two quarters, after the first round of MaxisONE data quota upgrades in May. With this latest revision, we expect a further rise in data traffic on Maxis’s network. The consequence of this is that capital expenditure is likely to stay high over the next few years as Maxis adds capacity to both the radio access network and backhaul through fiberisation. — CIMB Research, Nov 10