KUALA LUMPUR (Sept 25): Maxis Bhd (KL:MAXIS) will likely lead the second 5G network when the government announces who will win the right to develop the second 5G network, CIMB Securities said on Wednesday.

Regulators may want government-linked CelcomDigi Bhd (KL:CDB) to lead the first network under Digital Nasional Bhd (DNB), the research house said in a note. A partnership between CelcomDigi and YTL Communications Bhd may be a “good counterweight” to Maxis and U Mobile Sdn Bhd, it noted.

CelcomDigi could still win the tender with Maxis, U Mobile, and YTL Communications staying put at DNB, CIMB Securities flagged. “Other permutations may be too lopsided,” it said.

The impending announcement by the Malaysian Communications and Multimedia Commission (MCMC) is expected to clear up uncertainty in the telecommunication sector that has dragged on investors sentiment.

By then, investors will know the final equity stake for each telco in entity A, which will assume control of the existing 5G network owned by DNB, or entity B that will develop the new 5G network from the ground up.

“We believe CelcomDigi, Maxis and U Mobile are the final contenders,” CIMB Securities said.

Telekom Malaysia Bhd (KL:TM) has also submitted its application but may have been disqualified following termination of share subscription agreement with DNB, it said, noting that the agreement was a precondition to participate in the tender for the spectrum to rollout the second 5G network.

YTL Communications, a unit of YTL Power International Bhd (KL:YTLPOWR), did not submit an application for the tender.

MCMC is expected to announce only one winner, though “we expect the winning telco to enter into equity partnership, or long-term lessor-lessee arrangement, with other telcos,” CIMB Securities said.  

“This will enable it to share the cost of rolling out the second 5G network, as well as align with our belief that the government wants DNB and entity B to be of roughly equal size, in terms of 5G traffic,” the research house said.

CIMB Securities warned that there may be a knee-jerk reaction following MCMC’s announcement but recommended that investors take the opportunity to accumulate shares of the losing telcos that may decline sharply.