KUALA LUMPUR (Jan 15): U Mobile Sdn Bhd will likely struggle to roll out Malaysia’s second 5G network, pushing the company to even consider a merger, said Hong Leong Investment Bank (HLIB).
The award of the second 5G mandate to U Mobile harkens back to 2006 when Digi.Com Bhd, now CelcomDigi Bhd (KL:CDB), was forced to buy the 3G licence from state-controlled TIME dotCom Bhd (KL:TIMECOM), which won the licence together with U Mobile, the research house noted.
The second 5G network will likely have superior technology, lower total cost of ownership, higher level of compatibility and interworking, leading to a faster rollout, HLIB said, noting that the deployment, however, is rather “an uphill task for U Mobile considering its size and financials”.
U Mobile, controlled by tycoon Tan Sri Vincent Tan, was picked over its larger rivals to deploy Malaysia’s second 5G network. The company had announced several partnerships ahead of the November 2024 announcement by the Malaysian Communications and Multimedia Commission.
The company’s partnerships included with Axiata Group Bhd’s (KL:AXIATA) tower infrastructure unit edotco Group and Telekom Malaysia Bhd (KL:TM). Tan was reported in July saying that U Mobile will go for an initial public offering after rejecting a buyout offer from Maxis Bhd (KL:MAXIS).
The rollout of the network could face delays as the company must first finalise additional partnerships, appoint a 5G-advanced technology vendor, and secure financing, among other preparatory steps, Kenanga Investment Bank said.
U Mobile may pick CelcomDigi as its partner, a possibility supported by their history of collaboration, though Maxis may still be roped in due to the small gap between their subscriber bases, making them a “viable option”, the research house said in a separate note.
The lingering uncertainty continues to cloud long-term visibility on earnings, capital expenditure, and dividends for mobile network operators, the research house flagged. Valuations and sentiment will only recover upon resolution of the uncertainties, possibly after the policy directive is unveiled, it said.
Both HLIB and Kenanga have the Malaysian telecom sector on ‘neutral’ call.