Telcos lean on ancillary services as 5G gains slow

KUALA LUMPUR: Malaysian telecommunication (telco) players have enjoyed a strong bump in average revenue per user (ARPU) from the rollout of fifth-generation (5G) technology, but that honeymoon phase may be over, analysts said. Against this backdrop, many telcos have expanded their range of ancillary services to mitigate the diminishing impact of 5G on ARPU, resulting in sustained revenue growth.ARPU is a metric that measures the average income telcos earn from each customer over a specific period.

BMI technology director Andrew Kitson said the blended mobile ARPUs for CelcomDigi Bhd and Maxis Bhd have stabilised at around RM42 and RM54, respectively."I would stress, however, that these figures are not directly comparable as Maxis excludes machine-to-machine (M2M) connections from its numbers, while CelcomDigi does not indicate whether it includes or excludes M2M contributions. "We suspect that CelcomDigi's significantly lower blended ARPU includes M2M connections.



Since M2M SIMs typically generate lower ARPUs than smartphones, their inclusion would naturally lower CelcomDigi's overall ARPU figures, which appears to be the case," he told Business Times. According to Kitson, neither CelcomDigi nor Maxis has disclosed the specific factors driving their mobile ARPUs, particularly the contribution from 5G. However, he said the transition to 5G did support ARPU growth in its first year.

"Even so, as low-value 3G and 4G SIMs are being disconnected, the contribution of 5G is currently being diluted and its true impact is not apparent, other than helping to keep ARPUs stable or growing slightly quarter-on-quarter. "Price competition will continue to limit the contribution of 5G to ARPU, as Malaysian consumers clearly prefer prepaid over postpaid plans. As a result, the focus will remain on entry-level 5G offerings, which provide limited revenue uplift for operators," he added.

RHB Research analyst Jeffrey Tan said competition among telco players remains tight across mobile and home fibre, with growth in the fibre broadband segment tapering. In a research note, he said the country's two biggest telcos recorded a one per cent year-on-year (YoY) increase in mobile service revenue for 2024, driven by pre-to-postpaid conversions and fibre broadband bundling activities.Postpaid revenue for the period grew three per cent YoY, eclipsing the 2.

8 per cent YoY decline in prepaid. "After two consecutive quarters of tactical acquisition campaigns, industry fibre broadband revenue momentum appears to be tapering, with Telekom Malaysia Bhd (TM) and Maxis posting slower subscriber growth quarter-on-quarter. "That said, industry ARPUs have mostly held steady on the back of ancillary services and the upgrade to higher speed plans.

We expect competition to remain tight as consumers gear up for another round of subsidy rationalisation," said Tan. This year, earnings growth in the mobile sector may be crimped by higher 5G wholesale charges due to increased traffic, although the impact is expected to be offset by cost optimisation initiatives.Commenting on the two major telcos, Kitson said Maxis' prepaid ARPU is on a declining trend.

While its prepaid user base is growing, the company has either kept tariffs unchanged or offered sign-up discounts. "These activities by Maxis are both dilutive to ARPU. Its postpaid ARPU is also declining, albeit less significantly — a trend similarly attributed to a growing user base and the absence of tariff hikes," he said.

As for CelcomDigi, the merged entity no longer reports separate ARPUs for the Celcom and Digi businesses, making the group's latest numbers incomparable with data disclosed more than a couple of years ago.However, CelcomDigi's ARPUs appear to be more stable over the 2022–2024 period compared to Maxis, though the prepaid segment remains a weak spot for the operator. Tan said this is possibly due to a shrinking prepaid user base, as the telco giant seeks to wean inherited subscribers off the cheapest voice and data plans.

"Interestingly, CelcomDigi's postpaid ARPU has remained stable despite substantial losses in postpaid subscribers during the second half of 2024. A marked increase in the operator's device sales during the same period may have helped offset the decline and supported ARPU stability," he added.Kitson added that the development of bespoke or private 5G solutions by mobile network operators for enterprise clients serves as a lifeline, as such networks are likely to offer better returns on investment.

"There is also limited churn risk associated with private 5G, providing operators with more predictable, recurring revenue. It is, however, unclear whether ARPUs from these private 5G offerings are, or will be, included in overall ARPU figures," he said. Meanwhile, the fourth quarter of 2024 (4Q24) was a "dividend-friendly" period for fixed-line operators.

TM declared a special dividend of six sen per share (DPS) on top of a final DPS of 12.5 sen, bringing the total payout to a record 31 sen.Tan said the special dividend was supported by a higher profit after tax and minority interests base and tax credits.

Time Dotcom Bhd announced a notable special DPS of 27.45 sen, raising its full-year dividend payout ratio to 272 per cent.Maxis, meanwhile, declared a fourth interim dividend of four sen and a one-time dividend of one sen, taking its full-year DPS to 17 sen.

Tan added that capital management upsides remain for TM, driven by its strong balance sheet, and for Time Dotcom, due to its net cash position.© New Straits Times Press (M) Bhd.