It is the “main artery” of 5G data centers, and Malaysia Telecom has optical fiber to win alone

(Kuala Lumpur, 24th) Optical fiber is the “aorta” of 5G and digital centers. Market participants believe that regardless of the risks involved, Malaysia Telecom (TM, 4863, Main Board Trade Services) can profit from it, so they give it a separate “buy” rating.

Research analysts at Hong Leong Investment Bank pointed out that in fact, the telecommunications sector index only rose 5% in the first half of this year, and its performance was far less than the 9% increase in the Malaysian Fushilong Composite Index. It was mainly dragged down by various downside factors, including insufficient dividend distribution and uncertainty about the 5G regulatory mechanism.

Despite this, analysts are still optimistic about the performance of the relevant sector in the second half of this year, mainly because no matter how the political trend evolves and whether a single wholesale network (SWN) or dual wholesale network model (DWN) is used, it will not be possible to prevent the launch of 5G.

In the first phase of SWN, Malaysia's 5G Special Use Company (SPV) - National Digital Corporation (DNB), as entity A, successfully achieved 80% 5G population coverage last year.

Also, as of June 1, apart from Malaysia Telecom, which is still awaiting shareholder notions, all four other telecom giants have completed share subscription agreements.

After signing, in addition to meeting the financial requirements of the DNB, telecommunications giants also formulated a series of policies and strategies to carry out the transition plan.

Analysts are optimistic that Entity B's 5G network will be better and more cost-effective, and that it can use the existing construction infrastructure to launch the market faster.

Of course, as an important element for transmitting data at the speed of light, the role of optical fiber is also becoming more and more important, because it is one of the mandatory prerequisites for broadband and 5G construction.

Notably, demand for optical fiber is not only surging in terms of capacity, but will also follow a surge in coverage to make up for the lack of 5G spectrum transmission.

Analysts said that it is expected that in the next 3 years, demand for data centers will continue to increase rapidly, which will also drive the increase in demand for optical fiber.

Despite the implementation of the latest mandatory pricing (MSAP), which may affect net profit contributions, analysts are not concerned about this. The main impact is that the expected impact will not be as serious as the earlier “doubling the speed and halving the price”, and increasing consumer demand can offset the impact over time.

Analysts said that with the merger of Tiandi Tong Digital Network (CDB, 6947, Motherboard Telecom and Media Shares), market competition is expected to become healthier because of the reduction in the scenario where operators face a tit-for-tat price war to gain market share.

At this stage, telecom giants are still operating as usual, and always maintain a strict attitude of discipline, while paying special attention to costs.

Looking at the telecommunications sector, analysts continue to maintain a “neutral” rating. However, they are particularly optimistic about Malaysia Telecom, which not only gave a “buy” rating, but also raised the target price from the original RM7.21 to RM7.91.

Analysts only love Ma Telecom. They are mainly optimistic about the company's cost optimization, and the measures currently implemented have all produced influential results.

It is worth noting that with the exception of Telecom Malaysia, the ratings given by analysts to other telecom giants are simply “hold on.”

Analysts pointed out that with its extensive fiber coverage, Telecom Malaysia is regarded as one of the key components of 5G dual-mode and data center deployment.

Furthermore, in processing government data, Telekom Malaysia is regarded as the only cloud service provider in Malaysia and is in an advantageous position.