Industry experts foresee strategic mergers in Malaysia's telecommunications sector as it prepares for the impending 5G revolution under the government's ambitious Jendela initiative. U Mobile Sdn Bhd, positioned as the smallest player with a limited presence in wireline services, faces substantial challenges in competing within the expanding 5G landscape, according to BMI Research technology analyst Alex Kheder.
Kheder emphasised the necessity for market consolidation, citing competitive pressures from larger players like CelcomDigi, known for aggressive pricing strategies and economies of scale through shared infrastructure.
Responding to recent reports of Maxis' interest in acquiring U Mobile, major shareholder Berjaya Corp Bhd's Tan Sri Vincent Tan Chee Yioun disclosed plans to reject the offer, opting instead for an initial public offering by month-end.
While both Maxis and U Mobile declined to comment, U Mobile affirmed its commitment to advancing innovative 5G solutions and preparing for the government's 5G network tender.
Analysts believe Maxis' proposed acquisition of U Mobile, with its estimated 8.5 million subscribers, could significantly bolster Maxis' market presence in Malaysia, narrowing the gap with CelcomDigi, which leads with 20.4 million subscribers post-merger.
Mercury Securities' head of research, Toh Woo Kim, highlighted potential synergies in network sharing and economies of scale, noting U Mobile's focus on value-driven segments complementing Maxis' premium market strategy.
Toh dismissed other telco targets for Maxis, citing Astro's divergence from core telco operations and existing challenges.
Analyst Alex Kheder speculated on potential subscriber attrition at U Mobile post-acquisition, contingent on Maxis' strategy to maintain U Mobile's affordable offerings.
Kheder outlined opportunities for Maxis to diversify revenue streams through enhanced 4G services amid ongoing 2G and 3G phase-outs, positioning itself competitively in the 5G market.
As Malaysia prepares to award its second 5G network in Q3 2024, Maxis, CelcomDigi, and U Mobile remain contenders alongside Digital Nasional Bhd (DNB), where they collectively hold 14% interests pending decisions on future participation.