THE BUZZ
Maxis has raised the price of its Home fibre broadband service to slightly under Unifi’s entry level plan. At the same time, it cut the price of its 30Mbps plan to RM248/mth and introduced a 20Mbps plan for RM198/mth.
OUR TAKE
The gap narrows. The move to raise the price of its entry level fibre broadband plan effectively narrows the pricing gap with Unifi to just 0.7% (RM1) from 7.4% in July (RM11) and 20.8% in March (RM31). The 10Mbps package is now retailed at RM148 for a Maxis postpaid mobile user (RM168 for non Maxis customers). This represents a RM10 increase over the previous retail price (RM138) introduced in July and a RM30 increase over the price offered six months ago when it went on the offensive to create awareness of its fibre product. We believe Maxis is re-pricing its plans ahead of fresh packages to be unveiled over the next few months which will incorporate IPTV. While fibre revenue contribution remains small, the re-pricing of its packages should help Maxis to better monetize and improve the profitability of its fibre service.
Maxis has raised the price of its Home fibre broadband service to slightly under Unifi’s entry level plan. At the same time, it cut the price of its 30Mbps plan to RM248/mth and introduced a 20Mbps plan for RM198/mth.
OUR TAKE
The gap narrows. The move to raise the price of its entry level fibre broadband plan effectively narrows the pricing gap with Unifi to just 0.7% (RM1) from 7.4% in July (RM11) and 20.8% in March (RM31). The 10Mbps package is now retailed at RM148 for a Maxis postpaid mobile user (RM168 for non Maxis customers). This represents a RM10 increase over the previous retail price (RM138) introduced in July and a RM30 increase over the price offered six months ago when it went on the offensive to create awareness of its fibre product. We believe Maxis is re-pricing its plans ahead of fresh packages to be unveiled over the next few months which will incorporate IPTV. While fibre revenue contribution remains small, the re-pricing of its packages should help Maxis to better monetize and improve the profitability of its fibre service.
Still giving more for less. The key value proposition for a customer remains the bigger bandwidth offered by Maxis compared to similarly priced plans on Unifi (see Table 1). Maxis has cut the price of its 30Mbps plan by 38% to RM248/mth, slightly below Unifi’s equivalent plan (RM249) for 20Mbps. At the same time, it introduced a new 20Mbps plan priced at RM198 which compares with Unifi’s 10Mbps plan at RM199. The pricing strategy and additional bandwidth are carrots dangled to attract customers who may not be keen on IPTV and to encourage more users to trade up to higher tier plans. We expect Maxis to offer attractive bundled services (voice+broadband+IPTV) to lock-in an estimated 1m customers that its sister company Astro has within the fibre footprint of 1.2m premises.
Unifi remains unfazed by competition. Despite Maxis’ aggression, TM has maintained the subscription prices of its Unifi service offered since Day 1. We note that the number of IPTV channels offered on Unifi’s IPTV (HyppTV) service has increased by more than threefold from the launch of its service in March 2010 to 95 currently. In addition to the higher number of free channels, TM also introduced pay-per view packages to boost its ARPU. We think Unifi still commands the strongest appeal and top of mind share for users looking to upgrade their broadband plans to fibre given its strong distribution network of resellers and brand profile.
Time and P1 playing a different niche. P1 launched its fibre broadband service which rides on TM’s high speed broadband network in April. Our channel checks revealed that the take-up of its plans has been lukewarm. This does not come as a surprise as there is little marketing visibility of its service. P1 appears to be focusing more on the business segment where it currently has the lowest priced enterprise fibre plans in the market. It offers four business plans (5Mbps, 10Mbps, 20Mbps, 30Mbps) priced at RM99-RM429 while Unifi’s plans for businesses are retailed at RM199-RM359. Meanwhile, though Time currently has the fastest fibre broadband plan of 100Mbps, its coverage is limited and confined to multi-dwelling units and office towers.
Keen on P1? We gather from industry sources that Maxis is among the few telcos that are also keen on P1. It is eyeing P1’s WiMAX and the 2.6GHz/LTE spectrum although we think there could be regulatory hurdles as Maxis is already collaborating with U Mobile, another LTE spectrum recipient.
Maintain NEUTRAL. We are maintaining our NEUTRAL recommendation on Maxis based on FV of RM6.50 (WACC: 8%, TGH: 1.5%). The slide in its voice revenue market share, higher A&P and rising subscriber acquisition cost remain overriding concerns although the stock is benefitting from investors’ affixation over yield plays given the macro headwinds. Maxis’ steady dividend yield of over 5% provides good share price support.
Keen on P1? We gather from industry sources that Maxis is among the few telcos that are also keen on P1. It is eyeing P1’s WiMAX and the 2.6GHz/LTE spectrum although we think there could be regulatory hurdles as Maxis is already collaborating with U Mobile, another LTE spectrum recipient.
Maintain NEUTRAL. We are maintaining our NEUTRAL recommendation on Maxis based on FV of RM6.50 (WACC: 8%, TGH: 1.5%). The slide in its voice revenue market share, higher A&P and rising subscriber acquisition cost remain overriding concerns although the stock is benefitting from investors’ affixation over yield plays given the macro headwinds. Maxis’ steady dividend yield of over 5% provides good share price support.
Source: OSK
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