Spectrum reallocation concerns weigh on telco stocks

Spectrum reallocation concerns weigh on telco stocks
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KUALA LUMPUR (Feb 11): Telcommunication counters continued to see share prices drop today with an overall average of 6% since the government announced the spectrum reallocation policy on Jan 27.

At 12.07pm, share prices for Maxis Bhd, Axiata Bhd and Digi.com Bhd fell an average 1.37% on active trading, extending losses with FBM KLCI which declined 2.68 points to 1,641.73 points at the same time.

Axiata fell 10 sen or 1.76% to RM5.58 with 4.38 million shares changing hands for a market capitalisation of RM50.08 billion.

At 12.05pm, Maxis dipped seven sen or 1.13% to RM6.14 with 820,000 shares traded for a market capitalisation of RM46.1 billion.

At 12.07pm, Digi slipped six sen or 1.23% to RM4.82 with 2.6 million shares transacted for a market capitalisation of RM37.55 billion.

According to SJ Securities Sdn Bhd remisier K.C Goh, the spectrum reallocation might incur extra cost to telcommunication companies, thereby `hurting’ their profit.

This led to a drop in share prices up to 16% within a short span of time led by the sale by funders which triggered a buying frenzy after the announcement, he said.

“Retailers thought it is cheap so they started buying. After that, some short term fund came in and bought the shares to push the price to about 12 percent up.

“However, now they (retailers) have started taking profit because of the uncertainty in the market,” Goh told theedgemarkets.com.

Following the announcement of the spectrum reallocation in the Budget 2016 revision, Malaysian Communications and Multimedia Commission (MCMC) revealed that the spectrum in the 900MHz and 1800MHz would be reallocated among Celcom Axiata Bhd, Digi, Maxis and U Mobile Sdn Bhd by August this year.

It was reported that the two bands of spectrum will be assigned for a fee to the four telecommunication players for a period of 15 years. However, the fee for the spectrum is currently being determined.

"The MCMC intends to issue the spectrum assignment to all four players by August 2016 for full implementation by July 1, 2017," said MCMC chairman Datuk Seri Dr Halim Shafie. This is in line with the government’s decision to optimise the use of spectrum resources through reallocation and bidding.

Pursuant to that, concerns have cropped up on the expenditure cost required to enable the exercise to take place which has had bearings on investors.