RHB Research cuts CelcomDigi forecast on delayed integration, rising opex
KUALA LUMPUR: CelcomDigi Bhd's network integration timeline is now expected to be pushed to the second half of 2025 (2H25), delayed from its initial target of mid-2025, following changes in Digital Nasional Bhd's (DNB) operating model.
The revised model is expected to affect the remaining 25 per cent of sites pending integration.
"CelcomDigi believes the mobile network operators (MNOs) or shareholders to come to a landing soon with DNB that would result in a revised wholesale framework.
"This is as 5G traffic would be shared with U Mobile as the second 5G infrastructure provider," said RHB Investment Bank Bhd (RHB Research) in a note.
While no discussion has taken place with the latter, the firm said CelcomDigi acknowledged that a fresh wholesale agreement inked going forward would be commercially-driven.
"We understand the existing wholesale structure allows MNOs to terminate their respective agreements within 30 days of an alternative 5G network becoming available or before Jan 2028 with prior notice given.
"This suggests the earliest an MNO could do so would be in 2H26, based on U Mobile's reported rollout timeline," it said.
The firm expects stronger commercial execution and realisation of merger synergies from the completion of CelcomDigi's network integration.
Meanwhile, it said the bulk of CelcomDigi's capital expenditure for financial year 2025 (FY25) of between RM1.8 billion and RM2 billion will be for IT system upgrades which would translate to higher operating expenditure (opex) in the short-to-medium term.
"The higher opex and accelerated depreciation charges for network assets are baked into CelcomDigi's pre-tax earnings guidance for FY25 of a low-to mid-single digit growth which also factors in higher 5G wholesale charges," said the firm.
RHB Research adjusted its earnings forecasts for CelcomDigi down by 6.9 per cent and 8.8 per cent for FY25 and FY26 respectively, and an increase of 0.3 per cent in FY27, mainly to reflect higher IT integration cost.
The firm maintained a 'Buy' call on the stock with a target price of RM4.40.
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