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Intellasia East Asia News – CGS-CIMB: U Mobile may consider M&A for revenue share gain

CGS-CIMB said greater resistance to revenue share gains may prompt U Mobile Sdn Bhd to seriously consider mergers and acquisitions (M&A).

In a note today, the research house said with U Mobile’s service revenue and market share falling for the first time in the financial year 2021 (FY2021), the telecommunications service provider may now be running into greater resistance.

U Mobile’s mobile service revenue fell 1.6 per cent year-on-year (y-o-y) in FY2021 (FY2020: +2.7 per cent), the first contraction since 2011, resulting in a drop in its revenue market share (RMS) by 0.3 per cent y-o-y to 14.4 per cent.

“We believe U Mobile needs to continue pursuing a greater revenue scale to turn profitable, which may prevent competition from easing.

“Further market consolidation would improve competition, though this would be subject to parties agreeing on deal valuation and regulatory approvals,” it said.

CGS-CIMB said the contraction of U Mobile’s RMS could possibly be due to more competitive offers from the big three mobile network operators (MNOs).

“While U Mobile’s total revenue rose 1.4 per cent y-o-y in FY2021, driven by higher sales of goods and others, it was also the lowest growth based on our records,” said the research house.

Meanwhile, CGS-CIMB has maintained its “overweight” rating in the telecommunications sector and continues to prefer the fixed to mobile segment.

Key downside risks in the sector would be delays in final 5G resolution, it said.

https://www.malaymail.com/news/money/2022/09/29/cgs-cimb-u-mobile-may-consider-ma-for-revenue-share-gain/30800

 

Category: Malaysia


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