As reported in the Star newspaper, the government has announced that it will optimise the revenue from telecommunication spectrum through a redistribution and bidding process that will be implemented soon. This was announced under the revised Budget 2016.
According to a CIMB report, if "the MCMC uses the same reserve price benchmark (as per the recent Thai auctions), the minimum Maxis, Celcom and DiGi would have to pay to retain their 900MHz and 1800MHz spectrum are RM2.37bn, RM2.43bn and RM1.46bn, respectively. This would shave off 4.7% of our target price for Maxis, 4.2% for Axiata and 3.8% for DiGi."
The reaction from the market was swift. All three stocks dropped substantially this morning. Both Maxis and Axiata broke their strong horizontal support at RM6.20 & RM5.60 respectively. Digi dropped less and may find support at its horizontal line at RM4.60. As the current prices are still above the revised fair prices for all three counters (as per CIMB's report), it is best to avoid these stocks for now.
Chart 1; Axiata's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)
Chart 2: Maxis's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)
Chart 3: Digi's monthly chart as at Jan 29, 2016_10.45am (Source: ShareInvestor)
Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Axiata, Digi & Axiata.
http://nexttrade.blogspot.my/2016/01/telcos-hit-by-hefty-bill-to-retain.html
