Within the last week, reports surfaced that two global telecoms groups intend to sell off their telecoms assets in Malaysia.

According to Bloomberg, Saudi Telecommunications Company (STC) is considering offloading its 16 per cent stake in Maxis, valued at around $1.8 billion, while Telenor is looking at selling its 49 per cent stake in Digi or lining up a partner to form a joint venture.

The question is why?

Unlike most mobile markets in Asia, Malaysia isn’t dominated by a single player, such as Australia (Telstra controls 52 per cent of mobile connections) or Thailand (AIS has a 45 per cent share), or a market controlled by two players, like the Philippines, where Smart and Globe Telecom hold a collective 99 per cent share.

Malaysia, with a population of 30 million, is fiercely competitive. It has six mobile players after Telekom Malaysia (TM) reentered the wireless space with the launch of Webe in early August. TM rebranded Packet One Networks (P1), which it acquired in 2014, and is offering unlimited voice, SMS and LTE data service for MYR79 (about $19) per month. Average ARPU in the country is just $11.50 a month, which has been steady over the past year.

On the upside, 4G penetration has huge potential for growth, standing at just 25 per cent after doubling over the last year. Nearly 30 per cent of Maxis’ customers are 4G users, while less than 6 per cent of U-Mobile’s connections are 4G.

Changes at the top
Maxis is marginally the market leader with 12.1 million connections, or a 28.8 per cent share, with Digi a very close second with 12 million connections (28.5 per cent share) and Celcom Axiata third with 11.2 million connections (26.7 per cent share), according to GSMA Intelligence’s Q2 figures.

Over the past two years their market shares have narrowed in the same range, as Digi expanded its share by 2.5 points at the expense of its rivals. Celcom lost 6 percentage points since it was the market leader in Q2 2014, when it had a 33 per cent share and its sub base peaked at 13.4 million.

Maxis, meanwhile, has fared little better – its market share has fallen nearly 3 points since Q1 2015 and its sub base peaked at 13.3 million the next quarter. It has just 120,000 more subs than number two Digi, which moved ahead of Celcom in last quarter.

But anaemic subscriber growth isn’t the major problem. Falling revenue and ARPU likely are.

Celcom’s revenue again declined in Q2, falling 6.6 per cent, with blended ARPU down 9.3 per cent to MYR39 ($9.72). Digi’s revenue dropped 4 per cent in local currency terms in Q2 and ARPU fell 6 per cent “due to continued price pressure on international traffic and domestic data.” Maxis posted similar results: net profit fell 14 per cent in Q2 and service revenue was off 1.6 per cent (prepaid revenue dropped 5.2 per cent). Its H1 capex was 42 per cent higher than the previous year.

It’s interesting that Axiata Group aims to reduce its stakes in Indonesia (XL), Sri Lanka (Dialog) and Cambodia (Smart) to raise funds to pay down its rising debt burden but is holding on to its domestic assets despite continued struggles over the past year or more.

Looking for growth
Market share and even financial results, however, may not be the only factors behind Telenor and STC considering pulling out.

The Malaysian Communications and Multimedia Commission’s (MCMC) surprise move to reallocate spectrum will intensify competition as Digi and U-Mobile will gain access to more capex-efficient spectrum, which will help them to challenge the one-time market leaders Maxis and Celcom, Fitch Rating said.

In February the MCMC announced it will directly assign the 900MHz and 1.8GHz bands to the four operators. Digi will receive 2x5MHz of 900MHz spectrum and 2x20MHz in the 1.8GHz band. Celcom and Maxis had their spectrum allocations reduced to 2x10MHz in the 900MHz band and 2x20MHz in the 1.8GHz range. This leaves U-Mobile with 5MHz of 900MHz and 15MHz of 1.8GHz spectrum. It previously only had spectrum in the 2.1 and 2.6GHz bands.

Analysts said the reallocation effectively means Celcom and Maxis will need to give back spectrum they currently own.

Other factors
While there are a number of possible drivers, the most likely ones are that both Telenor and STC are rethinking their investment in a small, maturing Asian market and preparing to find opportunities in frontier or emerging markets, or they simply want to focus on their core markets at a time when margins are falling due to rising network investment to keep up with massive data consumption.

As one market watcher told Mobile World Live: “When resources become more limited from competition, they may want to concentrate their energies in ‘home’ or ‘core’ markets to cement dominant positions (out-invest) and fight competition”.

Whatever the reason, it certainly was a coincidence news of their intentions leaked just days apart.

The editorial views expressed in this article are solely those of the author(s) and will not necessarily reflect the views of the GSMA, its Members or Associate Members.