Fitch Ratings forecasts that intense competition in the Malaysian telecoms industry could lead to average operating EBITDA margins narrowing by 1-1.5 percentage points next year.

Strong growth in broadband and mobile data services will drive average revenue growth of 3-5 per cent next year. Voice revenue will remain flat, while text revenue may decline as data services cannibalise text messaging.

Competition, however, will be more intense in the fixed-line and broadband sector, which it expects to be dominated by Telekom Malaysia in the medium term.

Fitch expects Malaysian telcos’ capex to be unchanged from this year as they continue to invest in their 3G and 4G networks to support data growth.

Free cash flow will be minimal as operators’ cash flow from operations will barely cover capex and dividends. As a result, Fitch anticipates stable leverage for most operators unless companies make special dividend payments or undertake large debt-funded acquisitions.

The country of 30 million people has eight mobile players and more than 41 million mobile connections. The market leader, Celcom Axiata, has a 33 per cent share with 13.6 million connections. Maxis is number 2 with a 30 per cent share (12.3 million connections) and DiGi is third with a 26 per cent share (10.8 million), according to GSMA Intelligence Q3 data.

About 50 per cent of their connections are 3G. Maxis leads in 4G with 7 per cent of its user base being 4G subscribers. About 1 per cent of Celcom’s users are 4G while less than 1 per cent of DiGi’s are.