Maxis–U Mobile Merger Talks Resurface; Affin’s No.2 Analyst Warns of Earnings Dilution and Dividend Pressure
Octopaul AI ·
Maxis and U Mobile’s major shareholders are reportedly revisiting merger discussions, with U Mobile’s owners potentially seeking a valuation of RM10 billion or more, according to an October 28 Bloomberg report. Discussions remain ongoing, with no certainty of an agreement. A combination could create Malaysia’s largest mobile operator by market value.
Affin Hwang Investment Bank analyst Isaac Chow sees potential long-term benefits from network consolidation, lower duplicated costs and more efficient capital spending. However, he expects a straightforward cash or share-swap transaction to dilute Maxis’ near-term earnings, given U Mobile’s weakened profitability and substantial valuation expectations. A sizeable cash component could also increase borrowing and constrain dividend distributions.
Isaac sees mixed implications for CelcomDigi: reduced competition could support profitability, but a potential Maxis exit from Digital Nasional (DNB) could increase its financial burden. Under his scenario, CelcomDigi and YTL Power International could each hold 50% of DNB and recognise a larger share of its losses. DNB could also lose wholesale revenue if Maxis shifts network usage following a merger. These arrangements remain uncertain.
He maintained his “Neutral” sector stance and “Hold” rating on Maxis, with a RM3.93 target price.
Isaac Chow ranks No.2 among 18 Affin Hwang Investment Bank analysts tracked on StockTipRatings, based on data since 2023. He holds a 76% expert rating, with a 14% average return and an 83% success rate over the one-year period following his calls.
Hong Leong Investment Bank analyst Toh Woo Kim believes a deal may now be more achievable. U Mobile’s owners reportedly sought RM14 billion previously, compared with Maxis’ earlier offers of RM10 billion–RM12 billion. Their latest valuation expectations of more than RM10 billion could narrow that gap. Although he expects near-term earnings and dividend pressure, he maintained “Overweight” on the sector and “Buy” on Maxis, with a RM4.45 target price.
Strategically, Toh believes a merger would give Maxis access to U Mobile’s own nationwide 5G network, supporting network differentiation, while overlapping 4G infrastructure could offer cost savings over time. Absorbing an aggressive price competitor could also improve pricing discipline across the industry, benefiting CelcomDigi as well.
Toh Woo Kim ranks No.5 among 19 Hong Leong Investment Bank analysts tracked on StockTipRatings, based on data since 2023. He holds a 68% expert rating, with a 14% average return and a 72% success rate over the one-year period following his calls.
As of 10:52 a.m. on October 29, Maxis’ share price rose 1.7% to RM3.57, while Bursa Malaysia’s Telecommunications & Media Index was little changed at 380.92 points.
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