Thursday, January 15, 2009

Malaysia’s prepaid phone rates too HIGH!

PETALING JAYA: Malaysia’s prepaid phone rates can be reduced significantly because profit margins are high but cellular operators are not doing it because they want to avoid a price war in a mature market where growth is limited, analysts said.

But the big gap between prepaid and postpaid rates might bring down prepaid charges eventually, they said.

OSK Research said local cellular companies (celcos) charged a steep premium for their prepaid services, noting that Malaysian prepaid rates are among the highest in the region at 33 sen per minute, or nine US cents.

“A (celco) profits 25 sen per minute after netting off the interconnection fee paid to a competing operator and assuming zero ancillary costs,” analyst Jeffrey Tan said, adding that the operating profit margin for Malaysian celcos was more than 40%.

The analyst noted that growth in the prepaid sector had been slower than postpaid, which was another reason why cellular operators had been reluctant to slash their prepaid rates.

In addition, the prepaid segment accounted for 80% of the total subscribers in Malaysia and more than 60% of the celcos’ revenues, Tan said.

Nevertheless, Tan told StarBiz he expected the celcos to eventually and gradually revise downwards their prepaid rates as current domestic charges were too high compared with other countries.

HwangDBS Vickers Research in its report noted that Singapore’s celcos were able to charge lower prepaid rates, at four to five US cents, although its per capita income was five times that of Malaysia’s.

“Prepaid average revenue per user of US$17 in Malaysia (per month) is higher than the US$12 in Singapore, which is not sustainable in the long term because Singapore has higher purchasing power than Malaysia.

“The postpaid tariff of US 4 to 5 cents (in Malaysia) is less than half of prepaid, which implies that tariffs could come down sharply in time to come,” it said.

Another telco analyst agreed that rates would eventually come down, saying the industry’s profit margin was too high.

He said the current high tariffs were due to lack of competition, noting that “Malaysia has three major players, while other countries have more.”

The Malaysian prepaid market is dominated by Celcom (M) Bhd, DiGi.Com Bhd and Maxis Communications Bhd.

But TA Securities analyst Ikmal Hafizi said there was no reason for these celcos to reduce their prepaid rates without the Government lowering interconnection rates.

He said he did not foresee a price war at the moment, as none of the three operators was ready to outdo each other.

“They will try to maintain the tariffs and differentiate themselves in other ways,” he told StarBiz.

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