Studio Press

MOBILE service providers Maxis Communications Bhd, Celcom (Malaysia) Bhd and DiGi.Com Bhd are feeling the heat as the deadline for prepaid users to register themselves nears.

So far, only about one-fifth, or 4.8 million, prepaid users have registered with the respective telcos. The initiative started about one year ago and the deadline will expire in five months. This means that about 80 per cent of the prepaid users (about 12 million) would need to register over the next five months, averaging 2.4 million subscribers a month. According to OSK Research Sdn Bhd, it believes that the telcos would face some downside risks in the months ahead. The two main risks are the surge in "churn" after the expiration of the deadline and the overflow of registrations at the last minute which could disrupt front-end operations. However, the local research house said DiGi may stand to lose more from the potential delays in the exercise, mainly because a high number of its prepaid users are foreigners who may not want to register for various reasons. Another factor is DiGi's smaller distribution dealer networks in the Klang Valley, Penang and Johor. "This plays a pivotal role in improving the accessibility and convenience of registration. Based on data obtained from telcos' website, Celcom has the biggest dealer network followed by Maxis and DiGi," OSK Research said in a note on the telecommunication sector. Last year, the Government announced the registration requirement to enable the authorities to track users in a bid to prevent criminal activities using cell phones. Based on the official guidelines, subscribers are required to register by December 15 2006, failing which their numbers will be suspended. They will then be given 14 days thereafter to register or risk having their lines terminated. The telcos have the rights to terminate any subscriber found to have provided false information. OSK Research added that the recent rally on DiGi's share price was attributed to rising expectations of another sterling quarterly performance. Hence there could be downside to share sentiment if actual numbers fall short of expectations. "Note that DiGi's foreign shareholding level has reached an all-time high of 85 per cent in May, and that could trigger selling pressure on negative surprises. Another protracted concern is Telenor's requirement to pare down its 61 per cent stake (in DiGi) by the end of the year," it said. OSK Research maintains its "neutral" recommendations on Maxis and DiGi as valuations for both stocks are fair and on par with regional metrics, while holding a "buy" call on Telekom Malaysia Bhd. -Bussiness Times