KUALA LUMPUR, June 11 (Bernama) -- It will be no surprise if Celcom Axiata Bhd and DiGi Telecommunications Sdn Bhd form a joint venture for advanced network collaboration as similarly done in developed markets, according to ECM Libra Investment Research.

The two companies yesterday signed a memorandum of understanding (MoU) to explore long-term network and infrastructure collaboration in Malaysia.

In its research note, ECM Libra said it was a positive development for Celcom and DiGi subject to signing a definite agreement by year-end once both parties determined the long-term viability of the collaboration.

"Reducing costs will help boost margins and generate bottomline growth which has tapered off due to the saturating mobile market," it said.

Also, Celcom and DiGi stand to close the gap with Maxis Communications Bhd which currently commands the highest EBITDA (earnings before interest, taxes, depreciation and amortisation) margins.

ECM Libra said the move from the current passive sharing practice involving components such as towers towards the proposed active sharing including antennas and base station equipment mirrored closely other developed markets such as Australia (Vodafone and Optus) and Sweden (Tele2 and Telenor).

In these developed markets, operators form a joint-venture company to roll out 3G or 4G networks, thus reaping significant capital expenditure (capex) savings while lowering costs and risks to each operator, it said.

OSK Research Sdn Bhd said the Celcom-DiGi move could translate into significant cost savings in the long term as network operating expenditure and capex represented a significant portion of a telco's spending.

"We note that Axiata's 70 per cent-owned Bangladesh operations, Robi, is already engaged in similar tie-ups with Telenor's Grameenphone and Bangalink," OSK said in its research note.

It said that a key cost-down initiative over the past two years was the streamlining of the network cost element for Celcom, which has fallen to under 10 per cent of the revenue in first quarter 2010 from 14 per cent in 2007.

This compared with DiGi's 12 per cent and an estimated 12 to 13 per cent for Maxis, it added. - Bernama