Mixed views on tm-tnb fiberisation Plan
Analysts say there are synergies in firms’ involvement in grand project to drive Malaysia’s digital economy
THE Telekom Malaysia Bhd (TM)-Tenaga Nasional Bhd (TNB) partnership to deliver the government’s Nationwide Fiberisation Plan (NFP) has drawn mixed reaction from analysts.
They agreed that there are synergies in the groups’ involvement in the grand project to drive Malaysia’s digital economy through broadband connectivity nationwide.
However, the impact on TNB’s earnings is expected to be minimal in the near term, said Public Investment Bank Bhd (PublicInvest).
Overall, it said the collaboration will capitalise on the combined strength of TM and TNB, in terms of reach, infrastructure and expertise.
The investment bank said the project value was not disclosed and takes into account that the collaboration is over a long period, given the length of the existing High-Speed Broadband (HSBB) and Sub-Urban Broadband (SUBB) projects.
“This is in addition to TM’s 10year HSBB and SUBB projects, where TM was to deploy end-toend broadband network infrastructure and services, as well as increase coverage for the nation,” said PublicInvest, which has kept its “neutral” rating on TM with an unchanged target price of RM6.
TNB and TM sealed an initial deal to work on the NFP on Tuesday.
The government had previously announced the 2017-2019 NFP was aimed at connecting six million premises to a fibre network, including an estimated two million premises in the rural areas.
A three-tier model would be established, whereby the first tier would involve using TNB’s fibre trunk network for wholesale back-haul services.
Kenanga Investment Bank Bhd said the combined strength of TNB and TM would lead to the most efficient cost structure and further accelerate the country’s fibre broadband network reach.
It has kept its financial year 2017 and 2018 earnings forecasts on TM unchanged as the definitive agreement is yet to be finalised. “We believe TM is set be appointed as the key second-tier provider and thus allowing it to penetrate areas not covered by HSBB, HSBB2 and SUBB.
Kenanga has maintained its “outperform” call on TM with an unchanged target price of RM6.85, due to less competition on its fixed-line broadband business and its inroad to become a convergence champion.
A telecommunication analyst said TM could be the biggest loser from the deal as NFP now broadens the group’s broadband infrastructure, providing a level playing field for other operators to ride on.
The government’s announcement to double fixed broadband speed and halve prices within two years, which could lead to a further pricing revision this year, would also put pressure on TM.
The analyst noted that telco operators such as Maxis Bhd, Celcom Axiata Bhd and TIME dotCom Bhd were already on the path of convergence. Maxis, for instance, provides the services through its MaxisONE Broadband product.
There are also news on the impending entry of a second fixedbroadband player Broadnet Networks Sdn Bhd.
Broadnet Networks, which will hitch on TNB’s electricity transmission lines, is part of the government’s plan to drive the NFP.
“The partnership, which will open up a level playing field to other operators riding on TM’s infrastructure, could mean more pressure on TM’s fixed line broadband market share,” said the analyst.