TM’s Dubai venture unlikely to have significant near-term impact
KUCHING: Telekom Malaysia Bhd’s ( TM) venture into Dubai is not expected to have any significant near-term impact to the group’s earnings prospects, analysts say.
In a filing on Bursa Malaysia, TM explained that the formation of wholly owned subsidiary Telekom Malaysia DMCC in Dubai is part of the group’s global expansion effort to cover the Middle East markets.
Telekom Malaysia DMCC is based in Dubai’s free trade zone Dubai Multi Commodiities Centre (DMCC) which is an international trade hub of UAE.
Additionally, Telekom Malaysia DMCC will assume the role of TM’s regional sales focusing on UAE, Qatar, Bahrain, Kuwait and Oman.
“TM’s expansion into Dubai is unlikely to have any significant near- term impact to the group’s earnings prospects,” AmInvestment Bank Bhd (AmInvestment Bank) opined.
“This is part of the group’s ongoing strategy under TM Global to position Malaysia as the gateway into the Asean region, offering voice, data and backhaul services via submarine cable connectivity.
AmI n v e s tme nt Ba n k highlighted that TM Global, which accounted for 47 per cent of the group’s first quarter of financial year 2018 ( 1QFY18) operating profit, is TM’s global and wholesale business arm serving global carriers and local operators, focusing on content localisation to minimise outbound bandwidth and offer easier access for businesses at lower prices.
The research firm further highlighted that in 1QFY18, TM Global’s revenue fell six per cent year on year (y- o-y) due to lower indefeasible rights of use ( IRU) sales, while operating profit rose at a slight four per cent y- o-y.
“Within TM’s three main core divisions, TM Global delivered the highest operating margins, averaging at 25 per cent over the past four quarters versus 18 per cent for TM One and two per cent for Unifi,” it said.
“Meanwhile, recruitment rates for new unifi customers continue to grow, rising five per cent quarter on quarter (q- o-q) and 20 per cent y- o-y to 1.2 million in 1QFY18.
“However, Streamyx shrank by six per cent q- o-q and 19 per cent y-o-y to 1.1 million due to migration to unifi and other fixed and wireless broadband providers.”
According to AmInvestment Bank, in 1QFY18, unifi average revenue per users (ARPUs) slid sequentially by RM3 per month q-o-q to RM194 per month as TM positions to accommodate the government’s drive to “double the speed for half the price”.
“This has led to TM’s share price weakness over the past few weeks.”
However, AmInvestment Bank continued to expect the group’s convergence strategy to offer quadplay services to eventually lead the path towards sector consolidation as the need for a potential remerger with Axiata Group Bhd is re-accentuated by its recent weak 1QFY18 results.