TM slips into the red

Telco hit by huge impairments on wireless and fixed network assets

PETALING JAYA: After wading through competitive pressures in recent months, Telekom Malaysia Bhd (TM) slipped into its first quarterly loss in 10 years due to huge impairments on its wireless and fixed network assets.

The national telecommunications giant took more than RM1bil in impairments, which resulted in a net loss of RM175.6mil for the third quarter ended Sept 30. This compared with a net profit of RM211.9mil that the group registered in the corresponding period last year.

Separately, due to the challenging operating landscape, TM has proposed to cut its dividend payout ratio with effect from the financial year ending Dec 31, 2018, to support its long-term growth objectives.

Under the revised dividend policy, the company intends to distribute yearly dividends of 40% to 60% from its net profit. This compared with its dividend payout ratio of at least 100% in previous years.

“This is a matter of great importance to us. In light of the current operating landscape and after careful consideration of the potential impact on our earnings alongside our efforts to transform the company to adapt thereto, the board has determined the review of our dividend policy to support TM’s long-term strategic objectives,” TM acting group CEO Imri Mokhtar said in a statement.

Imri is the second interim head of TM follow- ing the sudden resignation of Datuk Bazlan

Osman on Nov 16.

Bazlan was appointed as TM’s acting CEO in early June after Datuk Seri Mohammed Shazalli Ramly quit the job shortly after Pakatan Harapan came into power.

Outgoing Astro Malaysia Holdings Bhd CEO Datuk Rohana Rozhan has been tipped to take over as the head of TM next year. She is sched- uled to leave the pay-TV operator by end-January 2019.

TM’s shares fell one sen to yesterday.

The company, which has seen RM14.96bil of its market capitalisation being wiped out since the beginning of this year, is set to be excluded as a constituent stock of the FBM KLCI by the end of this year.

In announcing TM’s financial results yesterday, Imri noted that the group continued to face various headwinds from competitive market dynamics.

“In light of the continued pressure from industry and market challenges and its impact on our revenue thus far, we have taken a prudent view, by undertaking the impairment of our network assets – this resulted in close to a RM1bil impairment loss this quarter,” he said.

In its filings, TM revealed that during the quarter in review, it recognised a provision of RM934.8mil for the impairment of fixed and wireless network assets, following the continued pressure from challenging business, industry and economic conditions combined. In addition, the group also recognised a provision of RM132.4mil as the estimated impact of the regulatory mandated access pricing on the group’s revenue under the wholesale segment from Jan 1 to Sept 30 this year.

Consequently, TM posted a loss per share of 4.67 sen for the third quarter of 2018, compared close at RM2.32

with an earnings per share of 5.64 sen in the corresponding period last year.

Its revenue was steady at RM2.95bil in the quarter, up 0.2% from RM2.94bil in the previous corresponding quarter, thanks to higher data as well as other telecommunications-related services income.

According to Imri, TM currently had 2.29 million broadband customers, with its unifi customer base growing at 1.26 million as at end-September 2018 as compared to 1.06 million as at end-September 2017.

“In terms of convergence, we saw more customers moving up the value chain having triple-play services and above, evidenced by our convergence penetration now at 48% of TM’s household penetration compared with 39% this time last year,” Imri said.

On a cumulative basis, TM posted a net profit of RM83.5mil for the nine months to end-September 2018, down 87.2% from RM652.7mil in the corresponding period last year. This resulted in its earnings per share slipping to 2.22 sen from 17.37 sen previously.

During the first nine months of 2018, TM’s revenue decreased 1.7% to RM8.73bil from RM8.9bil in the previous corresponding period, mainly due to lower revenue from voice and data services.

TM said the recent industry challenges and market environment have had major impact on the overall revenue estimates and earnings of the group this year.

It said the group would anticipate the challenging environment to persist for both its retail and wholesale segments. In the midst of these challenges, TM said it would continue to focus on strengthening the performance of its core business and operations.

For the first nine months of 2018, TM’s total capital expenditure stood at RM1.32bil, or 15.1% of revenue. By asset type, access comprised 62% of total spending, followed by core network at 15% with the remaining 23% going for support systems.