Govt’s call for TNB to open up its fibre network could end TM’s monopoly
Research firm says telco can play more crucial role via ServiceCo and AssetCo
THE government’s call for Tenaga Nasional Bhd (TNB) to open up its sprawling fibre network to telecommunications players has led to the idea of splitting Telekom Malaysia Bhd (TM) into a service company (ServiceCo) and a regulated asset company (AssetCo).
Communications and Multimedia Minister Gobind Singh Deo recently said TNB should open up its fibre network to support the nation’s need for increased broadband penetration.
Analysts have said the move could lead to the end of TM’s monopoly in the fibre space in Malaysia.
There are more than 2.5 million fixed broadband users nationwide in a market of 6.5 million households, leaving much room for growth.
TM reportedly has more than 54,000km of fibre optics deployed globally and more than two million broadband customers.
Macquarie Equities Research said TM could play a more crucial role in a liberalised fibre network if it was split into ServiceCo and AssetCo.
The research firm said AssetCo would provide an infra base for all access seekers to provide broadband services, similar to the Next Generation Nationwide Broadband Network (NG NBN) model in Singapore.
Macquarie said based on the NG NBN model, TM’s ducts and manholes could be stripped out to provide a core network for service providers.
It valued AssetCo at RM2.15 per TM share at 15 times price-earnings ratio, assuming that 80 per cent of TM’s telecom network assets form the base of AssetCo and a 7.3 per cent return on asset (as per TNB’s regulated return).
“Assuming ServiceCo is then merged with an existing mobile operator thus removing wireless losses, ServiceCo would be worth RM3.56 per TM share for combined value of RM5.71 per TM share,” it said.
While the liberalisation could be negative for TM over the long run, Macquarie said its discussions with TNB had suggested that the latter’s fibre infrastructure was inadequate to allow a telco to gain significant access to homes without significant investments.
“Macquarie’s discussions with TNB suggest that the bulk of the utility group’s fibre assets sits on its transmission network with limited fiberisation of its substations.
“Under Regulatory Period 2, which spans between this year and 2020, the fiberisation of its substations that are closer to homes will increase but it will still require telcos to build last-mile infrastructure — the costliest part of a broadband rollout,” it said.
Access to TNB’s ducts and poles would bring down these costs, but security and safety issues would have to be addressed, it added.
Macquarie has maintained its “outperform” call on TM shares, with a target price of RM5.40.
A telecommunications analyst told NST Business that while it was too early to tell on how the network liberalisation was going to impact TM, it could be negative for the group over the long term, considering its current monopoly.
However, the analyst said while it was not impossible to split TM into ServiceCo and AssetCo, the effort could meet roadblocks along the way as it was going to result in difficult situation when national agenda met shareholders’ stakes.
“It’s still too early to tell now as the government has not announced any clarity on its national broadband agenda,” the analyst added.