NFCP players garner negative revenue outlook
KUALA LUMPUR: Analysts have projected negative revenue outlook for National Fiberisation and Connectivity Plan (NFCP) players, following its launch last week.
AmInvestment Bank Bhd (AmInvestment Bank) recapped that under the 11th Malaysia Plan, gross national income (GNI) is expected to reach RM47,720 by 2020. It noted that an entry-level package amounting to one per cent of GNI translates to only RM40 per month.
“This is half of Telekom Malaysia Bhd’s (TM) Unifi Basic currently priced at RM79 per month for 60GB data versus Celcom’s RM80 per month for 30Mbps, Maxis Bhd’s RM89 per month for 30Mbps, Time dotCom Bhd’s (Time dotCom) RM99 per month at 100Mbps and Digi.Com Bhd’s (Digi) RM99 per month at 50Mbps,” the research firm said.
“For further comparison, TM’s second quarter of the financial year 2019 (2QFY19) Unifi average revenue per user (ARPU) average was higher at RM177 per month.”
According to AmInvestment Bank, the government might again be looking at further broadband price cuts next year, which will negatively impact the ARPU trajectory of broadband network owners such as TM and Time dotCom.
“However, the margin impact may be largely mitigated for third-party operators like Maxis, Axiata Group Bhd’s Celcom and Digi, who may be leasing TM’s fibre network at correspondingly lower rates.”
On TM, AmInvestment Bank highlighted that given the group’s role as the national broadband provider, it will likely bear up to half of the NFCP cost, which translates to RM2.2 billion over the next five years.
The research firm also noted that besides TM’s own capital expenditure (capex) requirements, the NFCP rollout alone translates to 19 per cent of financial year 2020 forecast (FY20F) revenue – already above management’s FY19F capex target of 18 per cent and eight per cent in the first half of FY19 (1HFY19).
“Additionally, the thrust of the NFCP towards connecting the rural population could mean that revenue accretion from these investments will be minimal.”
It further noted that the earnings impact to TM will snowball as the group’s capex mounts up to 2025 as higher borrowing costs and depreciation charges will gradually erode the group’s earnings.
“Doubling TM’s annual capex of RM2 billion currently will slightly cut its net profit by three per cent in FY20F but gradually worsen by 10 per cent in FY21F, 19 per cent in FY22F, 30 per cent in FY23F, 48 per cent in FY24F and 49 per cent in FY25F under a worst case scenario.”