Analysts downgrade ratings for TM as competition intensifies
KUCHING: Analysts have downgraded their call on Telekom Malaysia ( TM) given the government’s agenda to lower broadband prices and the possibility of the government opening TM’s carriageway ducts other telecommunication (telco) players.
According to previous news reports, Communications and Multimedia Minister Gobind Singh Deo said that TM’s carriageway ducts will soon be opened for the access of other telco players as part of the government’s strategy to introduce more competition in the fixed broadband market.
He was also reported as saying that the ministry has also approached Tenaga Nasional Bhd ( TNB) on opening its fibre optic network, and potential ducts and poles to telcom players.
In a report, the research arm of AmInvestment Bank Bhd (AmInvestment) said: “While the mandatory standard access pricing structure for the High Speed Broadband usage has not been announced yet, it is likely to be reduced to incentivise third parties to deliver lastmile connectivity.”
It noted that TM and TNB’s memorandum of understanding ( MoU) to jointly develop an implementation plan to deliver the government’s Nationwide Fiberisation Plan ( NFP) was aborted.
“This was the previous and current government’s aspirations to drive the country’s digitalisation under both the NFP as well as TM’s own RM11 billion High Speed Broadband ( HSBB) project, by tapping into the sharing of resources with TNB such as the existing fibre network, control centres, other transmission systems and building facilities of both companies.
“Currently, TNB’s fibre network is primarily used for supervisory control and data acquisition,” it added.
“From our recent meeting with the MCMC, we understand that the current broadband penetration rate of 85 per cent appears poised to reach the 95 per cent target envisioned under the 11th Malaysia Plan.
“Hence, TM’s HSBB, HSBB2 and Suburban Broadband (SUBB) programmes already appear to be reaching the government’s goal.
“However, there remains a coverage gap in remote or underserved areas which will require alternative connectivity solutions,” AmInvestment noted.
Meanwhile, it also pointed out that TM has recently announced more affordable propositions at RM79/month (with a quota of 60GB) for households earning below RM4,500/month while boosting the speeds of its existing plans while Unifi aims to raise the speed of its RM139/month package from 30Mbps to 300Mbps while its RM329/month plan from 100Mbps to 800Mbps.
“The stock currently trades at a depressed financial year 2018 forecast (FY18F) enterprise value per earnings before interest, tax, depreciation, and amortisation ( EV/ EBITDA) of six- folds, half of SingTel’s 12- folds due to uncertainties on the impact on its broadband average revenue per units from the rising tide of competition and government-mandated price cuts,” it said.
As such, AmInvestment downgraded its call on TM to ‘hold’ from ‘buy’.