Shares of Malaysian telcos fall on earning outlook worries

Telecommunications companies (telcos), led by Telekom Malaysia Bhd (TM) and sister company Axiata Group Bhd , were the biggest drag on the stock market as investors continue to fret over their earnings outlook.

The FBM KLCI tumbled 16 points, or almost 1%, to close at 1,678 points – its lowest level since January 2017.

Shares in TM fell after Fitch Ratings revised its credit outlook to negative on worries that the telco would continue to struggle with rising cost pressures.

The stock declined eight sen, or 2.5%, to close at RM3.13 on a volume of 11.27 million shares – its lowest level since July 2010. Sister company Axiata plunged 20 sen, or 4.7%, to RM4.06.

Fitch yesterday revised TM’s outlook to “negative” from “stable” due to its weakening credit profile, driven by pressure on earnings before interest, tax, depreciation and amortisation.

Fitch also said TM was impacted by its continuing high capex and dividend commitments.

“The company’s goals for 2018 include flat earnings before interest and tax and revenue growth of 3.5%-4%, suggesting near-term cost pressure,” it said.

The rating agency said in a statement that its long-term foreign-currency issuer default rating and its senior unsecured rating were affirmed at A-.

“We expect TM’s continued dominance of the domestic fixed-line market and the ongoing modest expansion in 4G networks to support a leverage profile that is consistent with the rating,” it said.

Shares in TM had been under pressure in recent days following the government’s announcement last week to reduce the price for broadband by year-end.

Communications and Multimedia Minister Gobind Singh Deo had said last week that broadband prices should fall by at least 25% with the implementation of the mandatory standard on access pricing on June 8.

https://www.thestar.com.my/business/business-news/2018/06/26/shares-of-telcos-fall-on-earning-outlook-worries/