Telekom sees RM714m erased from market cap

Telekom Malaysia Bhd (TM) saw RM714mil wiped out from its market capitalisation on Friday as investors worried about the impact of greater competition in the provision of broadband via fibre.

It ended the day down 4.9% or 19 sen to RM3.68, which was the lowest since July 18. Its recent low was RM3.06 on June 28.

With a paid-up of 3.7579 billion shares, TM’s market capitalisation was reduced to RM13.829bil.

Axiata Group Bhd fell seven sen to RM4.32.

The Star reported telecommunication players will have little excuse not to provide broadband access via fibre to users across the nation, as TM’s ducts (carriageway) will soon be open to them.

The report said for the longest time, TM’s ducts were solely meant for its own use although the access to high-speed broadband (HSBB) was open to all players.

With the new mandatory standard access pricing coming into force, any player can use Telekom’s ducts to lay fibre to reach out to existing and new areas. The wholesale pricing for HSBB usage has also been lowered.

In an interview, Communications and Multimedia Minister Gobind Singh Deo has even asked Tenaga Nasional Bhd (TNB) to open its fibre optic network, and potentially ducts and poles to telecoms players. If the latter agrees, then it could signal the end of TM’s monopoly in the fibre space.

AmInvest Research downgraded its call on TM to hold from buy with a lower fair value of RM3.80 a share (from an earlier RM4.40 a share) with an FY19F enterprise value/earning before interest, tax, depreciation and amortisation (EV/EBITDA) of six times.

“This was three standard deviations below its three-year average of eight times given the government’s agenda to lower broadband prices amid rising competition.”

“We have cut FY18F-FY20F earnings by 4%-7% on lower average revenue per user (ARPU) assumptions for TM’s unifi
segment,” it said.

To recap, Gobind said the ministry’s position would be that now other telcos have a right to use those ducts, subject to payment to TM for the right of way, of course with a reasonable payment, and they can use those ducts (pipes) to lay fibre and extent their network.

The move is intended to create the much-needed competition in the fixed broadband space by having more players slugging it out.

Hopefully, such a move will see a drop in the pricing of broadband packages, the quality of services including the speed improved, and more people potentially having access to fixed broadband services.

There are over 2.5 million fixed broadband users in the country in a market where there are 6.5 million households, leaving much room for growth in this space.

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