TM 1Q17 profit drops 29%

By NG MIN SHEN

Telekom Malaysia Bhd’s (TM) earnings for the first-quarter ended March 31, 2017 (1Q17), fell 28.5% to RM230.43 million from RM322.43 million recorded in the same period a year ago, due to lower foreign-exchange (forex) gains on group borrowings in the current quarter compared to last year.

“We hope to break the RM3 billion barrier in a year’s time in 1Q18,” group CEO Datuk Seri Mohammed Shazalli Ramly said at a media briefing in Kuala Lumpur yesterday.

Operating profit before finance cost also decreased 9.5% to RM299.1 million in 1Q17 due to the absence of any significant other gains recorded in 1Q16, and from a drop in the group’s obligation on a put option over shares of webe Digital Sdn Bhd held by a non-controlling interest.

Revenue for the period under review rose marginally to RM2.96 billion from RM2.86 billion the year before, driven mainly by higher revenue from its Internet services, which contributed 33% to revenue and other segments.

The country’s oldest telecommunications service provider said it is on track to meet its key performance indicators for the financial year ending Dec 31, 2017 (FY17). This includes a revenue growth of 3.5% to 4%, flat earnings before interest and tax levels, and a customer satisfaction measure of 73.

Group CFO Nor Fadhilah Mohd Ali added that the group has budgeted a capital expenditure (capex) of 25% to 30% of its full-year revenue for FY17 similar to FY16.

“The capex will be used to continue the roll-out of fourth-generation long-term evolution deployment, continue what we have worked on for our High-Speed Broadband Phase 2 (HSBB 2) and Sub-Urban Broadband (SUBB) projects, some submarine cable upgrades and some customer projects,” she said.

Last year, the group spent RM3.3 billion in capex, amounting to about 27.5% of revenue. In FY15, the group spent RM2.5 billion in capex, equal to 21.4% of revenue.

The company’s total capex for 1Q17 amounted to RM352 million or 11.9% of revenue, centred mostly on projects such as HSBB and SUBB.

Of the total spent, 53% was allocated for access, 23% for core network and 24% for support systems.

On TM’s wireless mobile service offering webe Digital, group deputy CEO and ED Datuk Bazlan Osman said the service managed to double its penetration rate during 1Q17, following its launch in September last year.

“During 1Q17, we saw webe Digital’s penetration rate growing from 2% of the total households subscribed to TM services to about 4.2%,” he stated.

The group previously said it targeted 8% to 10% of TM households to subscribe to at least one webe Digital line by end-2017.

Bazlan added that the group also aimed at launching the prepaid segment of webe Digital by 3Q17. Currently, webe Digital only offers post- paid subscriptions.

As at end-March 2017, TM recorded a total broadband customer base of 2.37 million customers, while its UniFi segment had close to 979,000 customers activated in 1Q17 compared to 877,000 in 1Q16. Its fixed-line segment recorded 4.16 million customers as at the end of 1Q17.

AmInvestment Bank Bhd maintained its ‘Buy’ call on TM, with a fair value of RM7.90 per share based on a FY17 forecast of earnings value/ earnings before interest, tax, depreciation and amortisation of nine times.

“This is at a 35% discount to Singapore Telecommunications Ltd’s 14 times as the possibility for a likely remerger with Axiata Group Bhd reduces the valuation differential,” it said in a report yesterday.