GLC says implementation of the MSAP will hurt its earnings due to lower broadband prices

By P PREM KUMAR / Pic By MUHD AMIN NAHARUL

Telekom Malaysia Bhd (TM) has appealed to the government to delay and revise the implementation of the Mandatory Standard on Access Pricing (MSAP), which will force the government-linked company (GLC) to slash its fixed broadband prices.

Such reductions in charges to users will further deteriorate the company’s earnings, which have been under pressure for the past few quarters.

According to people with knowledge of the matter, an official appeal has been made to the Prime Minister’s Office and the Ministry of Finance (MoF) to revoke the MSAP implementation, which has been backdated to January 2018.

The MSAP was announced last month as the government seeks to make broadband access cheaper, as promised by the Pakatan Harapan government. The MoF is expected to discuss the appeal.

“TM has appealed, saying if they implement the MSAP, it will hurt their earnings,” sources told The Malaysian Reserve.

The appeal, if accepted, would be the escape route to delay the implementation of MSAP beginning June 8, as announced by Communications and Multimedia Minister Gobind Singh Deo last month. He said the Malaysian Communications and Multimedia Commission (MCMC) had implemented the MSAP since June 8, which would result in reductions in fixed broadband prices.The MSAP stipulates the ceiling wholesale prices that can be charged by service providers for the facilities and services used by retail telco players. It was slated for enforcement on Jan 1, 2018, but was placed on hold after an earlier appeal by TM to revise some of the pricing components.

MCMC had stipulated July 31 as the extended deadline to complete all access agreements based on the new MSAP prices. The access agreement has to be compliant with MCMC’s Mandatory Standards on Access (MSA) and MSAP.

The telcos, however, have yet to receive any access agreement to-date from TM that is compliant with the MSA and MSAP.

“As a result of this delay and thinking that TM needs more time to draft new agreements, the deadline has been extended until the end of August.

“At this crucial juncture, TM has written to the government to halt the MSAP implementation,” the sources said.

After Gobind’s announcement, the broadband company, which had seen revenues from traditional business like voice dwindled, had announced an “affordable” 30 megabits per second UniFi plan at RM79 per month for the B40 (bottom 40%) household income segment.

The company said it will also introduce three upgrade plans for existing customers with up to 10 times the current speed, in line with the government’s aspiration to provide cheaper broadband at higher speeds.

However, sources said the government’s intention, besides higher speed, is price reduction.

“The minister (Gobind) had always said double the speed for half the price…that means price has to come down too, which is what is being appealed by TM,” said one source.

According to RAM Rating Services Bhd, the MSAP is expected to have a “most pronounced impact” on the financial position of TM, as its implementation would lower wholesale prices on highspeed broadband access for the other telcos.

“This would allow the telcos to cut the prices of their broadband packages, thereby compelling TM to revise theirs accordingly to remain competitive.

“As it is, competition is intensifying — with a noticeable shift in consumer preferences to mobile and wireless broadband,” RAM said in a recent note.

The retail broadband segment constitutes the bulk of top line for TM, at 44% of its financial year 2017.

RAM noted that TM could see a gradual 25% reduction in broadband subscription rates over the next two years, flat subscriber growth and further debt drawdown for capital expenditure and dividends.

TM shares ended last Friday at RM3.73, a sen higher than last Thursday. With a paid-up of 3.76 billion shares, TM’s market capitalisation was RM14.01 billion.

On Aug 3, TM saw RM714 million wiped out from its market capitalisation as investors scurried for cover over worries about the impact of competition in the fibre broadband business. Its shares fell 4.9% or 19 sen to RM3.68, which was the lowest since July 18. Its recent low was RM3.06 on June 28.

The telco could also face a new competitor, Tenaga Nasional Bhd, that could jump into the fray as it has enough fibre across the country.