Customers likely to switch to lower-priced packages with higher speeds rather than maintain current plans
By NG MIN SHEN / Pic By ISMAIL CHE RUS
Domestic broadband price reductions continue to hit Telekom Malaysia Bhd (TM) and TIME dotCom Bhd as investors take a cautious approach on the future earnings prospects of these companies.
The Malaysian Communications and Multimedia Commission (MCMC) said on Sunday that TM, TIME, Maxis Bhd and Celcom Axiata Bhd have introduced broadband entry-level packages priced below RM100.
The move is in line with Communications and Multimedia Minister Gobind Singh Deo’s call for telecommunications companies (telcos) to offer cheaper broadband services with greater speed, as part of the Mandatory Standard on Access Pricing (MSAP).
Under the MSAP, retail broadband prices are expected to drop by about 25% by the end of this year.
AmInvestment Bank Bhd analyst Alex Goh said existing customers would likely switch to lower-priced packages with higher speeds rather than maintain their current broadband plans.
“You may not need the extra speed. So, most of the existing customer base would move towards the lower price point. That would mean a drop in revenue with the impact being more noticeable for TM,” he told The Malaysian Reserve.
TM’s earnings have already been hit as seen in their most recent financial results. The group’s net profit plunged 51.6% to RM101.93 million in the second quarter ended June 30, 2018 (2Q18), from the RM210.48 million recorded a year ago. The company attributed the poor performance to to lower revenue and foreign- exchange losses.
But revenue during the quarter was almost unchanged at RM2.94 billion from RM2.98 billion a year ago.
“TIME is also expected to see some profit erosion going forward. Maxis will see lower margins as they are riding on TM’s high-speed broadband (HSBB) service. Axiata Group Bhd (Celcom’s parent) won’t see much impact since its broadband operations are only in Sabah,” Goh said.
According to MCMC, TM’s starter pack of 30Mbps, previously priced at RM139 before the MSAP was implemented on June 20, now costs RM79. Celcom’s 40Mbps starter pack has been reduced to RM80 from RM180.
Maxis’ 30Mbps starter pack is now priced at RM89 versus RM139 previously, while TIME’s 100Mbps starter pack has been reduced to RM99 from RM149.
TIME’s 500Mbps package is now priced at RM139, while its 1Gbps package stands at RM199.
Meanwhile, Gobind said he realised that the starter plans, despite sounding affordable, do not reduce the prices for existing customers.
“This means that they do not immediately get to enjoy the benefits of the new plans.
“I also found that there have not been any suggestions on how to overcome the problems faced by Streamyx users, which is something that needs to be handled immediately.
“I will be meeting with representatives from the telcos to discuss the matter as soon
as possible,” he said in a statement.
TM said last month that existing Streamyx customers, also known as pre-UniFi users, can begin checking for eligibility for a free upgrade to UniFi.
However, this depends on the availability of UniFi in their areas. In areas not presently covered by UniFi, Streamyx users will be upgraded to 8Mbps, the highest speed available for the service.
Streamyx broadband plans are currently priced at between RM110 and RM160 per month, with Internet speeds ranging from 384Kbps to 8Mbps, considered ancient compared to UniFi and other operators.
Public Investment Bank Bhd in a research report yesterday downgraded the telecommunications sector to ‘Underweight’ due to the challenging environment and competition both for mobile and fixed-line operators.
It said the sector has been hit by lower margins and greater competition after the MSAP was implemented. There is also still room for further price declines in the mobile segment, judging from the relatively high profit margins enjoyed by operators.
“Revenues are projected to fall, while the scope to improve on cost efficiency is limited,” the research house said.
It downgraded Maxis and DiGi.Com Bhd to ‘Underperform’ and ‘Neutral’ respectively, while maintaining ‘Neutral’ calls on Axiata and TM, although there is downside to Axiata if it does engage in a bidding war for its associate company, Singapore-based M1 Ltd.
TIME’s shares were hit the most yesterday, closing 25 sen or 3.03% lower at RM8, valuing the company at RM4.67 billion.
TM, whose shares fell seven sen or 2.27% to RM3.01, was the most active telco counter yesterday valued at RM11.31 billion.
“TIME’s shares were down on a catch-up effect. If you look at TM, they’ve already been hit very badly in the last few months, while TIME wasn’t,” Goh said.
Axiata fell one sen or 0.23% to RM4.29 for a market capitalisation of RM38.91 billion. Maxis closed one sen or 0.18% higher at RM5.70, valuing the company at RM44.56 billion.
DiGi rose three sen or 0.64% to RM4.71, leaving the telco valued at RM36.62 billion with 2.34 million shares traded.