TM projects decline in revenue amid challenging year ahead

According to its group CFO, capex is forecast to remain at the same level this year


Telekom Malaysia Bhd (TM) foresees a decline in its revenue for the financial year ending 2019 (FY19) as the telecommunications environment remains challenging for its business operation.

“TM expects the environment to remain challenging, impacting our business operations and we foresee our revenue declining by a low to medium single digit (year-on-year or YoY),” acting group CEO Imri Mokhtar said at a media briefing in Kuala Lumpur yesterday.

For its fourth quarter (4Q) ended Dec 31, 2018, TM’s net profit plunged 74.9% YoY to RM69.66 million or 1.86 sen earnings per share (EPS) due to pricing pressures on its services.

Revenue for the quarter fell 3.5% YoY to RM3.09 billion due to a decrease in data, Internet and multimedia services, as well as non-telecommunications-related services.

TM declared an interim dividend of two sen per share, payable on April 12.

Its UniFi business’ revenue fell 6.7% YoY to RM1.29 billion in the 4Q on the back of lower revenue from voice services, in line with a drop in the customer base and usage.

Profit, however, rose to RM102.9 million from RM15 million a year ago due to lower operating costs.

Its TM ONE business recorded an 8.4% YoY drop in 4Q revenue to RM1.15 billion due to lower revenue from voice services, while profit fell 31.6% YoY to RM130.4 million due to higher operating costs.

TM Global recorded a 6.8% YoY rise in 4Q revenue to RM705.7 million due to higher demand for voice services, but profit fell 46% YoY to RM90.3 million on higher operating costs.

For FY18, TM’s net profit plunged 83.5% YoY to RM153.15 million due to the recognition of an impairment loss on network assets in the 3Q.

That led to a 65.9% drop in operating profit before finance cost. The group also recognised a higher provision of RM928.5 million during the financial year for the impairment of fixed and wireless network assets.

“This was following the continued pressure from challenging business, industry and economic conditions,” Imri said.

Revenue for FY18 declined by 2.2% YoY to RM11.82 billion due to lower revenue from voice, data and non-telecommunications-related services. EPS fell to 4.08 sen in FY18 from 24.74 sen in FY17.

Group CFO Nor Fadhilah Mohd Ali said total capital expenditure (capex) for 2018 was set at RM2.14 billion, or 18.1% of revenue, and lower than TM’s full-year capex guidance of 19%-20% of revenue.

“In 2018, investments were focused on expanding connectivity via deployment of broadband ports and mobile coverage, as well as on digital infrastructure for information and communications technology, data centre, cloud and smart solutions,” she said.

Nor Fadhilah expects capex to remain at the same level this year, between 18% and 20% of the revenue.

In 2018, TM serviced households saw an increased convergence penetration of 53%, according to Imri.

The group had a total of 2.23 million broadband customers comprising 1.3 million UniFi and 936,000 Streamyx customers respectively.

In 2018, over 911,000 UniFi customers upgraded to 10 times the existing speed, while over 239,000 Streamyx customers upgraded to UniFi. Over 181,000 Streamyx customers upgraded to two times the existing speed where technology permitted, the company revealed.

“For those yet to be upgraded, we will continue ongoing discussions with the government and the Malaysian Communications and Multimedia Commission to explore specific funding options, fit-for-purpose technologies and optimising existing industry mechanisms to deliver a better broadband experience,” Imri said.

He said the group will continue implementing its “Performance Improvement Programme 2019-2021”.

“We will focus on bringing a convergence digital lifestyle to all Malaysians and enable enterprise and public sector industry verticals to realise their full digital potential, while being the industry backbone, connecting Malaysia to the world.

“We will sweat our assets to optimise performance and achieve better focus through convergence,” Imri said, adding that the group will prudently manage its costs to deliver better value to stakeholders.

TM’s share price closed three sen lower at RM3.02 yesterday on the news. The stock hit a low of RM2.15 in October from a high of RM6 early last year, losing some RM12 billion in market capitalisation in the process.

The fall in its share value was mainly due to the implementation of the Mandatory Standard on Access Pricing for wholesale access.

Since TM provides access on its high-speed broadband network, any drop in access pricing affects its bottom line.

TM also faced pricing pressure when the government pushed for lower-priced broadband packages at higher speeds.

When asked if there would be further price reductions, Imri declined to comment.