TM closes higher on new wireless broadband plan

Unifi Air is hailed as a solution for Streamyx customers who reside in LTE coverage areas


TELEKOM Malaysia Bhd (TM) continues to attract investor interest following the announcement of Unifi’s latest wireless high-speed broadband service, Unifi Air.

It is characterised as one of the many solutions to elevate the Internet experience of existing Streamyx customers who reside in its LTE coverage areas.

TM also announced that existing Streamyx customers will be migrated to Unifi Lite starting September 2019.

The counter gained two sen or 0.5% to close at RM4.02 yesterday after trading between RM3.89 and RM4.07, thus valuing the company at RM15.11 billion.

The company has lost RM3.69 billion of market value since the government pushed for lower prices for telecommunications services last year.

TM’s move to slash prices on its Streamyx service plans could hurt the group’s earnings in the near to mid term due to the negative impact upon its average revenue per user (ARPU), JPMorgan Asia Pacific Equity Research said in a recent report.

The telecommunications giant expects to upgrade 70% of its Streamyx customers to Unifi fibre broadband services by end-2020.

Counter-intuitively, the migration to fibre could lead to further compression of ARPU for TM despite the faster speed and capital expenditure required to migrate customers. TM’s Streamyx 8Mbps plan is priced at RM160, while the Unifi 30Mbps plan is priced at RM79.

JPMorgan noted that every RM10 reduction in Streamyx ARPU is 1% dilutive to TM’s revenues.

At the end of the first quarter of 2019 (1Q19), there were 872,000 Streamyx customers generating ARPU of RM87.

“If ARPU declines to RM77, we calculate revenue loss of about RM100 million, which is about 1% of our forecast financial year 2019 revenue of RM11 billion,” the investment bank stated in a note last Friday.

Unifi fibre ARPU declined by 7% year-on-year to RM179 in 1Q19 from RM193 in 1Q18 and is likely to remain under pressure.

“There is a further downside risk to TM’s Unifi fibre ARPU as currently three out of its four plans are priced lower than its ARPU. There’ll be a significant downside to the share price if the cost reduction announced in 1Q19 is not sustained,” JPMorgan said.

Other telcos recorded a marginal decline in their share prices yesterday after the unveiling of Unifi Air.

TIME dotCom Bhd closed five sen or 0.56% lower at RM8.91, giving it a market capitalisation of RM5.21 billion.

Volatile global markets saw Maxis Bhd close five sen or 0.92% lower at RM5.37. The company is now valued at RM42 billion.

Axiata Group Bhd closed at RM4.83, down 11 sen or 2.23% lower. It now has a market capitalisation of RM44.09 billion.

Digi.Com Bhd lost one sen or 0.2% to RM4.97, giving it a RM38.64 billion market capitalisation.