Telekom Malaysia once again reported a resilient financial year for 2022, despite an inconsistent 12 months the network operator delivered a round of solid performance. However moving into 2023, there are multiple issues that require attention which could see the group challenging itself to stay focused.
On the government’s announcement on Mandatory Standard on Access Pricing (MSAP), TM commented that the recently announced MSAP is currently undergoing negotiation and is due to be concluded by 1HFY23. Nonetheless, it is looking to retain its existing subscribers, without reducing prices. One of the ways would to retain subscribers is by offering complementary speed upgrades. MIDF reckons that the larger expected cut in MSAP has been priced in and TM is to likely experience a less substantial ARPU impact compared to the situation in 2018.
With regards to 5G Rollout with DNB, the group reiterated that the Fibre Leasing Service agreement with Digital Nasional Berhad to supply the 5G provider connectivity options is still ongoing. To recall, the term sheet agreement with a total contract value of RM2.0b over 10 years will require TM to provide DNB with 5G fibre leasing services for connectivity between DNB’s 5G mobile sites and nodes, leveraging on its domestic fibre cable network which spans over 640,000 km across the country. Given DNB’s new deadline to reach 80% coverage by the end of 2023, up from 50% at the end of 2022, TM’s site fiberisation team will have a demanding year ahead. We believe TM will continue to be a reliable wholesale infrastructure provider, given their significant role is to drive the digital industry and 5G ecosystem.
For this year’s financial Guidance, TM can’t provide any guidance as it is awaiting the MSAP conclusion which is due in 1HFY23, and the 5G rollout plan from the Government which is also due this month. Nonetheless, they plan to continue investing in their capex not only on the core business but also beyond the organic growth to ensure continuous improvement across all lines of business in the Group. MIDF opines the capex spending will be around 18-20% of the Group’s revenue, at max, equivalent to FY22 spending. On a side note, the management stated that the dividend policy remains intact at 60% of the Group’s PATAMI.
As the favored fiber service provider, MIDF says it believes TM will persist in its efforts to expand the deployment of 4G and 5G fiber infrastructure while collaborating with local service providers in accordance with the Government’s JENDELA initiative. The fact that TM will provide 5G fiber leasing services for DNB’s 5G infrastructure requirements also demonstrates TM’s dedication to infrastructure sharing and its role in facilitating exceptional wireless solutions and services.
