PETALING JAYA: The upcoming reduction in broadband internet prices from the implementation of the Mandatory Standard on Access Pricing (MSAP) after September 2023 will unlikely impact Telekom Malaysia Bhd’s (TM) financial performance for its third quarter, said PublicInvest Research.
The MSAP, unveiled by the Malaysian Communications and Multimedia Commission in February 2023, sets the wholesale rates for various telecommunication services including broadband access prices. However, the MSAP can only take effect after TM concludes its wholesale agreements with access seekers.
Hence, PublicInvest said the actual influence on TM’s earnings will hinge on the terms negotiated with telecom firms leasing TM’s infrastructure, as these terms may deviate from the MSAP’s prescribed rates due to variations in commercial contracts.
“In our opinion, TM could post lower profit in the early stage of implementation but earnings could rebound due to various cost optimisation measures in place,” it said.
The telecommunications giant might consider setting aside reserves to account for the possibility of reducing wholesale rates, it added.
For the third quarter ended Sept 30 (Q3 FY2023), PublicInvest said TM’s financial performance could continue to be weaker due to reduced pricing in significant contracts.
However, it noted earnings will be partially cushioned by tax credits acknowledged during the fiscal years 2023-2024 and enhanced contributions from TM Global.
“We are forecasting FY2023 earnings to fall by circa 4%, while FY2024 will remain flat. Nevertheless, we do not rule out further downside risks, should the decline in wholesale rates be larger than expected,” it said.
PublicInvest maintained an outperform call on TM with a target price of RM6.20. Its bullish outlook stems from the group’s prominent role as Malaysia’s network infrastructure provider, positioned favourably to capitalise on the 5G network rollout and increasing demand for hyperscale data centres.
This, combined with TM’s cost-efficiency strategies and expansion of service offerings, is anticipated to mitigate the adverse effects of declining wholesale prices on its profitability.
At the close of trade, TM’s share price was down five sen or 1.01% to RM4.92, valuing the company at RM18.88 billion.