Stock Name: TM
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK
Telekom Malaysia Bhd (TM)
(March 25, RM3.48)
Maintain neutral at RM3.40, target price of RM3.03: We were at the high-speed broadband (HSBB) launch on Wednesday night at Merdeka Square in Kuala Lumpur. The key showcase piece was TM's much-awaited triple-play offering (branded as UniFi) where guests were treated to superior broadband bandwidth and a selection of 22 linear Internet protocol television (IPTV) channels.
We were reasonably impressed by the broadband experience which boasts consistent throughputs of 18Mbps-20Mbps with little noticeable service degradation (sceptics would argue that this is possible in a "closed" environment and it remains to be seen if such would prevail in a residential setting). On IPTV, the on-screen interface appears friendly and uncluttered. We gather that up to 50 true video-on-demand channels will be made available.
For a start, TM will be making available three bundled packages (voice+broadband+IPTV with speeds of 5Mbps, 10Mbps and 20Mbps, respectively) with monthly subscription rates that range from RM149 to RM249 for residential use while for business use, the rates are from RM199 to RM899.
The entry level plan is priced only slightly lower than its top- tier 4Mbps Streamyx Combo ADSL package which retails for RM150 per month (including fixed-line access). Subscribers will get a sleek Huawei set-top box, a router modem and an IP phone (TM's IP phone allows free inter-IP calls with an attractive flat rate tariff for mobile calls of 10 sen per min). Overall, we believe the price-points are attractive and would encourage some of its existing ADSL subscribers on 1Mbps/4Mbps lines to up-trade with some cannibalisation of the 4Mbps plan anticipated. To help boost broadband penetration in the country, TM also lowered the monthly access for its entry level 384kbps ADSL plan to RM38 per month from RM50 per month. With access to RM1 billion worth of Universal Service Provision funding (a fund under the Malaysian Communications and Multimedia Commission), it will also provide bundled netbooks to students under a student broadband package.
TM remains a neutral on valuation. Although the HSBB opens up a new revenue stream and is viewed as a longer-term panacea to TM's eroding fixed-line franchise, we are not overly excited given expectations of modest take-up in the medium term that will be accompanied by sharp increases in operating expenditure (opex) and capital expenditure (capex) (upside risks to capex) into financial year ending Dec 31, 2012 as TM expands its coverage to 1.3 million premises. - OSK Research, March 25
This article appeared in The Edge Financial Daily, March 26, 2010.
Company Name: TELEKOM MALAYSIA BHD
Research House: OSK
Telekom Malaysia Bhd (TM)
(March 25, RM3.48)
Maintain neutral at RM3.40, target price of RM3.03: We were at the high-speed broadband (HSBB) launch on Wednesday night at Merdeka Square in Kuala Lumpur. The key showcase piece was TM's much-awaited triple-play offering (branded as UniFi) where guests were treated to superior broadband bandwidth and a selection of 22 linear Internet protocol television (IPTV) channels.
We were reasonably impressed by the broadband experience which boasts consistent throughputs of 18Mbps-20Mbps with little noticeable service degradation (sceptics would argue that this is possible in a "closed" environment and it remains to be seen if such would prevail in a residential setting). On IPTV, the on-screen interface appears friendly and uncluttered. We gather that up to 50 true video-on-demand channels will be made available.
For a start, TM will be making available three bundled packages (voice+broadband+IPTV with speeds of 5Mbps, 10Mbps and 20Mbps, respectively) with monthly subscription rates that range from RM149 to RM249 for residential use while for business use, the rates are from RM199 to RM899.
The entry level plan is priced only slightly lower than its top- tier 4Mbps Streamyx Combo ADSL package which retails for RM150 per month (including fixed-line access). Subscribers will get a sleek Huawei set-top box, a router modem and an IP phone (TM's IP phone allows free inter-IP calls with an attractive flat rate tariff for mobile calls of 10 sen per min). Overall, we believe the price-points are attractive and would encourage some of its existing ADSL subscribers on 1Mbps/4Mbps lines to up-trade with some cannibalisation of the 4Mbps plan anticipated. To help boost broadband penetration in the country, TM also lowered the monthly access for its entry level 384kbps ADSL plan to RM38 per month from RM50 per month. With access to RM1 billion worth of Universal Service Provision funding (a fund under the Malaysian Communications and Multimedia Commission), it will also provide bundled netbooks to students under a student broadband package.
TM remains a neutral on valuation. Although the HSBB opens up a new revenue stream and is viewed as a longer-term panacea to TM's eroding fixed-line franchise, we are not overly excited given expectations of modest take-up in the medium term that will be accompanied by sharp increases in operating expenditure (opex) and capital expenditure (capex) (upside risks to capex) into financial year ending Dec 31, 2012 as TM expands its coverage to 1.3 million premises. - OSK Research, March 25
This article appeared in The Edge Financial Daily, March 26, 2010.
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