TM (4863) - TM heeding the clarion call on broadband
April 20, 2015 : 10:52 AM MYT
Telekom Malaysia Bhd
(April 17, RM7.35)
Maintain neutral with a raised target price of RM7.40 from RM7.35 previously: TM has unveiled two new fixed broadband (FBB) plans in line with the government’s call for cheaper broadband services.
The new plans will be made available for subscription in mid-June/July. Its new entry-level 1Mbps broadband plan which is priced at RM38/month (ex-GST) and bundled with 1GB of data, is at a 57% discount to the current 1Mbps package of RM88 per month with no usage cap.
It also lowered the price of its 10Mbps UniFi triple play FBB plan by 10% to RM179 per month (ex-GST) from RM199 per month. We believe the affordable plans will allow TM to tap into a wider customer base and increase broadband/data uptake.
This comes on the back of the slowdown in subscriber growth (fourth quarter 2014: +0.7% year-on-year) in recent quarters and ahead of the roll-out of high speed broadband phase 2 (HSBB2)/suburban broadband (SUBB) and its converged mobile offering, slated to be introduced by year-end.
As the new plans are targeted at a new market segment with potential for upselling, we think the risk of cannibalisation and average revenue per user (Arpu) dilution will be minimised.
We note there are some 300,000 subscribers (13% of TM’s overall FBB base) on broadband packages of 1Mbps, who could down-trade to a cheaper plan although the revenue impact could be offset by more virgin FBB subscribers signing up.
We think the new UniFi plan would compel subscribers on the 5Mbps line to trade up given the better data experience, and that they are currently paying close to RM160 per month (with GST).
We lift our financial year 2015 (FY15) to FY17 net profit forecasts by 1% to 3% after imputing stronger FBB subscriber growth, although we expect Arpu to be slightly diluted by the FBB plans.
Our discounted cash flow-based target price is revised to RM7.40 (from RM7.35) following the earnings revision. TM’s longer-term growth catalyst will be driven by the roll-out of HSBB2 and SUBB, as well as the eventual roll-out of P1’s converged mobile broadband product. — RHB Research, April 17
http://www.theedgemarkets.com
April 20, 2015 : 10:52 AM MYT
Telekom Malaysia Bhd
(April 17, RM7.35)
Maintain neutral with a raised target price of RM7.40 from RM7.35 previously: TM has unveiled two new fixed broadband (FBB) plans in line with the government’s call for cheaper broadband services.
The new plans will be made available for subscription in mid-June/July. Its new entry-level 1Mbps broadband plan which is priced at RM38/month (ex-GST) and bundled with 1GB of data, is at a 57% discount to the current 1Mbps package of RM88 per month with no usage cap.
It also lowered the price of its 10Mbps UniFi triple play FBB plan by 10% to RM179 per month (ex-GST) from RM199 per month. We believe the affordable plans will allow TM to tap into a wider customer base and increase broadband/data uptake.
This comes on the back of the slowdown in subscriber growth (fourth quarter 2014: +0.7% year-on-year) in recent quarters and ahead of the roll-out of high speed broadband phase 2 (HSBB2)/suburban broadband (SUBB) and its converged mobile offering, slated to be introduced by year-end.
As the new plans are targeted at a new market segment with potential for upselling, we think the risk of cannibalisation and average revenue per user (Arpu) dilution will be minimised.
We note there are some 300,000 subscribers (13% of TM’s overall FBB base) on broadband packages of 1Mbps, who could down-trade to a cheaper plan although the revenue impact could be offset by more virgin FBB subscribers signing up.
We think the new UniFi plan would compel subscribers on the 5Mbps line to trade up given the better data experience, and that they are currently paying close to RM160 per month (with GST).
We lift our financial year 2015 (FY15) to FY17 net profit forecasts by 1% to 3% after imputing stronger FBB subscriber growth, although we expect Arpu to be slightly diluted by the FBB plans.
Our discounted cash flow-based target price is revised to RM7.40 (from RM7.35) following the earnings revision. TM’s longer-term growth catalyst will be driven by the roll-out of HSBB2 and SUBB, as well as the eventual roll-out of P1’s converged mobile broadband product. — RHB Research, April 17
http://www.theedgemarkets.com
