TM industry tie-up a win

PETALING JAYA: The move by Telekom Malaysia Bhd (TM) to push for domestic roaming with other players will help boost its mobile coverage and presence in the country in view of 5G.

Even though the agreement is for 4G sites, it is necessary for TM to have enough mobile subscribers to be able to capture users for its 5G experience eventually.

This new deal allows TM to save on capital expenditure or capex and close the gap on 4G coverage with its biggest peers, said RHB Research.

Recently, TM teamed up with Maxis Bhd for the multi-operator core network and 2G/4G domestic roaming.

The agreement for three years will see its 4G (unifi mobile) population coverage expand to more than 95% from more than 80% currently (own sites). Maxis will provide access to 6,800 4G sites and 10,000 2G sites.

No value was disclosed for the wholesale contract and TM said it is based on usage (not subscribers), rates and other agreed parameters.

RHB Research said it continued to see robust Internet/unifi and wholesale (domestic and international) growth offsetting weaker/muted growth at TM One, which is hit by lower value of public sector contracts upon renewal, ie, MyGov*Net and various execution delays.

TM is in discussions with hyperscalers and/or strategic investors for the expansion of its data centres (DC), which would see upfront/pre-sold DC inventories, it added.

TM will also recognise significant tax credits/losses in financial year 2023 (FY23) following its internal reorganisation exercise, which saw its key operating units being transferred to TM Technology Services (previously Webe Digital).

This would result in a boost (non-cash) to the group’s reported profit after tax and minority interest (Patami) and consequently higher dividend per share payout.

TM’s dividend payout is based on 40%-60% of reported Patami.

There is upside risk to its forecast, with management expecting FY23 earnings to be on par or better than FY22, notwithstanding the impact of the new mandatory standard on access pricing, supported by extended cost efficiencies.

TM should see over RM100mil in operating expenditure and rental cost savings from the shift of its corporate headquarters from Menara TM to TM Campus in Cyberjaya and internal cost efforts.

It has a “buy’’ call on the stock with a target price of RM6.20 a share.

It said TM remains its preferred sector pick.