PETALING JAYA: Telekom Malaysia Bhd
(TM) has turned aggressive to defend and expand its Unifi market share as competition continues to intensify in the fixed broadband and mobile segments.
The telco will escalate its marketing efforts this and next year, including offering subsidised electronic devices for Unifi’s service plans, to retain existing customers and attract new subscribers.
This is a significant departure from its traditional approach, which was primarily defensive and refrained from aggressive competitive measures, according to Kenanga Research.
It said near-term growth is expected to be driven by broadband services, comprising wholesale as TM targets the provision of fibre backhaul for the second 5G network and home fibre.
It is also focusing on cost-effective entry level GPU-as-a-Service for its customers and is open to procuring higher-end GPUs if customer demand progresses toward advanced AI workloads.
Kenanga has an “outperform” call on the stock with a target price of RM7.53 a share based on unchanged 7 times financial year (FY) 2025 enterprise value to earnings before interest tax depreciation and amortisation.
At the time of writing, the stock was trading at RM6.61.
Risks to its call include cost drag from Unifi Mobile due to lack of scale, pricing pressures at the retail segment arising from policy-led directives, and market share loss from intense competition in the retail fibre broadband market.
It said Unifi is expected to benefit from its renewed aggressive market stance, while TM Global is poised for growth due to an expected increase in wholesale demand from the second 5G network (NW2).
Kenanga sees potential upside risk to its forecasts, which do not account for the possibility of TM capturing significant market share from its competitors or securing NW2’s fiberisation contract.
Unifi Mobile TM has seen strong uptake of its quad-play convergence packages that bundle Unifi Mobile postpaid plans with home fibre, fixed-line voice and TV content.
TM currently has a higher proportion of postpaid users compared to prepaid. This is favourable for TM as it allows it to bypass the typical trajectory of most start-up mobile providers.
New players often start by targeting prepaid users, and later attempt to migrate them to postpaid plans to achieve higher average revenue per user (ARPU) and lower subscriber churn.
With regards to 5G, the research firm said it foresees potential cost headwinds for TM, as it does not rule out the possibility that it may incur a full 5G annual access capacity payment of RM288mil to Digital Nasional Bhd (DNB) starting in 2025.
In contrast, fees paid to DNB in 2024 were significantly lower, as they were based on actual 5G traffic volumes.
The increased cost could impact TM's bottomline, considering Unifi Mobile's relatively small subscriber base, which limits 5G monetization opportunities.
Over the longer term, TM is also excited about its prospects in the data centre (DC) space.
If TM’s DC business continues to gain momentum, the group envisions regional expansion into ASEAN markets, growing in locations where it has existing submarine cable landing stations.
To explore these opportunities, TM has engaged in preliminary discussions with incumbent telcos across several SEA nations regarding potential joint ventures.
Looking ahead, should TM’s DC business achieve sufficient scale, a future strategy could involve a separate spin-off, potentially through a public listing or other suitable mechanisms, it added.
