TM sets FY16 capex at 25-30% of revenue

KUALA LUMPUR: Telekom Malaysia Bhd (TM) has allocated a higher capital expenditure (capex) of 25-30% of revenue for the financial year ending Dec 31, 2016 (FY16) due to its aggressive services rollout plans this year.
Group CEO Tan Sri Zamzamzairani Mohd Isa said the capex will be spent on the ongoing programmes and projects, which are mainly the High Speed Broadband Phase 2 (HSBB 2) and Sub-Urban Broadband (SUBB) projects.
"Of course, there is heavier investment in the P1 (Packet One Networks (Malaysia) Sdn Bhd) rollout as well. This is an investment year for us, 2016, so we will see a little bit higher capex this year compared with last year," he told reporters at a briefing yesterday.
Group CFO Datuk Bazlan Osman said the 25-30% capex guidance is subject to the rollout of the services as well as demand from its business, household and SME customers.
"As what we had announced in December last year on HSBB 2 and SUBB, we have this commitment to complete the HSBB 2 and SUBB by end of 2017. It is a three-year programme. So the peak will be these two years, 2016 and 2017, because we are also having the LTE rollout as well. These are the two years that we will have the peak of the capex spend," he said.
Last year, TM spent RM2.5 billion in capex, which is 21.4% of revenue. Capex spend in FY14 was at 16% of revenue.
On funding for the capex, Bazlan said it will be a mix of internally generated cash and facilities that it has in hand.
"Any draw down (from the facilities) will be based on the pricing of the cost, basically the cost of debt. We do have ringgit and dollar facilities that we will be able to draw down, we will have to look at the two, which one gives us the best pricing.
"For US dollar, as at Dec 31, we have this EMTN programme of about US$750 million (RM3.2 billion) and for ringgit, we have balance of RM1 billion. But we also have cash...any funding for capex will be subject to the pricing and the cash that we have."
Bazlan said most of its borrowings are in ringgit, with foreign currency denominated borrowings making up some 12% of its total borrowings. "Of course we had also hedged some of the US dollar borrowings."
TM's headline key performance indicators (KPIs) for 2016, excluding P1, is 3%-3.5% of revenue growth and maintaining earnings before interest and tax (Ebit) growth at FY15 levels. For 2018, it is targeting 3.5%-4% revenue growth and 3%-5% Ebit growth.
Zamzamzairani said the KPIs for 2018 are higher than 2016, driven by the aggressive rollout of the HSBB 2 and SUBB projects, which will result in wider coverage, as well as growing demand for bandwidth.
For FY15, revenue grew 4.3% to RM11.72 billion from RM11.23 billion a year ago. Earnings before interest, tax, depreciation and amortisation (ebitda) grew 1.6% to RM3.69 billion from RM3.63 billion a year ago while ebit fell 2.9% to RM1.25 billion from RM1.29 billion a year ago.
The group said the lower ebit was due to the full-year consolidation of P1. Excluding one-off items such as unrealised foreign exchange gain on international trade settlements, group normalised ebit stood at RM1.24 billion, 10.6% lower than RM1.39 billion a year ago.
Net profit for the year fell 15.8% to RM700.3 million from RM831.8 million a year ago due to foreign exchange losses from borrowings of the group as a result of the weakening ringgit. Group normalised net profit fell 4.9% to RM894.9 million from RM941.2 million a year ago.