TM sees higher capex on Webe investment

KUALA LUMPUR: Telekom Malaysia Bhd (TM), which reported lower earnings for the second quarter ended June 30, 2016, will see higher capital expenditure (capex) incurred this year on the back of heavy investments for Webe.
According to TM CEO Tan Sri Zamzamzairani Mohd Isa, the group is expected to spend 30% to 35% of its topline this year, compared with the initial allocation of 25% to 30%. TM is to invest RM1.6 billion for Webe over the next five years.
For the first half of the year, TM spent RM938.5 million in capex representing 15.9% of total revenue.
TM’s net profit fell 34.2% to RM139.45 million for the second quarter against RM212.07 million in the previous corresponding period, due to a decrease in operating profit, higher finance cost and foreign exchange losses.
Forex losses were from its borrowings as a result of a weaker ringgit.
Revenue for the quarter under review, however, expanded 7.2% from RM2.84 billion to RM3.05 billion, thanks to the contribution from internet, data, other telecommunication and non-telecommunication related services.
The group has proposed an interim dividend of 9.3 sen per share.
For the first half of the year, TM’s net profit soared 35.5% from RM340.98 million to RM461.89 million, on the back of a 5.1% increase in revenue from RM5.61 billion to RM5.9 billion.
Zamzamzairani said while the group could be financially setback this year due to huge investments for Webe and the second phase of high speed broadband (HSBB 2), he is still optimistic about its outlook.
“Next year, we expect the capex to trend down as the peak will be this year for Webe and HSBB 2,” he told a press conference in conjunction with the results announcement here yesterday.
Webe, formerly known as Packet One Networks (M) Sdn Bhd (P1), was launched this month. Analysts opined that Webe is unlikely to break even in the next few years due to its low pricing.
On that, Zamzamzairani is of the view that Webe could bring in returns in three to five years’ time.
“Even with heavy investment in new business, we’ll ensure the sustainability of TM in the future. Our current business is still growing healthily,” he stressed.
Zamzamzairani, however, declined to share the take up rate thus far, and targeted market share for Webe.
“Webe is not a pure mobile player, it’s part of the convergence service offerings, which differentiates us from pure mobile players. It could be packaged together with other services that TM has,”he said.
For HyppTV, TM is looking to partner with more over-the-top (OTT) players.
“We’re seeing positive impact from HyppTV content and it continues to be taken up by our customers. We’ll continue to do that, not only on linear channels, but also through video-on-demand and working with OTT partners,” Zamzamzairani added.
TM’s overall broadband customer base grew 3.4% y-o-y to 2.37 million, driven by Unifi with over 900,000 customers as at June 30.
He doesn’t foresee Unifi facing strong competition from mobile players, with the launch of packages with speed of up to 100Mbps.