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Carrier Services
Telekom Malaysia suffers first quarterly loss in nearly three years
Year sees new mobile operator joining the fray
by Ek Heng, Asia-Pacific Correspondent
Telekom Malaysia Bhd (TM) incurred a net loss of RM165.8 million (US$46 million) for the third quarter ended 30 September 2008 owing mainly to negative foreign exchange translation of MYR195.7 million (US$54.6 million).
It marks a first quarterly loss by TM after nearly three years of profit by the country’s incumbent telco. Revenue for the nine months at MYR 6.17 billion (US$1.7 billion) is marginally lower than MYR6.19 billion for the corresponding period last year while net profit is reduced to MYR627.1 million (US$175 million) from MYR1.9 billion (US$530 million).
“The global financial crisis has had a significant impact on Telekom Malaysia's results, particularly the foreign currency translation differences on our US$1.1 billion bonds," it said in an explanatory note attributing the loss to exceptional items. Apart from its US dollar denominated bonds, there was also negative impact from foreign translation in the disposal of its stake in Guinea-based Sotelgui. Volume charges from other carriers were also recorded during this quarter.
Discounting the exceptional items, the loss for third quarter would have translated into a net profit of MYR176.4 million (US$49.2 million) compared with normalised net profit MYR195.5 million (US$54.6 million) in the corresponding quarter of last year, said TM in its statement. These exceptional cost items also resulted in lower EBITDA of MYR696.5 million (US$194.5 million) as compared with EBITDA of MYR816.4 million (US$228 million) for the same period last year.
Strong fundamentals
Given that TM is fundamentally strong with good cash flow and comfortable gearing, industry analysts are optimistic that TM will face up to the challenges. The telco reiterated its commitment to the current year dividend policy of MYR700 million (US$195.5 million) or 90% of net profit, whichever is higher. It paid an interim dividend for the current financial year of MYR12 cents (US3.3 cents) less 26% tax in September 2008.
The telco is the dominant local player offering fixed-line, broadband and data services. It is looking towards building on the broadband sector where TM is the contractor for the country’s nationwide MYR11.3 billion (US$3.1 billion) high-speed broadband infrastructure. As broadband currently has a penetration rate of just 16.6%, it sees this sector as a key driver for TM where the goal is to achieve 50% rate by 2010.
State-owned TM spun off its mobile and international business to TM International Bhd (TMI) earlier this year when it announced that the move would "result in significant operational and strategic benefits to both TM and TMI going forward."
Meanwhile, TM International reported nearly 26% drop in net profit at MYR243.9 million (US$67.8 million) for the third quarter ending September in spite of a 28.2% increase in turnover at MYR$3.2 billion (US$916 million). The lower profit is attributable partly to negative contributions from associates and jointly controlled entities as well as higher financing costs arising from the MYR4 billion (US$1.1 billion) it owes to TM following the demerger, and loans for acquisition of India’s Idea Cellular.
For the current nine months ending September, TMI’s revenue increased by 23.3% to MYR 8.9 billion (US$2.5 billion). Fluctuations in foreign exchange resulted in favourable translation for TMI to gain RM26.6 million (US$7.4 million) as opposed to RM28.5 million (US$7.9 million) loss in the same period last year.
TMI has interests mainly in mobile operators in nine Asian countries including Indonesia, Cambodia, Thailand, Sri Lanka, Bangladesh and India as well as local cellular operator Celcom.
Other mobile players
Celcom has the second largest subscriber base at 8.2 million while Maxis Communications has the biggest base of 10.5 million, and DiGi is the number three mobile operator with 6.8 million subscribers.
Meanwhile, third-ranked Malaysian mobile operator, DiGi posted revenue of MYR3.58 billion (US$1 billion) for the first nine months this year. The figure is 12% higher than the corresponding period last year. Profit after tax for the nine months was 12% higher year-on-year at MYR858 million (US$241 million), partly due to 1% reduction in tax.
This year will prove to be a watershed period as a fourth mobile operator launched its service in Malaysia. U Mobile offers 3G only service supporting GSM/UMTS mobile networks. As a new mobile operator, it has the advantage of skipping the older technology.
Previously known as MiTV Networks Sdn Bhd, the operator is targeting 3.1 million users by 2010. Japan’s NTT DoCoMo and South Korea’s KTF have a combined 33% ownership in the new telco. Malaysia is projected to have 25 million cellular users by end of this year with the base estimated to grow to 28.5 million by 2010.
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