RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Telekom Malaysia Berhad’s (TM or the Group) Sukuk Wakalah Programmes (2013/2033) and Islamic Securities Programme (2011/2026) as well as the AAA/Stable rating of Hijrah Pertama Berhad’s (HP) Islamic Stapled Income Securities Programme (2007/2018).

Published on 26 May 2014

RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Telekom Malaysia Berhad’s (TM or the Group) Sukuk Wakalah Programmes (2013/2033) and Islamic Securities Programme (2011/2026) as well as the AAA/Stable rating of Hijrah Pertama Berhad’s (HP) Islamic Stapled Income Securities Programme (2007/2018).
The ratings reflect TM’s prominent position within Malaysia’s fixed-line telephony sector and the high likelihood of extraordinary government support if required, given the Group’s critical role as the sole owner of the nation’s fixed-line infrastructure, including the high-speed broadband (HSBB) network and strong relationship with the Government. The Government’s 2014 Budget earmarks RM3.4 billion for the HSBB2 project which will boost the nation’s HSBB coverage and further solidify TM’s market position should it be awarded the project.
Having been on the lookout for opportunities to enter the mobile broadband space, TM recently announced its proposed acquisition of a 57% stake in Packet One Sdn Bhd (P1), which is expected to entail RM1.55 billion of investments over the next 3 years. While the proposed acquisition will complement and broaden TM’s product portfolio to include wireless-broadband services, take-up will hinge on service and network quality as well as the speed and pricing of the Group’s offerings. “TM’s mettle in the fiercely competitive wireless space will be put to the test with its P1 investment,” said Davinder Kaur Gill, RAM’s Co-Head of Infrastructure & Utilities Ratings.
In the short to medium term, we expect the P1 investment to weigh on TM’s balance sheet strength and debt-servicing indicators owing to the acquisition costs and proposed Long-Term Evolution (LTE)-related capital spend, while the earnings accretion from P1 will be gradual. Our assessment, however, excludes incremental capex owing to the HSBB2 project deployment (as negotiations with the Government remain ongoing) and the recently approved dividend reinvestment plan which allows the Group to reinvest profits for future expansion and reduce reliability on external debt. Over the next 2 years, the Group’s adjusted gearing ratio is envisaged to register at 1.1 times while its FFODC will decline to 0.4 times.
Media contact
Chinthamani Thanneermalai
(603) 7628 1013
chinthamani@ram.com.my