FW: RAM Ratings reaffirms Telekom Malaysia's AAA/P1 sukuk ratings

 

Published on 08 Jun 2018.

RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Telekom Malaysia Berhad’s (TM or the Group) sukuk programmes as well as the AAA/Stable rating of Hijrah Pertama Berhad’s sukuk (listed below). The ratings reflect TM’s strategic importance as the national fixed-broadband and fixed-line telephony provider as well as its steady financial performance. Based on RAM’s rating methodology for government-linked entities, the Group is viewed as highly likely to benefit from extraordinary support, given its strategic role and strong relationship with the Government.

TM’s earnings remain supported by the progressive take-up and upselling of its unifi offerings, as seen in its relatively stable average revenue per user. Riding on its bundling strategy (fixed voice, fixed broadband, wireless, mobile and IPTV), the Group maintains a dominant position in the fixed-broadband space with a 93% subscriber share. Take-up of unifi has been encouraging, with 1.12 million subscribers as at end-December 2017. That said, the Group’s total subscriber base had contracted slightly to 4.09 million as at end-December 2017 from 4.18 million the year before, owing to Streamyx’s higher churn rate.

As TM undertakes large-scale projects, capex will remain elevated in 2018 – the Group expects a capex-to-revenue ratio of 25%-30%. As such, we see little room for deleveraging at this juncture. At the same time, wider LTE coverage, higher-speed connections and increased data offered by mobile incumbents have led to a preference for higher on-the-go bandwidth. As a result, although the rollout of the High-Speed Broadband 2 (HSBB2) and near-completion of the suburban broadband (SUBB) projects would allow TM to tap into a wider pool of potential customers, the Group faces intense competition from wireless-broadband and mobile service providers alike. 

TM has a near monopoly over the local fixed-line and broadband segments, backed by its extensive connectivity, nationwide coverage and the strong government support it receives. These factors are expected to preserve its strong financial profile. TM is anticipated to maintain its niche position, although opportunities to grow its subscriber base may be limited by intensifying competition and a shift in consumer preference to mobile and wireless broadband.
 

 

Instrument	Rating Action	Ratings
Telekom Malaysia Berhad
Islamic Commercial Papers Programme (2013/2020) and Islamic Medium-Term Notes Programme (2013/2033) with a combined nominal value of up to RM3 billion	Reaffirmed	AAA/Stable/P1
Islamic Commercial Papers Programme and Islamic Medium-Term Notes Programme with a combined aggregate nominal value of up to RM2 billion (2011/2026)	Reaffirmed	AAA/Stable/P1
Hijrah Pertama Berhad
RM2,925 million Islamic Stapled Income Securities (2007/2018)	Reaffirmed	AAA/Stable

 

Analytical contact
Nurhayati Sulaiman
(603) 7628 1040
yati@ram.com.my

Media contact
Padthma Subbiah
(603) 7628 1162
padthma@ram.com.my

 

 

 

 

Best Regards,

Gan Yeow Hock

Data Management Executive - DCM

 

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