Telekom Malaysia Q2 Financial Results

Telekom Malaysia today announced its financial results for the second quarter of 2011 ended 30 June 2011.

Key take-away:

• Streamyx: 1.721 million customers as of Q2, 2011
• UniFi- As of 18 August 2011, more than 142,000 customers, 973,000 premises passed covering 76 exchange areas | Targeting 78 exchange areas by end 2011 for a total of 1.1 million premises passed
• Hotspots & Streamyx Zones: 16,111 sites nationwide as of Q2, 2011 | Target to hit to reach 28,000 locations by year end

Full details below.

Kuala Lumpur,24 August 2011-Telekom Malaysia Berhad (TM) today announced  its financial results for the second quarter of 2011 ended 30 June 2011.

TM  reported positive improvements all-round in its business and showed solid  progress in transforming itself into becoming Malaysia’s Information  Exchange.

The Group posted revenue of RM2,233.6  million for the second quarter of 2011 ended 30 June 2011, up by 3.8%,  compared to RM2,150.9 million in the 2Q2010, mainly attributed to higher  revenue from Internet and multimedia, data services and other  telecommunications related services.

Earnings Before Interest, Tax,  Depreciation and Amortisation (EBITDA) for 2Q2011 was higher at RM746.9  million, up 8.8% from RM686.2 million recorded in 2Q2010. Normalised  EBITDA improved 10.4% to RM768.0 million from RM695.5 million in 2Q2010. Normalised  EBITDA margin improved by 2.0pp at 33.9%, as compared to 31.9% in 2Q2010.

Group  Profit After Tax And  Minority Interest (PATAMI) rose 2.3% to  RM127.2 million in 2Q2011 from RM124.4 million in the corresponding period  last year. This was mainly attributed to higher revenue, and lower net  finance cost. Normalised PATAMI improved 20.8% from RM111.9 million in 2Q2010  to RM135.2 million this quarter.

Data revenue increased by 7.1% this  quarter to RM455.0 million compared to RM424.9 million in the same quarter  2010 arising from demand for higher bandwidth services. Internet and  multimedia registered higher revenue by 21.1% to RM487.9 million in the  current year quarter arising from increased broadband and UniFi customers to  1.721 million and 109,019 respectively in the current quarter from 1.541  million and 4,051 in the corresponding quarter 2010.

Speaking  at the press conference after announcing the Company’s 2011 second  quarter financial results, Dato’ Sri Zamzamzairani Mohd Isa, Group  Chief Executive Officer, TM said, “I’m pleased with this commendable  half-year results delivered by the TM team which has shown across the board  continued positive operational improvements. This demonstrates TM’s  ability to leverage on its inherent strengths and scale opportunities present  in this competitive environment. It is certainly not easy to simultaneously transform  and modernise your network, overhaul your processes, implement cost  initiatives, weather  severe competition and tightening revenues, while maintaining our leadership  position as Malaysia’s  broadband champion.”

In commenting on operational performance, Dato’ Sri Zam  said, “TM remains Malaysia’s  broadband champion as seen by the continued increase in customer base for  both our Streamyx and UniFi products. We continued to record growth in the broadband segment, with  Streamyx customers up by 11.7% YoY, from 1.541 million customers in the 2nd  quarter of 2010, to 1.721 million customers due to optimized product  portfolio and improved go-to-market strategy. Strong demand for  UniFi has exceeded expectations and  the momentum we saw at the beginning of the year continued into the 2nd  quarter with our subscriber base  almost doubling, from 63,541 in 1Q2011 to 109,019 in 2Q2011 on the back of  904,000 premises passed covering 68 exchange areas. As of 18 August 2011, we  have installed UniFi to more than 142,000 customers on the back of more than  973,000 premises passed covering 76 exchange areas, with 46 IPTV channels. This  shows a ramping up of take up rate from 12%, as at 30 June 2011 to 14% to  date which exceeds our initial expectation of 8-10% take up rate for the  first two years.”

TM is on track to increase the UniFi service coverage to a total  of 78 exchange areas covering 1.1 million premises passed by end of 2011 and  1.3 million premises passed by the end of 2012, which is the target set under  the PPP Agreement with the Government. On 3 June 2011, TM announced the  execution of the HSBB Services Agreement with Celcom Axiata Berhad (Celcom),  where it will provide wholesale HSBB (Access) services to Celcom for a 3-year  period. UniFi coverage was also expanded beyond the Klang Valley  area, with the latest launch in  Melaka last month. TM’s Hotspots &  Streamyx Zones nationwide also grew from 2,533 sites in June 2010 to 16,111  sites, a 5-fold year on year increase, in line with its plan to meet the  needs of nomadic customers as well as add value to the current offering for TM  fixed line customers. By year end, coverage is expected to reach 28,000  locations.

TM remains committed to grow its enterprise value through  improving return on capital, maintaining a stable profitability margin and a  positive dividend yield. As at 30 June 2011, TM’s Total Shareholder  Returns (TRS) continues to be above industry peer average at 24.7% – the best  performing Telco. In line with its continued focus in creating shareholder  value and dividend policy, TM is pleased to announce that its Board of  Directors has approved a single-tier interim dividend payout of 9.8 sen per  share or approximately RM350.6 million to be paid to shareholders in  September 2011, in line with its full year dividend commitment.

Dato’ Sri Zam went on to comment, “While we compete to offer the best value to our shareholders  and customers, we continue to be prudent in our spending by maintaining tight  focus on our capital management approach by striving to optimize our capital  productivity. This strong focus on cost optimisation and capex efficiency is reflected in the  lower Business as Usual (BAU) capex in 1H2011. TM spent RM307 million during  this period, 8.6% lower as compared to RM336 million in the same period last  year. This was the result of tighter procurement approach and requirement  scrutiny as well as optimising our network architecture. For the first half, our  Capex spend was in line with our planned HSBB rollout and the New Generation  Network (NGN) migration plan which focused on access and core network. We  achieved a commendable improvement in our capital management where we  recorded a capex/revenue 17.1% in 1H2011, as compared to 18.8% in the same  period last year. We will continue to ensure cost efficiencies for the Group  while ensuring the quality of our services and our customers’  experience with TM remains high.”

CONTINUED POSITIVE OPERATIONAL PERFORMANCE

 Comparison: Year-to-Date (1H2011 vs 1H2010 Results)

For  the first-half year ended 30 June 2011, the Group revenue increased by2.5% to  RM4,381.8 million as compared to RM4,275.8 million in 1H2010 on the back of  continued growth in demand for Internet and data services, which grew by  16.9% and 6.9% respectively. Data revenue grew by 6.9% to RM879.6 million  compared to RM822.6 million last year contributed mainly by higher revenue in  IPVPN services. Internet revenue for the half year increased by 16.9% from  RM805.1 million recorded in 1H2010 to RM941.3 million attributed to positive  growth in broadband customers.

EBITDA  increased 5.1% to RM1,477.8 million from RM1,406.2 million in 1H2010 due to  higher operating revenue. Normalised EBITDA was up 5.3% to RM1,497.0 million. Normalised  EBITDA margin improved by 0.9pp at 33.7%, as compared to 32.8% in 1H2010, due  to increased operating revenue.

Normalised  PATAMI, excluding mainly the foreign exchange gain improved 29.4% from  RM199.0 million in 1H2010 to RM257.5 million this year.

MOVING FORWARD

TM  remains steadfast in maintaining its position as Malaysia’s Broadband  Champion anchoring on Streamyx  and UniFi as its key broadband products, delivering an enhanced and integrated digital lifestyle to all  Malaysians where everyone can leverage on its platform to connect,  communicate and collaborate effectively; whilst focusing on  its transformation journey to be a New Generation Telco and an Information  Exchange. TM is also committed to pursuing its quality improvement program in  its effort to deliver an enhanced customer experience.

Having  a proven track record as the Government’s preferred partner in  delivering communications services coupled with its extensive network  coverage and collective expertise, TM is well positioned to support the  Government’s agenda in fulfilling the aspiration of the Economic  Transformation Programme (ETP) to transform the nation via our involvement in  the Entry Point Project (EPP) especially in the key areas of “Business  Services” and “Communications, Content and Infrastructure”  (CCI).

Against  this backdrop of industry  liberalisation, regulatory changes and intensely competitive  telecommunication landscape, the Board of Directors expects TM’s  business environment for the financial year ending 31 December 2011 to remain  challenging.