TM to benefit from pandemic-fuelled fibre broadband adoption

KUALA LUMPUR, May 18 ― Telekom Malaysia Bhd (TM), being the nation’s main fixed line player, is poised to benefit from the pandemic-fuelled fibre broadband adoption, hence putting the company in a favourable position.

Maybank IB Research has retained its “Buy” call on the stock with a target price of RM7.40.

The research outfit in its latest report revealed that fixed broadband adoption has continued to climb throughout 2020, ending the year at 3.35 million connections, representing a penetration of 41 per cent - a level last seen in 2015 when long-term evolution (LTE) networks were not yet launched.

“We estimate the standalone fibre broadband penetration at 29 per cent at end-2020, and rising.”

Premises passed for fibre totalled 5.4 million, implying a “conversion-rate” of 45 per cent.

“With telecommunication companies (telcos) working towards achieving Jendela's (National Digital Network) premises-passed targets of 7.5 million in 2022 and 9.0 million in 2025, we expect fibre connections to increase in the coming years.”

Maybank IB said with TM being a beneficiary of both the work-from-home and 5G-deployment themes, it sees room for valuation to expand.

As for the Environmental, Social and Governance (ESG) pressure faced by telcos, the research house said it is overall benign.

“Telcos are not major emitters and thus do not pose a significant threat to the environment. Major social issues relate to digital inclusion and data protection, and can generally be well-managed from an operational perspective.”

Apart from capacity superiority, fibre is also less energy intensive relative to copper as data is transmitted by light. Transitioning from copper to fibre is thus an easy way for telcos to reduce carbon footprint.

It said TM presently operates both copper (Streamyx) and fibre (Unifi) last-mile networks, and has already begun moving its copper broadband subscribers to fibre (where there is overlap) or mobile networks.

“We expect TM to continue expanding its fibre last-mile coverage, and believe it would eventually shut down its copper broadband network,” said Maybank IB.

As at 12.05pm, TM added 10 sen to RM5.82 with 1.58 million shares traded. ― Bernama