‘Broadband to be at least 25% cheaper by end 2018’

This article first appeared in The Edge Financial Daily, on June 21, 2018.
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KUALA LUMPUR: Broadband users should expect charges for the service to fall by at least 25% by the end of the year, said Communications and Multimedia Minister Gobind Singh Deo.

This follows the implementation of the Mandatory Standard on Access Pricing by the Malaysian Communications and Multimedia Commission (MCMC) on June 8.

In a statement yesterday, Gobind said the relevant parties are currently in commercial discussions to finalise the wholesale prices.

“I was made to understand that this process is scheduled to be concluded by the July/August time frame after which new lower-priced broadband packages are expected to be rolled out to consumers,” said Gobind, adding that lowering wholesale prices should translate into lower retail prices for consumers.

He highlighted that the revised prices should have come into effect on Jan 1 this year, but this was not implemented as Telekom Malaysia Bhd (TM) had appealed to the MCMC to reconsider its position on some of the pricing components.

“Hence, the decision to revise the prices for broadband was thereafter put on hold pending consideration of the minister of communications and multimedia.

“Upon my appointment as minister of communications and multimedia, I announce that the Pakatan Harapan government would take steps to reduce the prices of broadband in the country and increase its speed,” said Gobind.

“This hopefully will result in a reduction of broadband prices across Malaysia by at least 25%, by the end of the year,” he added.

Gobind also announced that the government would consider recognising access to Internet as a basic human right in Malaysia, even to the extent, if practicable, a constitutional right.

He explained that this is in recognition of the fact that broadband services are critical for the transformation of the nation into a digital economy and to ensure that all Malaysians have access to information.

Furthermore, access to broadband is critical to ensure that all Malaysians are able to enjoy all the benefits that an e-industry can offer, he said.

“In addition to this, I have directed the MCMC to consider other options available which would further reduce the prices of broadband,” Gobind said, adding that he had instructed the MCMC to monitor broadband prices in Malaysia to ensure affordable entry-level packages are offered to Malaysians.

Following the announcement that broadband access would be cheaper by 25%, analysts contacted by The Edge Financial Daily foresee it having a negative impact on the earnings of telecommunications players such as TM, Time dotCom Bhd and Maxis Bhd. However, the full-year impact would only be seen next year.

MIDF Research analyst Martin Foo explained that a pure broadband player like Time might possibly see a 25% reduction in revenue, while for TM, which is not just a stand-alone broadband player, the impact would be different.

Nevertheless, Foo said the telecom players may not see a 25% decline in revenue if they manage to entice more customers due to the more accessible prices.

Take TM’s Unifi for instance — its cheapest plan of 10mbps may go down below RM100 from RM129.

“One of the ways for TM to reduce the impact is by upselling the plan (from 10mbps to 30mbps plan). But this may lead to some strain on the network capacity, depending on the location,” said Foo.

Meanwhile, if the telcos manage to reduce the cost of broadband, it will partially help negate the decrease in margin, said Foo.

“As of now, it’s very hard to deduce the decline in earnings,” said Foo.

Concurring with Foo, Inter Pacific Securities research head Pong Teng Siew said the affected telco stocks could see some selling pressure today due to the announcement.

“It will definitely affect the fixed [broadband] line players,” said Pong.

Shares in telcos have been on a downtrend in the last two years, especially with the intense price competition and spectrum refarming.

Post 14th general election, TM has seen its share price fall as much as 27.4% to close at RM3.63 yesterday from RM5.

Year to date, Time shares were down 6.3% to RM8.35 yesterday, from RM8.91, while Maxis declined 5.74% to RM5.57 yesterday, from RM5.91.

Cheaper access to broadband — charges to be halved but speed doubled — was one of the Pakatan coalition’s election promises.