KUALA LUMPUR(Nov 26): Telekom Malaysia Bhd, which has lost some RM14.5 billion of its market value in recent months, announced a quarterly net loss of RM175.59 million — the first in 10 years — for its third financial quarter ended Sept 30, 2018 (3QFY18)   

The impairment loss of RM934.8 million on network assets has dragged the telco into the red in the current under review from a net profit of RM211.82 million in 3QFY17.

In a filing with Bursa Malaysia this evening, TM said that it recognised a provision of RM934.8 million for the impairment of  fixed and wireless network assets following the continued pressure from challenging business, industry and economic conditions, combined.

The impairment losses were projected based on an assessment of the recoverable value in use of the affected network assets at respective entity levels.

Revenue for 3QFY18 saw flat growth of 0.2% to RM2.95 billion from RM2.94 billion in 3QFY17.

For the cumulative nine-month period ended Sept 30, 2018 (9MFY18) TM reported an 87.2% drop in net profit to RM83.49 million from RM652.73 million in 9MFY17.

Revenue for 9MFY18 declined by 1.7% to RM8.73 billion from RM8.89 billion in 9MFY17. TM said that this was mainly due to lower revenue from voice and data services, whereby its data service was affected by the provision made on estimated impact of regulatory mandated access pricing.

In a separate statement today, TM said its total capital expenditure (capex) investment for the first nine months of 2018 was RM1.32 billion, or 15.1% of revenue. This is within TM’s full year capex guidance of 19-20% of revenue.

By asset type, access comprised 62% of total spending, followed by core network at 15% and the remaining 23% was for support systems.

TM acting group chief executive officer Imri Mokhtar said the group continues to face various headwinds from competitive market dynamics.

“Nonetheless, we held revenue steady over the quarter, and saw our cost reduction initiatives bearing fruit, by recording improved operational performance for quarter on quarter and year on year.

“However, in light of the continued pressure from industry and market challenges and its impact on our revenue thus far, we have taken a prudent view, by undertaking the impairment of our network assets — this resulted in close to a RM1 billion impairment loss this quarter

“The operational improvement in 3Q2018 is testament to the group’s commitment to the four pillars of our Performance Improvement Programme (PIP 2018) — Revenue Uplift/Preservation, Sustained Profitability, Improved Cash Flow and Increased Productivity that will navigate us through these headwinds. We are rationalising our business, reducing operating costs and focusing our resources on the opportunities that will have the most impact,” he said.

He shared that TM currently has 2.29 million broadband customers and its Unifi customer base continues to grow at 1.26 million as at end of 3Q2018 compared with 1.06 million as at the end of 3Q2017.

“In terms of convergence, we saw more customers moving up the value chain with having triple-play services and above, evidenced by our convergence penetration now at 48% of TM’s household penetration compared with 39% this time last year

“We will continue to strengthen our products and services portfolio and we are stepping up how we aggressively compete in the market, with greater sales and Go-To-Market activities on the ground.

“We are also working hard to reach more customers with various fit-for-purpose technologies to ensure that everyone can have the benefit of higher broadband speeds and enhanced experience.

“On top of that, we also have continuous engagements with the Ministry and the regulator to work toward mutually beneficial outcomes — for an improved broadband experience and help build a more balanced and inclusive digital nation, whilst at the same time balancing the business sustainability of the group and the interests of our other stakeholders,” he said.

The telecommunications utility also revised its dividend policy  to yearly dividends of 40% to 60% from its Profit After Tax and Non-controlling Interests (PATAMI). This is a downward revision from TM’s current dividend policy which is a payout of RM700 million or up to 90% of its normalized PATAMI, whichever is higher.

TM’s revised dividend policy is to take effect from its financial year ended Dec 31,2018. Dividends will be paid depending on overall business and earnings performance, capital commitments, financial conditions, distributable reserves and other relevant factors.

“This is a matter of great importance to us. In light of the current operating landscape and after careful consideration of the potential impact on our earnings alongside our efforts to transform the company to adapt thereto, the Board has determined the review of our dividend policy to support TM’s long-term strategic objectives,” said Imri.

The recent industry challenges and market environment have had major impact to the overall revenue estimates and earnings of TM Group in the financial year.

TM anticipates that the challenging environment will persist for both its retail and wholesale segments. In the midst of these challenges, the group will continue to focus on strengthening performance of its core business and operations.

At market close today TM shares closed down 1 sen or 0.4% at RM2.32 for a market capitalisation of RM8.7 billion. Year to date, its shares have lost some 63% of its market value.