This article first appeared in The Edge Financial Daily on November 27, 2018

KUALA LUMPUR: It never rains but pours at Telekom Malaysia Bhd (TM).

The telco, with some RM14.5 billion of its market capitalisation evaporated in recent months, has decided to pay less dividend moving forward.

The unpleasant news was coupled with the release of its quarterly net loss of RM175.59 million — the first quarterly loss in 10 years — due to the massive RM934.8 million impairment losses.

TM announced yesterday it wants to revise its dividend policy to pay out an annual dividend of 40% to 60% of its profit after tax and non-controlling interests (Patmi). This is a downward revision from TM’s current dividend policy — a payout of RM700 million or up to 90% of its normalised Patmi, whichever is higher.

TM’s revised dividend policy is to take effect in the current financial year ending Dec 31,2018. It said dividends will be paid depending on the overall business and earnings performance, capital commitments, financial conditions, distributable reserves and other relevant factors. It explained that the dividend cut is to support its “long-term strategic objectives”.

The revision of dividend may not come as a surprise to some quarters considering TM did not declare the first interim dividend in August when it released its second-quarter results, but it did in the past two financial years.

Based on the minimum RM700 million dividend promise, this would work out to a dividend per share of 18.6 sen. A random check on Bloomberg shows at least three analysts have forecast TM to declare less than 19 sen dividend per share for FY18.

However, many were caught off guard with the RM934.8 million of impairment losses on network assets that dragged the telco into the red in the current quarter under review from a net profit of RM211.82 million in 3QFY17.

It is unclear whether TM has embarked on a kitchen-sinking exercise to write off its investments. A major investment that it poured RM350 million into is Packet One Networks (M) Sdn Bhd, now known as webe.

In a filing with Bursa Malaysia yesterday, TM said it was for the impairment of fixed and wireless network assets after the continued pressure from challenging business, industry and economic conditions combined.

Quarterly revenue was flat at RM2.95 billion.

For the cumulative nine months ended Sept 30, 2018 (9MFY18), TM posted a net profit of RM83.49 million, down 87.2% from RM652.73 million in the previous corresponding period.

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

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

“However, in light of the continued pressure from the industry, and market challenges and their 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,” said Imri.

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-3Q2018 compared with 1.06 million a year ago.