KUALA LUMPUR (June 29): Mandatory Standard Access Pricing (MSAP) is going to have a "most pronounced impact" on the financial position of Telekom Malaysia Bhd, as its implementation would lower wholesale prices on high speed broadband (HSBB) access for the other telecommunication companies, said RAM Rating Services Bhd.

“This would allow the telcos to cut the prices of their broadband packages, thereby compelling Telekom to revise theirs accordingly to remain competitive. As it is, competition is intensifying — with a noticeable shift in consumer preferences to mobile and wireless broadband,” RAM said in a note today, noting the retail broadband segment constitutes the bulk of Telekom’s top line (FY Dec 2017: 44%).

On June 20, the government announced that broadband subscription rates could be reduced by 25% by year-end pursuant to the implementation of the MSAP.

RAM noted that Telekom could see a gradual 25% reduction in broadband subscription rates over the next two years, flat subscriber growth and further debt drawdown for capital expenditure and dividends.

“Our analysis indicates that Telekom’s gearing level may peak at 1.5 times while its funds from operations debt coverage may thin to an average of 0.31 times in the next three years (FY Dec 2017: 1.10 and 0.44 times),” it added.

However, the credit rating agency said as Telekom’s credit metrics are expected to remain within its rating threshold, it does not foresee any immediate impact on the AAA/Stable/P1 ratings of its sukuk programmes or the AAA/Stable rating of Hijrah Pertama Berhad’s sukuk.

“Our rating approach also considers Telekom’s strategic role and strong relationship with the government, which in our view renders the group privy to extraordinary government support, if required.”

At this point, RAM said Telekom and its counterparties are still in discussions to finalise wholesale prices.

“This is targeted to be completed within the next one to two months. We could reassess our stance if changes in the government’s directive and/or the group’s pricing strategies differ from our current expectations,” it added.

Telekom shares, which fell to a record low yesterday, retraced to close five sen or 1.63% up to RM3.11 today, valuing the company at RM11.54 billion.