Telekom Malaysia Bhd
(March 4, RM7.23)
Maintain hold call with an unchanged fair value of RM7.20. Telekom Malaysia (TM) has no problem funding capital expenditure (capex) for the development and construction of a new submarine cable called the Sistem Kabel Rakyat 1Malaysia [SKR1M] (amounting to RM400 million over a 2½-year period, at 50:50 public-private arrangement) versus its annual capex of about RM2 billion. 

Telekom announced that it had entered into a memorandum of understanding (MoU) with a unit of Time dotCom Bhd for the SKR1M project.  

The partnership with Time dotCom, depending on the actual arrangement and respective stake in the consortium, should tone capex requirement down further for this project.

As a recap, the SKR1M contract was awarded to TM in December 2014 via an open tender. 

It entails a reported contract value of RM800 million where TM is to operate and maintain the cable over a 20-year period. 

The cable spans 3,500km with an initial capacity of four terabytes per second, which is upgradable in the future. The submarine cable is basically to link Sabah and Sarawak to the Peninsular Malaysia which is the major international gateway for the country. It is expected to start carrying commercial traffic by mid-2017 and enhance data connectivity to Sabah and Sarawak.

The project is a public-private partnership arrangement between the Malaysian Communications and Multimedia Commission and TM utilising Universal Service Provision funds. 

TM’s partnership with Time dotCom in deploying SKR1M is said to be “in the spirit of supporting the government’s aspiration in fostering partnerships among industry players”. 

Upon signing, the parties (which will be known as the SKR1M consortium) will proceed with the tender exercise to determine its preferred technology partner supply, deliver and implement the SKR1M network. 

During the MoU period (three months), the parties will develop the principles for the construction and maintenance agreement.—AmResearch, March 4

This article first appeared in The Edge Financial Daily, on March 5, 2015.