Khamis, November 03, 2005

TM shares down on competition fears


TELEKOM Malaysia Bhd (TM) shares were among the top five losers on Bursa Malaysia yesterday, dropping 15 sen from RM9.85.

Its share price has been experiencing a downward trend since last week, closing at RM9.70, which is also its lowest price in the last six months.

This trend is the effect of heightened competition from rivals offering low rates in broadband, wireless and mobile line services, according to an analyst in a local research house.

On the whole, stiff competition and industry talk of a new player emerging in the local telecommunications market have contributed to TM's share price decline

“Generally, there is this fear of another player entering the already saturated market.

“TM's broadband service will also face competition once Jaring's broadband offerings at low rates take off.

“Jaring's service, despite being advertised in the market, has not been rolled out yet. But, once it fully takes off, it may impact TM,” the analyst said.

Competitors such as Time dotCom Bhd, which plan to offer wireless services, may also affect TM's market share.

Other than competition, TM's share price is possibly affected by DiGi.Com Bhd's impressive third quarter results released last week, along with announcements of its dividend policy and capital repayment plans.

“When DiGi.Com announced its results for the second quarter, we noted a slight decline in TM's price. Based on DiGi's good performance, TM is bound to lose some market share,” said the analyst.

For its overseas ventures, TM's Indonesian investment in PT Excelcomindo Pratama continues to be loss-making, said the analyst. “It should improve next year should the rupiah appreciate, but that is unlikely looking at current trends.”

The analyst said if investors compared TM's performance with its regional rival Singapore Telecommunications Ltd, the latter may appear more attractive due to lower costs and its wider coverage.

Another factor said to affect TM's performance is its falling fixed line voice revenue.

HLG Research Securities in a recent report said TM's second-quarter fixed line revenue dropped by 8.7% as a result of cuts in rental income and narrowing rates of fixed lines and mobile calls.

“New technologies in Internet phone, which carried lower rates or practically free usage via broadband are gaining acceptability,” said the report.


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