TM's profit margin may be at risk: OSK

Telekom Malaysia (TM), which will announce its second-quarter results next Monday, is expected to see its earnings before interest, taxes, depreciation and amortisation (EBITDA) margin come under pressure, according to OSK Research.

This is due to higher high speed broadband service-related operational expenditure and increase in marketing spending, it said in a research note today.

"TM will recognise the full quarter operational expenditure relating to its high-speed broadband, which was launched this year in the second quarter. As a result, we expect its core EBITDA to slide quarter-on-quarter/year-on-year in the second quarter," it said.

TM posted flat EBITDA of RM731 million in the first quarter, due to start-up costs for Unifi, while revenue fell seven per cent quarter-on-quarter following the lumpy project sales recognition in fourth quarter of financial year 2009.

"We expect the second-quarter revenue to show a slight recovery as the strong ADSL net-add momentum extended into the second quarter, albeit partially offset by the dilution in overall voice revenue as TM offered free local calls on its new bundled voice packages," OSK Research said.

The research house said it continued to see TM's Unifi service serving a niche market segment due to its premium pricing.

"The bulk of Unifi subscribers are early upgraders from its regular ADSL service. We expect contribution from Unifi to be insignificant in the context of TM's group revenue at one to two per cent over the next two financial years," it said. - Bernama