Telekom Malaysia Berhad (TM) delivered commendable performance despite challenging operational environment and stiff competition faced last year. For the financial year ended 31 December 2009, TM registered a PATAMI of  RM643.0 million, a healthy increase of 180.4% as compared to RM229.3 million (excluding the results of the demerged Axiata Group Berhad), recorded last year. This was primarily due to lower operating costs, gain on disposal of equity investment, unrealised exchange gain on translation of foreign currency borrowings.

TM also recorded a better Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) of RM3,102.9 million, up 6.4% from RM2,917.0 million achieved in the corresponding period last year.

Normalized full-year revenue was 0.9% higher than the revenue recorded in 2008 (excluding the exceptional revenue from special project MERS999 of RM235.2 million in 2008 against RM94.9 million from 2009). Including these exceptional items, revenue was lower by 0.8% to RM8,608.0 million as compared to RM8,674.9 million recorded in 2008.

These results were primarily driven by high-growth services (data, Internet and multimedia) which registered a year-on-year growth of 16.0% and 8.8% respectively.

The Company also announced a proposed final dividend of 13 sen (less tax 25%) amounting to RM348.9 million on top of the interim dividend of 10 sen (tax exempt) amounting to RM357.7 million distributed in September last year. again delivered its dividend commitment.

Speaking at the press conference after announcing the Company’s 2009 full-year financial results, Dato’ Zamzamzairani Mohd Isa, Group Chief Executive Officer, TM, said, “We are proud to maintain our dividend commitment of RM700 million or up to 90% of normalised Profit After Tax and Minority Interests (PATAMI) and continue to deliver value to our shareholders. With the proposed total dividend payout of RM706.5 million, that brings our 12-month Total Return to Shareholders to 38.5%, the highest amongst all fixed peers in the region.”

Total Revenue by Products:

Dato’ Zam went on to comment, “2009 was a busy year for us. We experienced strong demand for broadband services as customers becoming savvier with the Internet and its applications. This was also contributed by the surge of participation in social networking sites such as Facebook and Twitter among many Malaysians. Demand aside, we also saw aggressive push by the mobile and Wimax players who came onto the market with their products and services. Despite the fierce competition, TM continued to attract new customers and maintained leadership position in the broadband segment with 1.43 million customers as at end of 2009, a growth of 11.8% from 1.28 million customers a year ago. We also expanded the number of our hotspots from 1,270 in Q1 2009 to 2,069 as at end of 2009.”

“Quality of customer service is key in ensuring that these customers stay with us. In 2009, instead of spending 3.0% of our total revenue on customers’ quality improvement initiatives as we announced in our headline Key Performance Indicators (KPIs), we actually spent 3.6% or RM308.0 million to give our customers a better customer experience. Our customer satisfaction index  registered an improvement of 5.0% for overall TM brand.”

“While we compete to offer the best value to our customers, we continue to maintain our tight focus on cost management and capital discipline. With Performance Improvement Programme (PIP) 2.0, our cost management efforts were focused on process improvements and cost optimisation while capital efficiency improvement efforts were directed towards reducing accounts receivable days and optimising capital expenditure (capex). On overall operating cost, reflective of cost management improvement efforts, we recorded a lower direct cost to revenue ratio of 20.6% in 2009 as compared to 21.4% in 2008. We have also improved our Account Receivable (AR) collection day.  In 2008, we reduced our AR days from 115 to 106 and as at end of 2009, we successfully reduced further to 101 days. This is possible through effective accounts tracking across all customers’ segments. We have also monetised RM398.6 million worth of staff housing loans.”

“We also worked hard to optimise our overall capex spend. This we did through better planning and coordination in executing Business as Usual (BAU) and High Speed Broadband (HSBB) project capex, and also pushing for a more robust procurement approach. For the financial year 2009, we recorded 14.1% capex over revenue for BAU capex, an improvement from 16.7% in 2008. This is indeed a commendable achievement for us.” added Dato Zam.

Quarter-on-Quarter

For the current quarter under review, the Group revenue decreased by 9.0% to RM2,272.6 million as compared to RM2,497.8 million in the fourth quarter 2008, mainly attributed to lower revenue from special project, MERS 999. Excluding revenue from MERS 999, the current quarter revenue is only 1.5% lower as compared to preceding year quarter

Internet and multimedia revenue registered 2.6% growth to RM402.0 million in the current quarter from RM391.8 million recorded in Q4 2008 arising from growth in broadband customers (excluding Hotspot customers) from 1.28 million in the corresponding quarter 2008 to 1.43 million in the current quarter.

PATAMI increased by 2.5% to RM170.2 million as compared to RM166.0 million (excluding the results of the demerged Axiata Group Berhad) in the corresponding quarter in 2008. This was mainly attributed to unrealised exchange gain on translation of foreign currency borrowings of RM47.3 million as compared to a loss of RM18.2 million in the same quarter in 2008. Lower interest income in current year quarter partially offset the unrealised exchange gain.

Comparison with Preceding Quarter’s Results

Group revenue in Q4 2009 increased by 8.2% to RM2,272.6 million as compared to RM2,101.0 million recorded in Q3 2009, mainly driven by higher revenue from data services and other telecommunication related services.

The current quarter Group PATAMI of RM170.2 million was lower than RM179.1 million recorded in the preceding quarter primarily due to higher net finance cost.

Prospects for the Next Financial Year Ending 31 December 2010

PIP 2.0 will continue to drive TM strategic thrust in 2010. The first thrust on addressing customer needs will enhance customer experience by focusing on customer and network-facing improvements. The second thrust to propel revenue growth is leveraged on improving overall offering, segment-based management of TM’s core business and accelerate momentum on Broadband for General Population (BBGP) and HSBB. The third thrust towards operational excellence and capital productivity will focus on capital and operating expenditure (capex and opex) optimisation through tighter requirements scrutiny.  The fourth thrust in driving execution will continue to see impactful training for all-IP transformation.

On the HSBB project, TM is on track to commercially launch the retail service in the four areas of Shah Alam, Subang Jaya, Taman Tun Dr. Ismail and Bangsar by end of first quarter 2010. In addition to these 4 areas, we are also in the midst, of implementing our fibre access in 44 other exchange areas. With this, we will also be able to provide service coverage in some areas within Putrajaya, Cyberjaya and Iskandar Malaysia at launch date with the goal to have complete coverage in these areas by Q3 2010. The roll-out will be gradual and in phases to cover the designated locations in Zone 1 which include the Inner Klang Valley, Iskandar Malaysia and high-impact economic areas including key industrial zones throughout the country. TM is targeting 1.3 million premises passed by end 2012. Consumers will be provided bandwidth with network access speeds from 10Mbps while for businesses it can go up to 1Gbps. As at end 2009, TM completed 152,000 premises passed surpassing our target of 150,000.

Taking into consideration the above operating landscape, the Board of Directors expects TM’s business environment for the financial year ending 31 December 2010 to remain challenging.

Key Take-aways

1. Commendable performance:

• PATAMI up by 180.4% to RM643.0 million
• Data and Internet revenue registered a year-on-year growth of 16.0% and 8.8% respectively
• Improved EBITDA of RM3,102.9 million

2. TM successfully delivers its dividend commitment

3. TM continued to deliver value to shareholders

4. Maintained leadership position in the broadband segment with 1.43 million customers as at end of 2009, a growth of 11.8% from 1.28 million customers

5. TM spent 3.6% or RM308.0 million to give our customers a better customer experience

6. PIP 2.0 positive results:

• Improve cash collection – reduced AR days to 101 from 106
• Monetised RM398.6 million of staff loan
• Optimised capex - recorded 14.1% BAU capex over revenue, an improvement from 16.7% in 2008

7. Moving forward - continue with PIP 2.0 with COOL

8. HSBB:

• on track for commercial launch by end of Q1 2010
• Progressive roll-out
• 152k premises passed by end 2009