Strong focus on efficiency improvement and cost management helped delivered a healthy first half-year performance for Telekom Malaysia Berhad (TM). For the first six months ended 30 June 2009, TM posted a revenue growth of 2.9% to RM4,234.4 million as compared to RM4,115.1 million recorded in the same period last year. The growth was led by non-voice revenue which combined to contribute 51.9% of the Group’s revenue. Despite the challenging economic environment and heavy competition, broadband and data delivered 13.3% and 17.2% growth respectively for the period under review

TM also announced that its Board of Directors has approved an interim tax-exempt dividend of 10 sen per share or approximately RM358.0 million to be paid to shareholders by end of September 2009. With the interim dividend, TM is on track to meet its dividend commitment of RM700 million or up to 90% of normalized Profit After Tax and Minority Interest (PATAMI), whichever is higher.

Commenting on the first half-year performance, Dato’ Zamzamzairani Mohd Isa, Group Chief Executive Officer (CEO), TM enthused, “The continued encouraging performance of all of our line of businesses is primarily due to the effective delivery of our services to customers and Performance Improvement Program (PIP) 2.0 initiatives. After realigning our operations according to market segments, we were able to focus on improving our products / services offering and delivery to each of the market segments. For our Enterprise market for example, our efforts were directed towards growing data business while for our Consumer market, we were focused on improving product offering and customer experience, as well as managing churn. We continue to lead the broadband market space with 1.370 million customers (excluding Hotspot customers), a growth of 18.4% from 1.157 million customers a year ago. We are also happy to note that our fixedline customers, both residential and business, started to show a positive growth. It grew by 0.7% to 4.320 million from 4.290 million in 1Q 2009.”

“By being innovative, we also managed to package our products and services to cater to customers needs during this challenging time. We have launched several packages of fixedline product bundling and several Streamyx Combo and WiFi@Home packages. For the discerning customers, these packages offer good value proposition,” added Dato’ Zam Isa.

Performance of TM’s Line of Business:

The improved revenue and cost management helped to generate an Earnings Before Tax, Interest and Depreciation (EBITDA) of RM1,640.3 million, an improvement of 17. 3% from RM1,398.5 million last year, significantly improving EBITDA margin to 37.9% from 33.0% achieved in the same period last year. As a result of healthier EBITDA and unrealized foreign exchange gain on USD bonds, TM also registered a healthier PATAMI at RM293.7 million, a growth of 28.2% as compared to RM229.1 million posted last year.

Speaking on capital expenditure (capex), Dato’ Zam Isa explained that due to increased capex efficiency, TM recorded a lower Business as Usual (BAU) capex spending in the first half of 2009. TM spent RM520 million during this period, 27% lower from the same period last year. This was the result of tighter procurement approach and requirement scrutiny. TM expects to spend about RM1.4 billion in capex for the full year of 2009.

Comparison with Preceding Quarter’s Results

Group revenue for the current quarter of RM2,129.0 million increased by 1.1% from RM2,105.4 million recorded in the preceding quarter. This was mainly attributed to higher revenue from broadband and multimedia, other telecommunication related services and non-telecommunication related services, which mitigated the decline in voice revenue.

For the period under review, the Group registered PATAMI of RM266.0 million against RM27.7 million recorded in the preceding quarter primarily due to unrealised foreign exchange gain.

TM remains committed to improve its service delivery. To this end, TM is focusing its efforts on customer and network-facing improvements. On the customer front, the focused areas include billing, notifications, response time and first call resolution. While on the network-facing improvements, TM is consistently upgrading its core network, international capacity and last mile connectivity.

“We are pleased to note that our customer experience indicator for Streamyx, TRIM Index, recently improved from 50 to 64. This shows that our customers are starting to feel the positive experience that we hope to bring with the improvement initiatives. There is definitely room for further improvement for example in terms of customer handling and restoration. We will certainly work harder to address the gaps,” said Dato’ Zam Isa.

At the same time, TM has been increasing the number of centres nationwide to increase accessibility to customers. Recently, in July, TM launched its TMpoint TM Authorized Dealership Programme, an initiative to reach out to our consumers through an effective nationwide network based on the “Dealer Owned, Dealer Operated” concept. The outlets would also be an avenue for TM to provide more interaction centres for its current and potential customers as well as set up a presence in new and developing areas.

“Interaction and feedback from customers is important to us. We have now embarked on having dialogue sessions with selected customers to gain direct feedback and providing an avenue for exchange of information. Up to July 2009, we have held 3 such sessions. We aim to use our understanding of our customers' needs to publish a comprehensive Customer Charter by the end of 2009. The Charter will spell out operational benchmarks, set baseline and proposed targets for performance indicators,” explained Dato’ Zam Isa.

Prospects for the Current Financial Year

Despite the challenging business environment, TM expects the growth in broadband market to remain strong with estimated Compound Annual Growth Rate (CAGR) of 8.3% between 2008 - 2013 [source: IDC H2 2008]. The country’s broadband penetration rate had only surpassed 22.9% in Q1 2009 [MCMC – Q1 2009 report]. The emergence of mobile broadband technologies, most notably WiMax and HSDPA, will challenge TM’s dominance of the Malaysian Internet access service market.

In anticipation of this, TM has embarked on various initiatives to improve its broadband customer service and service offerings such as the introduction of Streamyx Combo Goes Mobile , WiFi@Home and other Streamyx value added packages; and a Performance Improvement Programme (PIP) initiative to address the end-to-end Streamyx improvement focusing on service delivery, process and quality. Meanwhile, the decline in voice revenue is expected to continue due to fixed mobile substitution. The PIP 2.0 initiatives are being put in place to manage the decline in voice revenue.

On the High Speed Broadband (HSBB) project, TM has inked its first deal in May 2009 for its HSBB (Transmission) Wholesale Service. TM will embark on its consumer user trial in Q4 2009, with the objective of testing and fine-tuning various aspects of its service roll-out such as systems, products, processes and network access transmission. Initial HSBB commercial retail roll-out in 4 exchange areas of Taman Tun Dr Ismail (TTDI), Bangsar, Subang Jaya and Shah Alam is scheduled for Q1 2010.

The Board of Directors expects TM’s business environment for the financial year ending 31 December 2009 to remain challenging.

About TM

Telekom Malaysia Berhad (TM), Malaysia’s leading integrated information and communications group, offers a comprehensive range of communication services and solutions in broadband, data and fixed-line. As a market leader in the broadband and fixed-line businesses, TM is driven to deliver value to its stakeholders in a highly competitive environment. The Group places emphasis on continuing customer service quality enhancements and innovations.

With its extensive global connectivity, TM is poised to position Malaysia as a regional Internet hub and digital gateway for South-East Asia. In line with this, TM is evolving into a Next Generation Network service provider enabling the Group to enhance its efficiency and productivity while providing enriched products and services.

On the Corporate Social Responsibility (CSR) front, the Group has always been a major corporate contributor towards responsible activities in the belief that these practices are a fundamental tenet of good corporate governance. The Group promotes 3 major platforms i.e. education, sports development and community/nation-building. Under education, TM has spent some RM800 million to develop Multimedia University into one of the top universities in Malaysia with more than 20,000 students. TM has also provided scholarships to over 10,000 graduates pursuing academic programmes locally and overseas. On the sports front, TM is actively contributing towards the upliftment of football at all levels while under the community/nation-building platform, the Group contributes towards causes that bring value to the community and nation at large. TM was awarded the prestigious STAR-BIZ ICRM Corporate Responsibility Award under the workplace category for 2008.