RESPONSES TO QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) 26 th Annual General Meeting 10 May 2011

Transcription

1 RESPONSES TO QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) 26 th Annual General Meeting 10 May 2011

2 Background It is noted that TM continued to maintain its leadership position in the broadband segment with 1.68 million customers as at end 2010, up 17.4%. It is also set to meet the UniFi target of 1.1 million premises passed by end 2011, while the total number of UniFi subscribers exceeded 60,000 as at 18 March Question 1(a) What is the Company s market share in the broadband segment as compared to the previous year, given that the number of mobile broadband subscribers has overtaken that of fixed broadband subscribers? TM is in the lead in terms of revenue market share in the broadband segment 56% as at end Dec Internet revenue grew 5.9% y-o-y. Malaysia s fixed line penetration rate is 42.5% of households as at end Dec 2010 clearly room to grow. Source: Company Financial Result; TM Group Regulatory & BMI Team Analysis 2

3 Question 1(b) How does the Board assess and reconcile the rapid change in wireless broadband technology such as 4G/LTE, with TM s plans to increase its Streamyx hotspots or WiFi to 28,000 by end 2011 from 10,982 in 2010? TM s strategy: WiFi services for our nomadic and inbuilding users - a wireless component to complement our suite of fixed broadband services. 14,000 hotspots available for our customers as at 5 May Continue our deployment of WiFi as part of our wireless aspirations as there is demand. 3

4 Question 2 It is noted that the Company s 2011 targeted KPIs were 2.5% growth in revenue and earnings before interest, tax, depreciation and amortization (EBITDA) margin of 32%. (i) What is the rationale for the EBITDA margin of 32.0% to be lower than the 33.1% EBITDA margin achieved in 2010 (2009: 34.0%)? We expect an increase in cost for the interim mainly due to higher network maintenance cost from maintaining 2 networks (copper and fiber), HSBB content and equipment cost. EBITDA margins expected to trend upwards to mid-30 s by FY13 due to better revenue growth. (ii) What could be the amount in term of ringgit Malaysia for the 1.1% difference in EBITDA margin? The estimated difference in RM terms is RM75.5mn or approximately 0.8% of the targeted 2011 revenue. 4

5 Background In 2010, the Company entered into a partnership with Japan-based NTT Communication Corporation to develop its first private cable, Cahaya Malaysia, connecting Malaysia with Hong Kong and Japan. It also invested in the new Batam-Dumai-Melaka (BDM) Cable System. On 25 April 2011, the Company participated in a 24-member Konsortium Rangkaian Serantau Sdn Bhd (KRS) under the National Key Economic Area. The KRS is to bring down the cost of Internet Protocol (IP) transit by buying international bandwidth in bulk and to be partners of submarine cable networks that reach the US and the European shores. Question 3(a) How does the Board assess the impact of the KRS consortium against its wholesale and global businesses which contributed an aggregate of 37.8% of segment results in 2010 (2009: 31.2%)? Too early to accurately gauge the potential impact of KRS to TM s current business. Impact : Positive - opportunities for TM to enjoy lower cost of bandwidth as KRS member and to provide future capacity as a supplier to KRS. Growing demand for international capacity and backhaul services more business opportunities for TM. 5

6 Question 3(b) What are the Company s roles in the KRS given its extensive experience in IP and submarine cable systems? To share our expertise and vast experience with KRS, if required. Question 3(c) What would be the capex for the Group s new and existing submarine cables in 2011? The Group s expected capex for new submarine cable projects in 2011 is RM239.3mn, whilst capex for existing submarine cable projects is RM58.0mn. These are investments to further grow our business and revenue, including any potential revenue opportunities from KRS. 6

7 Question 4 What are the reasons for the following provisions for impairment and write-off: Question 4(a) The write-off for trade and other receivables as uncollectible at RM197.0 million and RM36.1 million respectively (See Note 34)? These debts were written off because they are no longer recoverable despite various collection efforts. The write-off would also enable the Company to claim tax deductions. 7

8 Question 4(b) The provision for impairment for investment in TM ESOS Management Sdn Bhd of RM19.9 million (2009: RM99.0 million) (See Note 28)? RM19.9mn impairment comprises the difference between the exercise price and the carrying value of the TM and Axiata shares. This impairment has no impact to Company bottom line as the impairment is debited against Special ESOS Reserve and not to our Income Statement. 8

9 Question 4(c) The provision for impairment for available-for-sale receivables of RM17.7 million (2009: RM3.5 million) (See Note 32(a))? Mainly due to change in basis of assessment following the adoption of FRS 139 on 1 January Previously, the impairment review only takes into consideration overdue amounts. Under FRS 139, the impairment review takes into consideration the past repayment trend and applies it to the total outstanding balance including the non past due portion. 9

10 Question 5 As reported, the Board intends to dispose of its remaining shares of Axiata Group Berhad in The shares were valued at RM481.9 million or RM0.135 per TM share as at 31 December Would the Board consider another capital distribution for the financial year ending 31 December 2011? Any capital distribution arising from a disposal of our remaining shares in Axiata Group Berhad will be considered after taking into account TM s cash levels, gearing levels, business prospects, projected capex levels as well as our other investment plans and our current and expected debt obligations. 10

11 CORPORATE GOVERNANCE Background We understand that TM s Board had considered and deliberated the findings of an independent internal investigation into the alleged improper payments by Alcatel Lucent Malaysia Sdn Bhd to TM employees. The Board had agreed that the report by KPMG Corporate Services Sdn Bhd (KPMG) be submitted to the Malaysian Anti- Corruption Commission (MACC) which was duly furnished on 1 March However, the Board has not yet finalized the actions or solutions which are pending the outcome of the MACC investigation. Question 6(a) Could the Board update the shareholders on the findings by KPMG as well as the progress by MACC given that the Board had taken action to suspend Alcatel Lucent SA and its group of companies from participating in ongoing and future tender and procurement proposals for a period of 12 months? Based on legal counsel s advice, the findings will not be made public at this point in time. The MACC investigation is beyond our jurisdiction to comment. 11

12 CORPORATE GOVERNANCE Question 6(b) What were the recommendations by the Board Audit Committee s Sub-Committee and actions taken by the Board? The BAC s Sub Committee ( BSC ) recommended that the findings of the KPMG forensic accountants be handed over to the MACC - done on 1 March Alleged involvement of TM employees: recommended a full investigation - disciplinary action and reporting to the relevant authorities if any criminal acts found. Internal governance: recommended a list of preventive measures. A team to implement measures will report progress to Board Risk Committee. The measures to improve and enhance security shall cover both physical and virtual security. Continuous review of processes - uphold and ensure the integrity of our corporate governance. TM has a zero tolerance policy towards such improprieties. 12

13 THANK YOU 13 Investor Relations Level 11 (South Wing) Menara TM Jln Pantai Bharu Kuala Lumpur, Malaysia Tel (603) / 7366 / 7388