SINGAPORE (Dec 3): It never rains but it pours at Telekom Malaysia (TM).

The telco, which saw some RM14.5 billion ($4.8 billion) of its market capitalisation evaporate in recent months, has decided to pay less dividends moving forward.

The news came as the company announced a quarterly net loss of RM175.59 million — the first quarterly loss in 10 years — due to a massive RM934.8 million in impairment losses.

TM said last week it would revise its dividend policy to pay out an annual dividend of 40% to 60% of its profit after tax and non-controlling interests. This is a downward revision from its current dividend policy — a payout of RM700 million or up to 90% of its normalised profit after tax and non-controlling interests, which­ever is higher.

The revised dividend policy is to take effect in the current financial year ending Dec 31, 2018. TM said dividends would be paid depending on overall business and earnings performance, capital commitments, financial conditions, distributable reserves and other relevant factors. It explained that the dividend cut was to support its “long-term strategic objectives”.

The revision of the dividend policy may not come as a surprise to some quarters considering that TM did not declare the first interim dividend in August when it released its second-quarter results, unlike in the last two financial quarters,

Based on the minimum RM700 million dividend promise, this would work out to a dividend per share of 18.6 sen, translating into a dividend yield of 7.88% based on its Nov 29 close of RM2.36. A random check on Bloomberg shows at least three analysts have forecast TM to declare a dividend of less than 19 sen per share for FY2018.

However, many were caught off guard by the RM934.8 million in impairment losses on network assets that dragged the telco into the red in the current quarter under review, from a net profit of RM211.82 million in 3QFY2017.

It is unclear whether TM has embarked on a kitchen-sinking exercise to write off its investments. A major investment, into which it poured RM350 million, is Packet One Networks (M), now known as webe.

In a filing with Bursa Malaysia on Nov 26, TM said it was for the impairment of fixed and wireless network assets after the continued pressure from challenging business, industry and economic conditions combined.

Quarterly revenue was flat at RM2.95 billion.

For the cumulative nine months ended Sept 30, 2018 (9MFY2018), TM posted a net profit of RM83.49 million, down 87.2% from RM652.73 million in the previous corresponding period.

Cumulative revenue slid to RM8.73 billion from RM8.89 billion in 9MFY2017. TM said this was mainly due to lower revenue from voice and data services, whereby its data service was affected by a provision made on the estimated impact of regulatory mandated access pricing.

TM’s acting group CEO Imri Mokhtar said the group continues to face various headwinds from competitive market dynamics.

“However, in light of the continued pressure from the industry, and market challenges and their impact on our revenue thus far, we have taken a prudent view, by undertaking the impairment of our network assets — this resulted in close to a RM1 billion impairment loss this quarter,” said Imri.

He said TM currently has 2.29 million broadband customers. Its Unifi customer base continues to grow, at 1.26 million as at end-3Q2018, compared with 1.06 million a year ago. — <i>The Edge Financial Daily</i>

<i>Supriya Surendran is a senior writer with The Edge Malaysia</i>

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