Telekom Malaysia

Telekom Malaysia Berhad (TM) is a key player in the establishment, maintenance and provision of telecommunication and related services under the license issued by the Ministry of Energy, Water and Communications. It is the dominant player in the fixed line telephony market in Malaysia, offering local call, long distance call and data services through a range of platforms. TM’s mobile communications business operates under the Celcom brand while its Internet access business operates under the TM net and Streamyx brands. TM also operates a wireless broadband Internet access network through TM net Hotspot. TM was incorporated in 1984 listed on Bursa Malaysia Securities in Nov 1990.

the core business of TM is Telecommunications, Fixed Line Services, Mobile & Cellular, Internet Connectivity, Operation of optic fibred systems, Managed Network Services, Trading in telecommunications equipment.

Telekom Malaysia Berhad is the largest telecommunication company in Malaysia. It has a monopoly on the fixed line network and has a considerable market share of the mobile communications market after its acquisition of Celcom and merging with its mobile operation arm TM Touch. TM has an internet service provider subsidiary offering narrowband and broadband connectivity. Broadband connectivity is through DSL under TM Net’s Streamyx brand. Due to its near monopoly of the last mile connections, TM Net is now the sole DSL broadband provider in the country. Telekom Malaysia officially changed its global brand from Telekom Malaysia to TM in April 2005. Telekom Malaysia Berhad, is one of the largest listed companies on Bursa Malaysia with an operating revenue of more than RM16 billion and total asset over RM41.8 billion. TM is a government-linked company, reporting government shareholdings of over 36%. Of the remaining shares, less than 4% are held by non-bumiputera Malaysians, the racial distinction being an example of the government’s affirmative action policy. TM had a large numbers of companies under its control both in and outside of Malaysia. Through its investment arm TM International Sdn Bhd, TM has

purchased and assumed control of a number of start-up telcos most notably close to the home region. TM has a local subsidiaries such as:

On September 28, 2007, TM announced a revamp of its corporate structure, de-merging its fixed-line and mobile businesses into two separate companies: “Fixed Co” and “Region Co”. Fixed Co will comprise its domestic fixed-line business, internet service provider and other ancillary businesses. Region Co will comprise Celcom, its domestic cellular operator, and all of its international operations. The de-merger exercise is scheduled to be completed by Q1 2008 and both Fixed Co and Region Co will be listed on Bursa Malaysia by June 2008. On 10 December, 2007, TM announced a special dividend amounting to RM 1.6 billion to its shareholder. TM further added that after the demerger, Fixed Co. will adopt a dividend policy of a minimum RM700mil or up to 90% of normalized net profit, whichever is higher. On 11 April 2008, Telekom Malaysia announced that TM International will be listed on the Bursa Malaysia by 28 April 2008. TM International is renamed as Axiata Group Berhad in May 2009. Dialog Telekom customer base as of end 2008 was 5.5 millions.

In sponsorship, Manchester United signs five-year deal with Telekom Malaysia Premier League leaders Manchester United have signed a five-year deal with Telekom Malaysia (TM), which will become its Official Integrated Telecommunications partner in the Far Eastern country. TM is the largest telecommunications company in Malaysia, posting an increase in profits in 2009 of 180.4% compared to the previous year. The company is developing its tour match sponsorship of Man Utd into a complete

partnership with the Club. Man Utd’s success in Malaysia is clearly evident with approximately 25% of the population supporting the Club. Its tours of the Far East attract large crowds with around 40,000 attending the training sessions with the same figure supporting the team at a match in Kuala Lumpur.

Market analysis

Market analysis is a research aimed at predicting or anticipating the direction of stock, bond, or commodity markets, based on technical data about the movement of market prices or on fundamental data such as corporate earnings prospects or supply and demand. It is a designed to define a company’s current or potential markets, forecast their directions, and decide how to expand the company’s share and exploit any new trends. Market analysis is a tool companies use in order to better understand the environment in which they operate. It is one of the main steps in the development of a marketing plan. The first step is to conduct market research or gather information through direct mail, telemarketing, focus groups or online surveys. Market analysis, which involves critically reviewing and organizing the data collected so that it can be used in making strategic marketing decisions. Just as one would not build a house on sand, one should never undertake a marketing program that is not built on a firm foundation of market knowledge.

Telekom Malaysia (TM), the leading player in the Malaysian fixed-line market, is focusing on high-speed broadband and bundled services to drive its future growth, while a declining fixed-line market and shrinking ARPU remain its key challenges. Telekom Malaysia Berhad (TM) is engaged in providing a wide range of services for the telecommunications industry. The company’s offering include fixed line, wireless, data and broadband services. The group operates in different countries namely Indonesia, Sri Lanka, Bangladesh, Thailand, Cambodia, India, Pakistan, and Iran, with a strong focus on the Malaysian market.

The company provides fixed line and data services such as telephone and internet connections for business and domestic purposes. Solutions for international wide area networks, corporate level virtual private networks. The Internet and multimedia services of the company include access services and application services. Under the cellular services the company offers wireless related services to its customers. It is managed by its operating subsidiaries such as Celcom (Malaysia) Berhad, TM International (Bangladesh), Dialog Telekom (Sri Lanka), Multinet Pakistan, PT Excelcomindo Pratama

TBK (Indonesia), Spice Communications (India), Telekom Malaysia International (Cambodia), and Mobileone (Singapore). Major service offerings include voice, data, mobile internet, messaging, and international roaming. The non-telecommunication related services include property development, printing and publication of directories, education, trading in consumer’s premises equipment and other businesses.

The company operates through four reportable segments namely, Retail Business, Wholesale Business, Global Business and Shared Services or Others. The company’s Retail Business segment provides various telecommunication products, services and communication solutions principally to direct consumers, small and medium businesses, corporate and government customers. TM offers a range of voice services, internet or broadband services, data services and information communication technology services.

As on December 2008, the Retail Business segment holds a customer base of 1.6 million. During the fiscal 2008, the respective segment accounted MYR 6887.2 million, an increase of 6% over last fiscal. The Wholesale Business segment of the company delivers various telecommunication products and services through its direct networks to other licensed network operators such as Network Facilities Providers (NFP), Network Service Providers (NSP) and Application Service Providers (ASP). The company provides various telecommunications network related services through Fiberail’s fibre optics backbone, via railway tracks and Petronas’ gas pipelines. Fiberail is a joint venture formed by Telekom Malaysia Berhad and Keretapi Tanah Melayu Berhad (KTMB).

In addition, its Fibrecomm is a joint venture with Tenaga Nasional Berhad (TNB). It operates through 10Gbps fibre optics network. Moreover, Fibrecomm also
offers a neutral infrastructure service. During the fiscal 2008, the respective segment accounted MYR 997.1 million, a 0.65% decrease over last fiscal. Global Business segment is involved in the provision of inbound and outbound services for telecommunication products. The company under its Global Business segment holds collaborations in six continents namely, Asia, Europe, Americas, Oceania, the Middle East and Africa. It is involved on various business alliances with various telcos in Singapore, the Philippines, Brunei, Indonesia, Thailand, Myanmar, Cambodia, Laos and Vietnam and installed global IP nodes in Singapore, Hong Kong, the UK, US and others. Global Data Marketing and Global Voice Marketing teams are the major products and services provided by this segment. During the fiscal 2008, the respective segment accounted MYR 1148.4 million, an increase of 3.70% over last fiscal.

The company’s Shared Services or Others include all shared services divisions, networks and subsidiaries that do not fall under the above lines of business. During the fiscal 2008, the respective segment accounted MYR 4381.7 million, a 1.55% decrease over last fiscal. Telekom Research & Development Sdn Bhd (TMR&D), the research and development division of the group entered into an agreement with MIMOS for research collaboration in cutting-edge technologies between governments linked companies (GLCs). It also signed an agreement with University Technology Malaysia to promote co-operation between the two parties in the field of research and development. The company spent MYR 65.5 million on R&D during 2008.

In May 2009, Telekom Malaysia Berhad (TM) and Wi-Net Technology Sdn Bhd (Wi-Net) entered into a Wholesale Ethernet Service Agreement for the provisioning of Wi-Net’s wireless broadband service, Winet Broadband. It is the five year agreement, where the Wi-Net will leverage on TM’s existing Wholesale Ethernet service and the new High Speed Broadband (HSBB) network and expands supply of its broadband service to more than 2,000 locations nationwide by 2010.

Industrial analysis

Industry analysis is a tool that facilitates a company’s understanding of its position relative to other companies that produce similar products or services. Understanding the forces at work in the overall industry is an important component of effective strategic planning. Industry analysis enables small business owners to identify the threats and opportunities facing their businesses, and to focus their resources on developing unique capabilities that could lead to a competitive advantage. An industry analysis consists of three major elements. That is the underlying forces at work in the industry, the overall attractiveness of the industry and the critical factors that determine a company’s success within the industry. Ease of entry refers to how easy or difficult it is for a new firm to begin competing in the industry. The ease of entry into an industry is important because it determines the likelihood that a company will face new competitors. In industries that are easy to enter, sources of competitive advantage tend to wane quickly. On the other hand, in industries that are difficult to enter, sources of competitive advantage last longer, and firms also tend to benefit from having a constant set of competitors.

.The ease of entry into an industry depends upon two factors. It is reaction of existing competitors to new entrants and the barriers to market entry that prevail in the industry. Existing competitors are most likely to react strongly against new entrants when there is a history of such behavior, when the competitors have invested substantial resources in the industry and when the industry is characterized by slow growth. Some of the major barriers to market entry include economies of scale, high capital requirements, and switching costs for the customer, limited access to the channels of distribution, a high degree of product differentiation, and restrictive government policies. A comprehensive industry analysis requires a small business owner to take an objective view of the underlying forces, attractiveness, and success factors that determine the structure of the industry. Understanding the company’s operating environment in this way can help the small business owner to formulate an effective strategy, position the company for success, and make the most efficient use of the limited resources of the small business.

Once the forces affecting competition in an industry and their underlying causes have been diagnosed, the firm is in a position to identify its strengths and weaknesses relative to the industry. An effective competitive strategy takes offensive or defensive action in order to create a defendable position against the five competitive forces. Some of the possible strategies include positioning the firm to use its unique capabilities as defense, influencing the balance of outside forces in the firm’s favor, or anticipating shifts in the underlying industry factors and adapting before competitors do in order to gain a competitive advantage.

rom the economist intelligence unit

Malaysia’s telecommunications network is relatively advanced compared with other countries in South-east Asia. In terms of total industry revenue, Malaysia’s communications market is roughly on a par with that of Singapore (which has a much smaller population), and is well ahead of that of Indonesia. In 2003 the number of telephone land lines per 100 populations in Malaysia stood at 18.3, giving the country about twice the teledensity of Thailand, six times that of the Philippines and five times that of Indonesia. As in most of Asia, the use of cellular telephones has been growing steadily at the end of September 2005 there were around 17.6m mobile accounts. Although telecoms services are excellent and readily available in urban centre’s, they are only fair in many rural locations.

The monopoly of Telekom Malaysia, which is largely state-owned, on fixed-line and cellular services ended in 1994 with the licensing of several competitors. However, Telekom Malaysia remains the dominant provider of fixed-line services, with more than 90% of the market. The newcomers have tended to concentrate on mobile telephony. The ensuing competition has brought lower tariffs and improved service quality. The mobile network is primarily based on Global System for Mobile Communications (GSM) technology; although a code division multiple access (CDMA) system is being used by Telekom Malaysia to meet demand from rural areas in eastern Malaysia. In order to

achieve a truly competitive market, the government must eventually distance itself from the incumbent, Telekom Malaysia, and legislate provisions for local loop unbundling, co-location and interconnection. Without these, Malaysia will not have a competitive market for broadband services, and the fixed-line market is likely to remain stagnant.

The development of information and communications technology (ICT) plays a crucial role in the government’s plans for the economy. The government has attempted to position Malaysia as a regional and global ICT and multimedia hub, by providing tax breaks to attract multinational corporations and increase the companies’ competitiveness through the development of the Multimedia Super corridor (MSC) near the capital, Kuala Lumpur. Although the bursting of the “dot-com” bubble slowed the growth of the 750-sq-km MSC, by end-2005 a total of 1,421 companies had approved MSC status. These companies, of which 349 were majority foreign-owned, included technology manufacturers, data centre’s and communications-related industries. Usage of ICT, measured in terms of installed personal computers (PCs), rose to almost 170 per 1,000 population in 2003, up from 87.4 in 1998. The Economist Intelligence Unit estimates total information technology (IT) spending in Malaysia at US$3.3bn in 2005.

Company analysis

The Executive Summary entices the investor to learn more about the company. The company analysis in turn educates the reader regarding the company’s history

Company profile

Telekom Malaysia Berhad (TM) as the leading integrated Telecommunications Company in Malaysia, that aim to deliver cutting-edge communications, information and entertainment services and the vision is to be Malaysia’s leading new generation communications provider, embracing customer needs through innovation and execution excellence mission Strive towards customer service excellence and operational

efficiency, enrich consumer lifestyle and experience by providing innovative new generation services, improve the performance of our business customers by providing high value information and communications solutions, deliver value for stakeholders by generating shareholder value and supporting Malaysia’s growth and development

Past Accomplishments

Telekom Malaysia Berhad (TM) Investor Relations Unit is constantly striving to improve relationships with all our investors and in ensuring best practices are adhered to all communication with the capital market is governed by the Investor Relations Policy and Guidelines.

Unique Qualifications

Telekom Malaysia Berhad (TM) is a Malaysia based integrated communications solutions provider. The company is principally engaged in the provision of services and solutions in broadband, data and fixed line. TM serves 4.3 million fixed-line customers and 1.6 million broadband customers across the globe. In addition, the company also operates retail, wholesale and the global business. Major subsidiaries of the company include Celcom (Malaysia) Berhad, TM International (Bangladesh), Dialog Telekom (Sri Lanka), Multinet Pakistan, PT Excelcomindo Pratama TBK (Indonesia), Spice Communications (India), Telekom Malaysia International (Cambodia), and Mobileone (Singapore). Other than Malaysia, the company has presence in Indonesia, Sri Lanka, Bangladesh, Thailand, Cambodia, India, Pakistan, and Iran, through its subsidiaries. It is headquartered at Kuala Lumpur, Malaysia.

The company reported revenues of (Ringgit) MYR 8,674.90 million during the fiscal year ended December 2008, an increase of 4.57% over 2007. The operating profit of the company was MYR 729.40 million during the fiscal year 2008, a decrease of 21.27% from 2007. The net profit of the company was MYR 791.90 million during the fiscal year 2008, a decrease of 68.92% from 2007.

Industry and structural links to company analysis

Telekom Malaysia Berhad – Financial and Strategic Analysis Review

Global Markets Direct’s Telekom Malaysia Berhad – Financial and Strategic Analysis Review” is an in-depth business, strategic and financial analysis of Telekom Malaysia Berhad. The report provides a comprehensive insight into the company, including business structure and operations, executive biographies and key competitors. The hallmark of the report is the detailed strategic analysis of the company. This highlights its strengths and weaknesses and the opportunities and threats it faces going forward

The Company is engaged in the establishment, maintenance and provision of telecommunication and related services. The Company focuses on fixed line voice, data and broadband, and other telecommunication-related services. The Company operates in retail business, wholesale business, global business and shared services/others. Retail business provides a range of telecommunication products, services and communication solutions to consumers, small and medium businesses, as well as corporate and government customers. Wholesale business provides a range of telecommunication products and services delivered over its networks to other licensed network operators namely network facilities providers, network service providers and application service providers. Global Business provides inbound and outbound services for a range of telecommunication products, including the fixed network operations of its worldwide subsidiaries.