REDTone pact likely to boost TM earnings

Telekom Malaysia Bhd's earnings are expected to see an uplift following its high speed broadband (HSBB) agreement with REDTone International Bhd (REDtone) yesterday, said Hong Leong Investment Bank (HLIB).

"We would expect the agreement to contribute positively to TM's earnings whereby, it would normally encompass two types of income, recurring and usage based," HLIB said in its research note today.

Under the agreement, TM will provide both HSBB access and transmission services to REDtone with the latter having access to 1.3 million premises by year-end.

HLIB believes that REDtone would utilise the HSBB as a backhaul to complement its existing 4,500 WiFi hotspots and potentially increase it to 5,000 by year-end.

Meanwhile, it also believes that TM will continue to lead the fibre-to-the-home market segment with the advantage as the first mover.

"However, TM has again introduced another foe to its stronghold, thereby creating a potential market share erosion and loss of opportunity costs.

"This has increased the likeliness of a price war going forward as all are competing within the same market with undifferentiated product offerings.

"REDtone's contribution to TM is however, expected to be insignificant, after considering their relative operational sizes," it added.

Given this, HLIB is maintaining its "hold" call on TM with a target price unchanged at RM5.16. -- BERNAMA