Studio Press

TELEPHONE companies Telekom Malaysia Bhd (TM) and Maxis Communications Bhd, which are due to report their first-quarter results starting this week, may announce better net profits, analysts said.

TM, the country's most valuable phone company, is likely to record stronger net profit growth for the three months to March 31, driven by strong overseas contribution, according to most analysts. "Overseas revenue will be one of the major drivers of TM's earnings in Q1," AmResearch analyst Fiona Leong said. Avenue Securities telecommunications analyst Mohd Izhar Mohd Allaudin said he expects TM's first quarter to be better due to contributions from Indonesia's PT Excelcomindo and Sri Lanka's Dialog Telekom, which registered strong first-quarter numbers. "On the flipside, revenue contribution from fixed-line could be lower, but is anticipated to be squared off by the recent access rate hike," Mohd Izhar told Business Times. Last year, its fixed-line revenue dropped 7.4 per cent to RM6.47 billion, as against RM6.99 billion a year ago. In a research note, an analyst said he expects TM's first-quarter net profit and revenue to post 16 per cent and 15 per cent year-on-year growth respectively. TM made a net profit of RM374.5 million in the first quarter of 2005. A Reuters Estimates consensus shows TM's net earnings and sales improving to RM2.08 billion and RM15.5 billion respectively for the full year to December 31 2006. Meanwhile, the leading local mobile operator Maxis may see higher first-quarter earnings, driven by better revenues and strong subscriber growth. Maxis, according to Reuters Estimates consensus, is expected to register about 14 per cent growth in revenue to RM7.28 billion. It brought in 1.8 million new subscribers last year, of which 848,000 came in the fourth quarter alone, driven by price-cutting and marketing initiatives. It currently leads the industry with 7.86 million subscribers. "First-quarter net (customer) additions will not be as strong as the first-quarter, but we expect the momentum to continue," said an analyst. However, another analyst said Maxis may see lower first-quarter earnings due mainly to its loss-making Indonesian operation PT Natrindo Telepon Seluler (NTS). NTS is not expected to break even until 2007. Last year, NTS recorded losses of RM73 million, and Maxis expects further losses this year because the former is in the early stages of operation. "Its Indonesian operation will dilute part of the group earnings this year," an analyst said. For the full year, the group is expected to post a net profit of RM1.66 billion, just marginally lower than the RM1.67 billion recorded last year, Reuters Estimates indicated. TM and Maxis are expanding overseas to grow earnings as the local market has become saturated, with more than 74 per cent of Malaysians owning a mobile phone. In comparison, a market like India has less than 10 per cent of its 1.2 billion population owning a cellular phone. TM, besides Indonesia and Sri Lanka, has investments in Singapore, Bangladesh, Pakistan and Cambodia. It has also completed buying a 49 per cent stake in India's Spice Communications Pte Ltd. Maxis, with its investments in NTS and India's Aircel Ltd, is optimistic of doubling its existing subscriber base by 2008. It aims to elbow its way up into the top five of India's, and the top three of Indonesia's mobile phone market.-Bussiness Times