RAM Ratings reaffirms Telekom Malaysia’s AAA/P1 sukuk ratings

Published on 27 Apr 2020.

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RAM Ratings has reaffirmed the AAA/Stable/P1 ratings of Telekom Malaysia Berhad’s (TM or the Group) sukuk (as listed below). The ratings are anchored by the Group’s dominant position in the Malaysian fixed broadband and fixed line services and telecommunications industries. This is further cemented by the critical role that TM plays and its strong relationship with the Government of Malaysia (GoM). Based on RAM’s rating methodology for government-linked entities, the Group is deemed highly likely to benefit from extraordinary support in the event of financial distress.


Rating Action


RM2 billion Islamic Medium-Term Notes Programme and Islamic Commercial Papers Programme (2011/2026)



RM3 billion Islamic Medium-Term Notes Programme (2013/2033) and Islamic Commercial Papers Programme (2013/2020)



RM4 billion Islamic Medium-Term Notes Programme and Islamic Commercial Papers Programme (2018/2048)




TM has managed to preserve its operational and financial performance despite the regulatory-driven pricing revision in 2018, which has heightened competition within the fixed broadband space.

While its market share has continued to slide, TM has broadly maintained its dominance over the fixed broadband space, with an 81% market share in 2019 (2018:84%). The Group’s revenue only declined by 3.3% in fiscal 2019 despite its average revenue per user (ARPU) diluting by 17% to RM153 (2018: RM177). Meanwhile, the Group recorded its highest operating profit before depreciation, interest and tax (OPBDIT) and OPBDIT margin in a decade, of a respective RM3.89 bil and 34.00% in fiscal 2019. Weakness in its fixed broadband segment was cushioned by numerous cost-cutting initiatives and stronger demand in its wholesale segment (which leases bandwidth to other mobile broadband players and the nation’s internet service providers).

In line with efforts to improve internet accessibility and affordability, the GoM, via revision in Mandatory Standards on Access Pricing (MSAP), had mandated the reduction in wholesale prices which TM charges for access to its core and last-mile fibre networks, effective August 2018. Competition in the fixed broadband retail arena has therefore intensified, with 56%-61% price cuts for fixed broadband subscription rates, initiated by TM’s rival, Maxis Berhad. The competitive pressure continued through 2019, extending to the business and SME segments as well as TM’s Streamyx subscription. Going forward, we expect pricing pressure and competition to remain, albeit less intense than previously anticipated. Our analysis shows that TM’s cashflow-debt-coverage will remain robust even after assuming further ARPU dilution of up to 18% and a decline in net subscribers.

As an essential service provider, TM is largely insulated from the movement control order and Covid-19-related impact, although deteriorating economic conditions may affect businesses and retail telecommunication spending.

The new management under Group CEO Datuk Noor Kamarul Anuar Nuruddin’s leadership has identified wholesale business as the next area of growth for TM. This is due to greater demand for bandwidth from other telecommunication service providers. As it is, the data segment’s uptake has been robust, with a strong revenue expansion of 16.9% in fiscal 2019.

TM is also leveraging its extensive network – a mandatory prerequisite to support 5G capacity and latency requirements - to position itself as the nation’s wholesale provider of the 5G mobile network. “While 5G technology is arguably the most disruptive trend, it is difficult to ascertain the timing and quantum of investment required for its deployment. This is due to the uncertainties with regard to 5G’s commercialisation and readiness to adopt this technology,” highlights Davinder Kaur Gill, RAM’s co-head of Infrastructure & Utilities Ratings. “While we expect a more staggered roll-out of the new technology, we remain on the lookout for developments on this front and the eventual impact on TM,” adds Davinder.


Analytical contact
Nurhayati Sulaiman
(603) 3385 2518

Media contact
Padthma Subbiah
(603) 3385 2577


The credit rating is not a recommendation to purchase, sell or hold a security, inasmuch as it does not comment on the security’s market price or its suitability for a particular investor, nor does it involve any audit by RAM Ratings. The credit rating also does not reflect the legality and enforceability of financial obligations.

RAM Ratings receives compensation for its rating services, normally paid by the issuers of such securities or the rated entity, and sometimes third parties participating in marketing the securities, insurers, guarantors, other obligors, underwriters, etc. The receipt of this compensation has no influence on RAM Ratings’ credit opinions or other analytical processes. In all instances, RAM Ratings is committed to preserving the objectivity, integrity and independence of its ratings. Rating fees are communicated to clients prior to the issuance of rating opinions. While RAM Ratings reserves the right to disseminate the ratings, it receives no payment for doing so, except for subscriptions to its publications.

Similarly, the disclaimers above also apply to RAM Ratings’ credit-related analyses and commentaries, where relevant.

Published by RAM Rating Services Berhad
© Copyright 2020 by RAM Rating Services Berhad

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Ratings on Telekom Malaysia Berhad