RAM Ratings affirms TM Tech’s AAA/P1 sukuk ratings

Published on 07 Jul 2023.

Share Tweet Email

RAM Ratings has affirmed the ratings of TM Technology Services Sdn Bhd’s (TM Tech) sukuk:



 RM3 bil Islamic CP/MTN Programme (2013/2033)


 RM4 bil Islamic CP/MTN Programme (2018/2048)



We view the recent novation of Telekom Malaysia Berhad’s (TM or the Group) sukuk to TM Tech following an internal reorganisation by the Group to be credit neutral to the rated sukuk. Subsequent to this exercise, the Group’s core businesses were transferred to TM Tech. Given the inextricable financial and operational linkage between TM Tech and TM – with the former is now the Group’s main earnings contributor, RAM views the two entities in aggregate from a rating perspective.

TM’s expected continued dominance of the local fixed-broadband, fixed-line services and telecommunication industry anchors the affirmation of the ratings. The Group’s critical role and strong relationship with the Government of Malaysia solidify its position. Based on RAM’s rating methodology for government-linked entities, both TM and TM Tech are deemed highly likely to receive extraordinary support in the event of financial distress.

In FY Dec 2022, TM’s revenue rose 5.1%, thanks mainly to the Unifi and TM Global segments. Profitability saw a healthy uplift, with the Group’s unadjusted operating profit before depreciation, interest and tax (OPBDIT) margin clocking in at 39.7% as costs remained under control. Improved earnings, coupled with active debt management, resulted in better leverage and debt coverage ratios. TM’s gearing hit a low of 0.87 times as at end-December 2022 while fiscal 2022 funds from operations debt coverage stood at 0.65 times.

From an industry standpoint, 5G is touted as the next technological advancement to turnaround stagnating earnings growth for the sector. Stronger demand for data and digitalisation via 5G is a boon, but any resultant uptick in earnings in the retail (unifi, TM One) and wholesale (TM Global) segments is likely to be seen only in the medium term. For now, the government’s decision to move to a dual wholesale network ends an impasse on the country’s 5G network deployment mode/design. Separately, pro-consumer regulatory policies around the new Mandatory Standard on Access Pricing that came into effect on 1 March 2023 are likely to weigh down TM’s earnings. 

The weakening ringgit gives rise to increased forex risk from the portion of the Group’s debts that are denominated in foreign currencies (end-December 2022: 36% of total debts). We note that the exposure is hedged using forward contracts, cross-currency swaps and options. Despite ongoing uncertainties and challenges, TM’s financial metrics are expected to stay steady due to financial discipline in previous years, focused on deleveraging and improving operational efficiencies.  


Analytical contacts
Ho Chian Leng, CFA
(603) 3385 2527

Davinder Kaur Gill
(603) 3385 2525


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 2023 by RAM Rating Services Berhad

Rating Rationale

Ratings on TM Technology Services Sdn Bhd