Telekom Malaysia sees profit below forecasts

Kuala Lumpur, Mar 21: State-controlled Telekom Malaysia Bhd expects that because of higher spending on its international expansion, the firm's 2007 net profit will come in at around 2 billion ringgit (2 million), below analyst forecasts for 2.2 billion ringgit, its chief said on Wednesday.

Telekom -- which earned 2.07 billion ringgit in 2006 -- is banking on high-growth mobile markets in Indonesia, Bangladesh, Sri Lanka and India to counter shrinking fixed-line revenues and a maturing mobile market at home.

When asked if Telekom was on track to a meet consensus forecast of 2.2 billion ringgit in net profit this year, Chief Executive Officer Abdul Wahid Omar said Telekom is aiming at a 2007 return on equity of 9.8 percent this year, which is lower than the 10.6 percent it achieved in 2006.

''That translates into a ballpark figure of about 2 billion ringgit,'' Abdul Wahid said in an interview.

''We do expect higher depreciation charges and higher financing charges, given the significant amount of investment we need to do on the network in 2007,'' he added.

Telekom said on Monday that it plans to spend 4.9 billion ringgit on capital expenditure for its overseas mobile businesses in 2007. That is a 75 percent increase from a year ago, when it spent 2.8 billion ringgit.

Telekom, which had sales of 16.4 billion ringgit last year, said on Monday that it plans to achieve revenue of 18.1 billion ringgit this year.

Overseas Profits:
Contributions from Telekom Malaysia's overseas businesses are expected to amount to as much as 35 percent of 2007 net profit, Wahid said.

He added that Vietnam is a key market for the firm to enter but said that it is not in talks yet with any of Vietnam's mobile firms.

He also said that Telekom wants to list its Bangladesh unit as early as 2009, and said that a key focus was first to grow revenues by as much as 60 percent annually and for liquidity in Bangladesh's capital markets to improve.

''We need to ramp up its performance first, but a lot also depends on the liquidity of its markets,'' he said.

He added that there are no current plans to list Telekom's international unit.

''Our strategy is to list our overseas investments in their respective home countries as opposed to the intermediate holding company.'' Telekom is also in talks with Malaysia's telecommunications regulator to provide WIMAX services on its 2.5 GHZ spectrum, after it lost out in a 17-firm bid for one of four of the high-speed wireless licences awarded earlier this month.

Telekom is prepared to spend up to 300 million ringgit on the initial WIMAX costs, Abdul Wahid added.

Group-wide, Telekom has around 4 billion ringgit in cash, and it has the capacity to borrow an additional 3 billion ringgit for acquisitions if needed, he said. Any new borrowings would come from the debt capital markets, he added.

Telekom is more than 60 percent owned by state asset firms Khazanah Nasional Bhd., the Employees Provident Fund and Permodalan Nasional Bhd.

Reuters