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Edited Transcript of TM.KL earnings conference call or presentation 26-Nov-19 10:00am GMT

Q3 2019 Telekom Malaysia Bhd Earnings Call

Kuala Lumpur Jan 10, 2020 (Thomson StreetEvents) -- Edited Transcript of Telekom Malaysia Bhd earnings conference call or presentation Tuesday, November 26, 2019 at 10:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Noor Kamarul Anuar Nuruddin

Telekom Malaysia Berhad - MD, CEO & Executive Director

* Razidan bin Ghazalli

Telekom Malaysia Berhad - CFO

* Rohaila Mohamed Basir

Telekom Malaysia Berhad - GM of Corporate Finance & IR & Head of IR

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Conference Call Participants

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* Arthur Pineda

Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research

* Choong Chen Foong

CIMB Research - Analyst

* Alex Goh

AmBank Group Research - Research Analyst

* Prem Jearajasingam

Macquarie Research - Analyst

* Ranjan Sharma

JPMorgan Chase & Co, Research Division - Analyst

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Presentation

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Operator [1]

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Good evening, and welcome to all sites to today's conference. You are now participating in Telekom Malaysia Berhad conference. (Operator Instructions) I will now hand over this session to the conference leader, Dato' Noor Kamarul Anuar Nuruddin, Group Chief Executive Officer of Telekom Malaysia Berhad. Thank you, and over to you, Dato'.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [2]

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So welcome and a very good evening. Thank you for dialing to TM's Third Quarter 2019 Results Briefing.

We will start with a brief review of the quarter, our performance and some recap on events along the first 9 months of this year. Our new Group CFO, Razidan Ghazalli, will then elaborate on the financial and operational details. As usual, we'll have our Q&A after the end of presentation.

Some brief notes for the year as at September 30, 2019. Overall, we saw continuing improvements in our fundamentals. Although revenue challenges remain on the retail front, our performance improvement initiatives continue to bear fruit, especially on costs. As per our guidance, our group revenue saw a contraction of 3.8% to MYR 8.4 billion from MYR 8.7 billion over the same period a year ago.

Nevertheless, we have managed to keep a close eye on our operational efficiencies to deliver a sustained profitability. We recorded EBIT growth more than 100% at MYR 1.2 billion from losses before interest and tax of MYR 187.3 million over the corresponding period of last year. CapEx for up to September 2019 was well within our guidance, totaling 8.8% of revenue and on track as we continue our target investment to ensure we deliver better service experience for all our customers.

Let's now have Razidan to take you through our financial and operational details. Over to you, Razidan.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [3]

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Thank you, Dato'. Good evening, everyone. I will now cover the other key items for year-to-date September 2019 as compared against year-to-date September 2018. On revenue, challenges still persist into the third quarter as we recorded revenue decline of 3.8%. Contractions we've seen on our voice and Internet products were both recorded 10% and 6.7% de-growth, respectively. Data, however, improved by 13%.

Despite these challenges, we are pleased to report that our operational efficiency initiatives continue to deliver results. Our reported EBITDA improved by 18.8% while normalized EBITDA improved by 19.6%, and this was on the back of lower operating costs.

Depreciation and amortization was lower by 33.2% due to significantly smaller provision for impairment compared to last year. The impairment on our fixed network asset this period was recognized following from the group's recent announcement of the Streamyx price adjustment. Other losses was higher at MYR 14.1 million due to provisional fair value losses off an investment. Net finance costs expanded by 24.4% due to higher interest expense arising from finance lease liabilities with the adoption of MFRS 16.

On ForEx. We recorded a ForEx loss of MYR 22 million on borrowings, which is lower than year-to-date September 2018. Our reported PATAMI improved multifold at MYR 683.8 million as at year-to-date September '19. And by stripping off the nonoperational items, our normalized PATAMI stood at MYR 810.9 million, which was higher by 53.7% against the same period last year.

Moving on to operating costs, our OpEx-to-revenue ratio improved by 16.6 points year-to-date, translating to cost over revenue of 86.7% notwithstanding the significant impairment in 2018. Direct costs was lower mainly due to 3 things: one, lower domestic roaming charges following revised rates and one-off discounts booked in the first quarter of 2019; secondly, reduction in content costs due to content rationalization and improved contracts for unifi TV; and finally, the third point, lower outpayment at TM Global due to year-to-date '18 included MFRS 15 adjustments as well as lower domestic interconnect outpayment in line with the new MSAP rate and lower voice traffic minutes from wholesale customers.

Lower materials was due to lower cable issuance for maintenance and lower purchase of equipment parts. Other OpEx was lower due to 4 items: a decrease in rental due to MFRS 16 reclassification of rental to depreciation; lower A&P due to cessation of sports sponsorship and optimization at unifi; decrease in impairment of trade receivables, mainly from initial impact of the implementation of MFRS 9 in 2018 based on expected credit loss or ECL model; and final point is due to lower maintenance charges.

Lower depreciation and amortization in 2019 compared to 2018 was mainly due to impairment made in 2018 for network assets amounting to MYR 995 million. And for this year, our G&A was lower against 2018 despite additional depreciation for ROU assets under MFRS 16 and accelerated depreciation.

Our CapEx was well within our guidance at 8.8% of revenue up to September 30, 2019. And out of the amount spent, 16% was made for core network; 58% for access; and the balance, 26%, was made for support systems.

Looking at the group cash flow. Our cash and bank balances was higher at MYR 3.68 billion, arising from lower payments to suppliers as well as lower spending on PPE. From a product perspective, we saw revenue growth in data, while other products contracted.

Moving on to comparison of year-to-date September 2019 versus year-to-date September 2018. Voice revenue continued on a downtrend by 10% against last year across all customer segments. And this was mainly driven by lower overall cumulative customer base and lower traffic minutes. Internet was lower by 6.7%, mainly due to lower Streamyx revenue contributed by lower cumulative Streamyx subscribers. IPTV revenue also decreased due to lower number of buys for a la carte premium. Data, however, was higher by 13%, mainly contributed by TM GLOBAL with growth in domestic, ethernet, HSBA, including lease services on both domestic and international.

Other revenue was lower by 8.1%, mainly at TM ONE and VADS due to lower ICT and BPO revenue. However, it was offset by TM facilities with higher net revenue due to additional recognition in the sale of land and higher ticket sales at Menara KL from increased visitors.

Comparing third quarter 2019 versus second quarter 2019, Q-on-Q, voice decreased mainly due to lower customer base at unifi and lower voice allocation for rental and usage. Internet decreased mainly due to one-off revenue adjustment in the current quarter coupled with lower Streamyx revenue. Data decreased at TM GLOBAL from lower lease revenue and lower IRU revenue. Others, however, increased mainly at TM facilities due to additional revenue recognition of the land sales and higher tuition fees at university telecom.

Moving on to the comparison of third quarter 2019 versus the third quarter 2018, year-on-year comparison. Voice decreased, mainly at unifi, due to lower customer base and lower VoIP revenue at TM GLOBAL. Internet decreased, mainly at unifi, lower Streamyx revenue in line with lower customers.

Data, however, increased from TM GLOBAL due to higher HSBA shifts. Other decreased, TM ONE from lower customer project and lower rental co-location revenue at TM GLOBAL.

Let's move on to the performance by cluster. Year-to-date, unifi overall revenue was down by 10.1%. And the decline was mainly due to lower call usages and customer base for voice and lower customer base for Streamyx. For TM ONE, lower year-to-date revenue was from lower ICT and BPO, business voice, customer projects and other data services. TM GLOBAL registered revenues of MYR 1.532 billion year-to-date, which was a 14% increase from year-to-date 2018. And this was mainly driven primarily from higher wholesale and leased services on the domestic front and HSBA. For others, there was higher contribution from TMF due to the additional recognition and higher revenue at Menara KL.

Now let's move on to our physical performance. Our total broadband customers as at year-to-date September '19 was more than 2.15 million. Even though there was a decline in number of total broadband subscribers, unifi customer base continues to grow. And as at the third quarter of 2019, our conversion penetration was at 55% compared to 52% in the third quarter of 2018. Today, we have about more than 3.3 million ports nationwide that can provide high-speed broadband under HSBB, HSBB2 and as well as SUBB projects.

Let's move on to the reconciliation of numbers that was reported prior to and with the impact of MFRS 16, which took effect this year. As at September 2019, the adoption of MFRS 16 has resulted in the reduction of group's retained earnings by approximately MYR 793 million. And this is consequent to the difference between the carrying value of the lease liability and the right of use assets. On the income statement, expenses, which previously included operating lease rental within OpEx, is replaced by depreciation of the ROU assets and interest expense on the lease liabilities over the remaining lease period. As such, MFRS 16 has the effect of increasing EBITDA, depreciation as well as interest expense.

Well, that's all for the financial and operating highlights. I'd like to now hand over to Dato' Noor Kamarul for some concluding remarks. Thank you.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [4]

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Thank you, Razidan. Next I'd like to share with you some updates on TM since our last meeting. We have been keeping our focus on customer acquisition in the consumer space and have entered into collaboration with our enterprise and public sector customers, alongside our role in delivering our country's Digital Nation aspiration. In October, we announced that TM would be showcasing our 5G use case in Selangor and Langkawi, Kedah, in collaboration with local municipal councils and other potential partners, where we will be demonstrating a total of 21 from the 35 5G use cases across various verticals as well as facilitate, build and nurture the development of potential use cases of 5G in [allied], but controlled environment and grow the 5G ecosystem in Malaysia.

More recently, we announced more [coverage] to our customers with aggressive Pay Nothing and MYR 59 unifi mobile promotion [of the carriers](inaudible) for the year-end holiday to give our customers more value for money for our fixed and mobile services. Amongst the several collaborative MOUs we have signed in the last few months, we recently entered into a memorandum of understanding with Huawei to leverage on each other's core expertise and capabilities to explore a working mechanism for 5G. This will include collaborating for a joint study on 5G spectrum and its evolution, possibly joint development of new services concepts and business cases of selected 5G use case, which includes, but not limited to fixed wireless assets, smart cities and vehicle-to-vehicle or vehicle-to-infrastructure joint study in the area of 5G ecosystem innovation and as for future cooperation on the full-fledged 5G end-to-end study.

Before we proceed with Q&A, let's wrap up the presentation with some key takeaways. In line with sector contraction, our revenue challenges still persist in line with our expectation and [recent] guidance. However, we are happy to report that the initiatives put in places over the last 18 months to navigate us through the challenges continue to bear fruit as seen in our strong profit performance up to September this year. This is thanks to our lower operating and capital expenditure and the priority given to reversing revenue decline and strengthening our customer experience and [revenue] initiative.

Over the last 3 months, we have articulated our intention to be the key driver in Malaysia's Digital Nation aspiration with our proposal to be the national infrastructure provider in both fixed and mobile space. This commitment was reinforced with our participation in the 5G demonstration projects and our preliminary move towards building infrastructure readiness. The details, in particular, the financials, are being refined, and we hope to be able to share them with you in the next few months.

With that, I thank you for your attention. So let's move on to the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is -- comes from Mr. Arthur from Citigroup.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [2]

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Several questions, please. Firstly, can you elaborate on the revenues -- on the other revenues. What's driven up TMF and MKL? Are these revenues sustainable into the fourth quarter? Secondly, can you give some clarification on the CapEx guidance for the year? It seems that 9 months is trending well below the initial expectations of around 18%. Are you still keeping that? Lastly, can you help us reconcile normalized profit after tax versus what you've reported? What items were booked as extraordinary?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [3]

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Arthur, it's Razidan here. Revenue -- other revenues, your question was whether it's sustainable into the fourth quarter. Yes, it is sustainable into the fourth quarter. Second question was on CapEx guidance. I think we did give market guidance of 18%. For this year, 2019, we will probably be slightly below guidance, slightly below guidance.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [4]

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Okay.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [5]

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The reconciliation between PATAMI and normalized PATAMI is mainly due to the impairment of network assets.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [6]

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Sorry, can I just get clarification on the first one, on the TMF and MKL issues? You mentioned these are sustainable. But I understand in your earlier discussion that this is also partly on some property sales. Can you elaborate on what's driven up the MKL and TMF revenues?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [7]

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On MKL revenues, that's sustainable into the fourth quarter. But as far as the TMF, there was a share of joint development land revenues that's probably one-off this quarter.

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Arthur Pineda, Citigroup Inc, Research Division - Director and Head of Pan-Asian Telecommunications Research [8]

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And that's included as normalized PAT?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [9]

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No, no, it's not.

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Operator [10]

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The next question is from Mr. Ranjan from JPMorgan.

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [11]

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I just have a couple of questions from your balance sheet and cash flows. It seems like your revenues are up again this quarter versus the previous 2 quarters, but your cash receipts from customers are down MYR 140 million to MYR 150 million. What's the reason for that? In the same regard, your OpEx is higher than the first 2 quarters, but yet payments to suppliers and employees is lower than at least the last 12 quarters. Is there any -- I mean, at the same time, your deferred income has gone up substantially on the balance sheet. Is that in some ways offsetting the payments to suppliers and employees?

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Rohaila Mohamed Basir, Telekom Malaysia Berhad - GM of Corporate Finance & IR & Head of IR [12]

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Ranjan, this is Rohaila here. Could you please repeat the question because we -- it was not -- it was a bit unclear. Am I correct, for the first question, you're asking that on the cash flow, the receipts from customers was lower, but our quarter-on-quarter revenue had grown. Is that correct?

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [13]

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Yes, yes, that's right.

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Rohaila Mohamed Basir, Telekom Malaysia Berhad - GM of Corporate Finance & IR & Head of IR [14]

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And what's the question after that? Please, could you repeat?

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [15]

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Yes. The other question, the second question, was your OpEx is up compared to the first quarter and second quarter, but your payments to suppliers and employees is lower than at least the last 12 quarters or so. So what explains that? And what I see on your balance sheet is that your deferred income has also increased quite a bit. So does that offset the payments to suppliers or employees in any ways? So just trying to understand the cash flow on the balance sheet.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [16]

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I'll try and answer this question. I think as far as revenue has -- receipts have reduced. Is that your question? Why receipts have reduced?

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [17]

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Yes. That's right.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [18]

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So receipts have reduced. But if you go and look at the balance sheet, the data has increased.

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [19]

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This is very simply put, like your reported revenues on the income statement have gone up, but your cash receipts from customers on the cash flow have come down. So just trying to understand that.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [20]

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You are comparing to Q-on-Q? Q2 versus Q3? Or you comparing 9 months against 9 months?

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [21]

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I'm just looking from -- for the first quarter, second quarter and third quarter. So we are -- sequentially into the quarters.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [22]

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The cash flow is 9 months. Hello?

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [23]

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Yes, yes, I mean, I just -- based on what you've reported on your cash flow statement, I just derived your cash flows for the first quarter, second quarter and third quarter. The third quarter numbers of receipts from customers I have is MYR 2.47 billion, which is about MYR 140 million or so lower than the second quarter and the first quarter of this year. Similarly, your payments to suppliers and employees is down to MYR 1.3 billion versus MYR 1.7 billion in the second quarter and MYR 2.1 billion in the first quarter, while your overall OpEx is up.

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [24]

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Okay. We don't seem to see those numbers unless we do a calculation quarter-to-quarter. We are only looking at 9 months versus 9 months here at the moment. And if you want to take it offline, and we'll get back to you on this one.

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Ranjan Sharma, JPMorgan Chase & Co, Research Division - Analyst [25]

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Okay. So I'll take the questions offline. Maybe then I can take another question. On your CapEx side, I feel that you are reiterating your focus on the mobile business, and especially ahead of 5G. But your CapEx is still is running at 8%. And it seems like your PP&E is decreasing, so it's effectively depleting the assets. So do you expect a big ramp-up in CapEx in the next few quarters as you build the mobile business?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [26]

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Generally, our market guidance is 18%. And I think I've just clarified that the guidance is probably going to be slightly lower than what we have estimated and what we have provided to the market. So inclusive in all those CapEx will be the mobile CapEx.

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Operator [27]

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The next question is from Mr. Prem from Macquarie.

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Prem Jearajasingam, Macquarie Research - Analyst [28]

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Congratulations on a good set of numbers. A few questions from me, please. Firstly, could I just clarify this revenue from TM facilities? How much of that jump in -- 80% jump quarter-on-quarter in terms of revenue came from the sale of land, in particular? And would I be right to assume that whatever you booked at the revenue essentially flowed straight through to the bottom line? That's -- just some clarification around that.

Next is with regards to the TM ONE business. I recall, post elections, there was a sharp slowdown in government ICT spending, which was hitting TM ONE. Has there been a change of any significance in that line item or have you been forced to go out and seek other commercial agreements to shore up revenues for TM ONE?

Then a bit more strategic, given that we've now been at TM for a few, I would say, 2 quarters now, could you help me understand when you look at the asset base of TM, you look at your aspirations to build a wholesale wireless network. What assets do you think we need to acquire -- outside of organic CapEx, et cetera, are there any assets that you think you need to acquire to take TM forward based on your vision? And then coming back to this wholesale wireless network initiative. In your discussions with the regulator, has there been any major pushback? And how do you see the recent announcement of Celcom and Maxis collaborating on 5G, impacting your wholesale plans?

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [29]

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Okay. I'll answer the asset or wholesale that we require. Basically, we are being, firstly, engaging with our regulators. We are trying to get as much as possible on the 700 megahertz frequency. But that will cost us some money for that. Same time, we are also trying to get into the 3.5 megahertz. These are 2 media assets that I think will drive us for the -- I think having this is key. And if possible, for 700, we are trying to get as much as possible. We prefer to have the [whole 10] if we can because that will drive the cost per bit down, especially for the suburban and rural areas. And right now, we are testing it for Langkawi on the 700. We already got in some approval from regulators to do a trial on the 700 just to test out after the [ASO], whether there's any more issues on this new band that will be released in the future.

Sorry. Yes. You asked about the collaboration between [Maxis and]...

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Prem Jearajasingam, Macquarie Research - Analyst [30]

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Yes.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [31]

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I think they have just announced that for some -- I don't know what (inaudible). I think what's important if you want to roll [out] 5G, I think the key asset they require is fiber. I think we have the most fiber. I believe, like it or not, later on they will come back to us for the fiber, since we have the most fiber on the ground now. And we also -- in our trial for Langkawi, we're also inviting the others to come in. We already have about 2 -- about a few interests that we are working on. Okay?

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Prem Jearajasingam, Macquarie Research - Analyst [32]

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Sure. Can I just clarify with your first answer with regards to the wireless. So you're focused primarily on the 700 and the 3.5 gigahertz spectrum. Am I right on that?

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [33]

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Yes. [That is just] -- will be made available by our regulators. So we are focusing on that band. We submitted our, what we call, PI, public inquiry (inaudible) submitted our proposal for the 700, especially. But 3.5 is another discussion because there will be another process. And testing on Langkawi will be activated soon. I think we already have our installation done. And next January, we'll be launching it for test -- for trial. That we are working on our cost-sharing capability on this. For the Langkawi, we are not only having 700, we're also given the 3.5 for testing. And most likely, we are already preparing the network for the stand-alone, SA, so to do, what I call, this test, the full capability of the 5G.

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Prem Jearajasingam, Macquarie Research - Analyst [34]

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And can I clarify, in light of the fact that the 3.5 gigahertz is still used for satellite in Malaysia, should we consider using 2.6 gigahertz in any way? And what are your views around the 2.6?

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [35]

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2.6 is considered as [dirty] band. It's being used by everybody. So I think it's really difficult to really roll out 100% on 2.6. We are different, not China. China, I think they have all the bands for use, really. We are in this situation, we have a lot of our current operator be invested in this 2.6. So it's a bit difficult to really roll out 5G on that, and the band also is quite small.

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Prem Jearajasingam, Macquarie Research - Analyst [36]

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Yes. Perfect. Could I just get the clarification with regards to the government ICT spend? Have they been -- has there been a pickup on that front? Or are we still having to go to other customers to shore up revenues at TM ONE?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [37]

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I think as far as government ICT spend, although, yes, it's been in the news that government is cutting down the IT spend, but going forward, we are quite confident that we will be defending our revenues in the government as well as through all the other verticals that we service. And on your first question, Prem, on the Q-on-Q revenues from TMF, it's 40% of the increase.

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Prem Jearajasingam, Macquarie Research - Analyst [38]

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So half the increase has come from...

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [39]

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Yes. And this goes straight to the bottom line.

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Operator [40]

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The next question is from Mr. Foong from CIMB.

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Choong Chen Foong, CIMB Research - Analyst [41]

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Two questions from me. Firstly, on your earlier announced plans for network upgrades, for the copper network. Can you provide us some color to the expected investment that TM will make for this network upgrade? When will it start? And also, when will it be completed? And related to that, do we see the CapEx to sales rising a fair bit because of this program into 2020? And if you could go through sort of guidance on the long-term CapEx level, that will also be very helpful.

And then my second question. I wanted to ask whether the -- in the third quarter itself, was there any Streamyx-to-unifi migration? I mean, pertaining to the free upgrade from Streamyx to unifi, because I thought that the upgrade had already been completed in April. But in the presentation, there was still some mention on that. So I just want to clarify whether there was still any migration in the third quarter. And also, just a bookkeeping question. Year-to-date, how many Streamyx customers have been migrated to unifi? Those are my 2 major questions.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [42]

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The migration is a natural thing we are doing now. We are doing in stages, and we are combining both partly fiber, partly on our wireless. So I think our approach is more prudent now. With wireless, we know where the customers are. Then we will move the fiber in. So basically, it's a natural growth -- natural migration we are doing now. We are not pushing it to the maximum. But the numbers I have shared with you (inaudible).

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [43]

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For migration of Streamyx to unifi, I think, generally, what we are seeing is about 400,000 plus customers have been migrated. And the expected investment from the copper network upgrade, I think it's within the guidance, the CapEx guidance that we've given to the market.

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Choong Chen Foong, CIMB Research - Analyst [44]

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Can I just follow up on that? On the copper network upgrade, have we already started on that already? Or would most of that come in 2020? And just on the 400,000 subscribers migrated from Streamyx to unifi. I just want to clarify whether you are referring to just the free upgrades.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [45]

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We are doing in stages. I think this is continuous process. I think we are not really particularly focused on 1 particular year to put everything in, but we are spreading out throughout years.

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Choong Chen Foong, CIMB Research - Analyst [46]

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Okay. And on the 400,000 subscribers migrated from Streamyx to unifi, is -- are you just referring to the free upgrades?

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [47]

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I don't understand what you mean by free upgrades. I think what we are doing is as we move into unifi, we offer the packages that we have. I think (inaudible) moving. And on the customer, last customer, maybe we offer a specific [case there], if we want to [carry on] copper. As long the copper is there, we just maintain. But there are cases where a customer -- there is only one customer left in one particular area, then we will just offer, what I call is, special package for migration. Other than that, it's a normal migration that we are doing.

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Operator [48]

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The next question is from Mr. Alex Goh from AmBank.

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Alex Goh, AmBank Group Research - Research Analyst [49]

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I have several questions. The first is, regarding your CapEx, I understand you said that the full CapEx is going to be slightly lower than 18%. But since (inaudible), call it, only 8.8% CapEx to your revenue for the first 9 months, does that mean your fourth quarter CapEx is going to shoot up by what 4, 5x compared to quarter-on-quarter? And also the second one, it relates -- on your OpEx. It has been coming down, but I'm just wondering, should we expect any back-loaded spending to occur in the fourth quarter, right? And my third question is regarding the NFCP. Given the requirement by MCMC on the need to move towards the rural and suburban areas, I'm wondering, how much would that add to your CapEx next year? And my third question is regarding on your nontelco income. How much IRU have been accounted for in the third quarter and for the 9 months?

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Razidan bin Ghazalli, Telekom Malaysia Berhad - CFO [50]

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I think for CapEx, I think I mentioned that we remain within our guidance, the CapEx guidance. But we are going to be a little bit below that guidance, slightly below the guidance. OpEx. No, it's not expected to be back-loaded to Q4. And if we see CapEx expected next year, we'll make the announcement next year, and we'll give you a CapEx guidance for next year. IRU, basically, is part of our telco revenue. And usually, we don't disclose. And I don't think we want to disclose that, but it's trending positively.

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Operator [51]

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There is no more question from teleconference participants, sir.

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Noor Kamarul Anuar Nuruddin, Telekom Malaysia Berhad - MD, CEO & Executive Director [52]

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So we have gone through all this question and answer. So I'd like to thank you for your participation and thank you for asking question. And hopefully, we have answered you. And thank you very much.