KUALA LUMPUR: The Communications and Digital Minister Fahmi Fadzil's directive to cut internet prices by September will impact Telekom Malaysia Bhd's margins the most, but also investor sentiment on the telecommunications sector.
Tradeview Capital Sdn Bhd executive director and chief investment officer Nixon Wong said TM's margins will be directly impacted by the government government directive as the company owns the high speed broadband network.
However, the magnitude of the impact on the company's margin depends on the structure of the company and the wholesale pricing that it imposes on other fibre service providers.
"For other fibre service providers who do not rely on TM's High-Speed Broadband (HSBB) network, they would be compelled to pass on the cost savings to the customers."Which on one hand could drive higher demand for data, but on another hand could see higher marketing spending to maintain market share," he said.
Wong said Malaysian Communications and Multimedia Commission (MCMC) imposition of a ceiling on the wholesale price of broadband under the Mandatory Standard on Access Pricing, enables it to dictate a large part of the cost of providing internet services and thus influence the final retail price.
Areca Capital chief executive officer of fund Danny Wong Teck Meng said the internet price reduction will push internet service providers to give up some of its margin in the short term, but also alter investor's sentiment towards the telecommunication sector to the negative.
Another industry observer said the directive will not come as a surprise this time around as internet service price reduction was first announced in 2018.
"I truly believe that most telcos are more prepared this time around when these occasions arise, nonetheless the telcos have not disclosed any figures to how much they would be impacted," industry observer said.
"To be honest, the Malaysian telecommunication has been sitting on higher profit from a long time ago and it's only recently that their margins have come down, compared to regional peers whose internet service is more efficient and consumers get to enjoy it at cheaper price with higher margin," internet observer said.
Telekom Malaysia's share price closed 0.39 per cent lower to RM5.05 a share.