• Tenaga Nasional (TNB) announced that it will start a pilot project in Jasin, Melaka this month to assess the technical, safety and commercial viability of using TNB’s electrical infrastructure for the government’s National Connectivity Plan (NCP) that will allow faster, cheaper and wider internet accessibility.

• The pilot project, which will be completed by end-2018F, will cover 1,100 out of 4,300 houses in Taman Merbau, Taman Maju and Felda Kemendor, Jasin. The households will gain access to a high speed broadband network through TNB’s own fibre optic cable. TNB currently has 12,000km of fibre optic cables used for its Supervisory Control And Data Acquisition (SCADA) system.

• The outcome of the pilot project will determine the decision on the commercial viability of a larger NCP participation nationwide.

• This development comes after the termination of an MoU between TNB and Telekom Malaysia to jointly develop a plan to deliver the Nationwide Fiberisation Plan as it was previously called, in July 2018. The MoU was signed in January 2018.

• The estimated total cost of the last-mile fiberisation is estimated to be RM10bil. Previously, TNB was looking to partner with other broadband companies as although the group has a fibre network, it is not extensive enough.

• We do not expect capex for the pilot project to be significant. TNB’s capex amounted to RM6.48bil in 1HFY18.

• In the longer term, it appears that TNB may be a new entrant into the broadband sector.

• Maintain BUY on TNB with a fair value of RM17.25/share.

Source: AmInvest Research - 7 Sept 2018