- We maintain HOLD on TM at an unchanged DCF derived fair value of RM5.40/share. TM is making available its IPTV service (HyppTV) to Streamyx subscribers. Currently, HyppTV is offered as a bundle with TM’s Unifi services. Unifi is currently offered in 5mbps (RM149/month), 10mbps (RM199/month) and 20mbps (RM249/month) packages.

- HyppTV to Streamyx is only available for the 4mbps and 8mbps packages. Existing 4mbps subs need to purchase HyppTV’s RM30/month Platinum Pack to access HyppTV (on top of RM140/month basic broadband subscription). The 8mbps service on the other hand is a new service. All 8mbps subs will automatically get HyppTV’s free channels upon subscription to the broadband package (for RM160/month), but need to top-up for channels and packages.

- Unlike HyppTV for Unifi, HyppTV for Streamyx does not have a dedicated bandwidth for IPTV – meaning that broadband speed might be affected during heavy traffic. The 8mbps Streamyx service (which is delivered via copper), will not be made available in Unifi serviced areas (mainly in Klang Valley and primary cities such as JB and Penang).

- We are broadly positive on this development given that:- (1) It encourages subs to trade up. Currently, only 10%-15% of Streamyx’s 1.6mil subscribers are under the 4mbps package, which at RM140/month, is priced just RM10-30 above the 1-2mbps Streamyx packages; (2) Potential ARPU enhancement from a wider coverage of HyppTV services.

- We estimate:- (i) a 3% increase in Streamyx ARPU if all 4mbps subs add on HyppTV; (ii) a 23% increase should all Streamyx subs trade up to the minimum 4mbps package; (iii) and up to a 49% increase if all subs trade up to the min. 4mbps package and add-on HyppTV (Platinum pack at RM30/month). More importantly, this comes at minimum additional cost (besides customer acquisition cost of c. RM1.5K) given that content cost is already being incurred.

- Possibilities of securing high demand sports content such as EPL could help strengthen HyppTV’s following (30% of Unifi subs subscribe to paid channels), though at this juncture we are unsure about the licensing terms between Astro and EPL and whether it allows Astro to sub-license out its rights to EPL content.

- That said, Astro is a tough competitor given its well established position in the pay-TV space. TM’s Unifi faces rising risk of subscriber churn due to contract expiry of its earlier batch of subscribers and the advent of MaxisAstro’s IPTV bundling, while TM’s potential venture into 4G could mean capex will remain elevated.

Source: AmeSecurities