- TM announced that it had entered into a MoU with a unit of Time dotCom (TdC) for the development and construction of a new submarine cable called the Sistem Kabel Rakyat 1 Malaysia (SKR1M).

- As a recap the SKR1M contract was awarded to TM in December 2014 via an open tender. It entails a reported contract value of RM800mil where TM is to operate and maintain the cable over a 20-year period. The cable spans 3,500km with an initial capacity of 4Tbps, which is upgradable in the future.

- The submarine cable is basically to link East Malaysia (Sabah and Sarawak) to the Peninsular which is the major international gateway for the country. It is expected to start carrying commercial traffic by mid-2017 and enhance data connectivity to East Malaysia.

- The project is a public-private partnership arrangement between MCMC and TM utilising Universal Service Provision (USP) funds.

- The partnership with TdC in deploying SKR1M is said to be “in the spirit of supporting the government’s aspiration in fostering partnerships among industry players”.

- Upon signing, the parties (which will be known as the SKR1M consortium) will proceed with the tender exercise to determine its preferred technology partner to supply, deliver and implement the SKR1M network. During the MoU period (3 months), the parties will develop the principles for the construction and maintenance agreement.

- Maintain HOLD on TM at an unchanged fair value of RM7.20/share. TM has no problem funding capex for the project (amounting to RM400mil over a 2.5-year period, at 50:50 public-private arrangement) vs. its annual capex of circa RM2bil. The partnership with TdC, depending on the actual arrangement and respective stake in the consortium, should tone capex requirement down further for this project.

Source: AmeSecurities