MYTV  Broadcasting  Sdn  Bhd  and  Telekom  Malaysia  Bhd  (TM)  have signed an agreement worth RM1.057bn for the provision of infrastructure and  network  facilities  for  digital  terrestrial  television  (DTT)  services  in Malaysia.  Under  the  agreement,  TM  would  provide  MYTV  with infrastructure  and  network  services,  including  terrestrial  and  satellite distribution network services, for a 15-year period. The agreement entails TM developing a terrestrial distribution network to connect MYTV's digital multimedia broadcasting hub  to  all  37  main  transmitter  sites,  10  regional hubs  and  two  earth  stations  via  a  nationwide  STM-1  ring  network.

In addition,  TM  would  also  provide  MYTV  with  the  fibre  broadcast  network and  system  to  enable  MYTV  to  deliver  high  quality  pictures.  The  DTT services  will  be  rolled  out  in  two  phases.  The  first  phase,  starting  in Kelantan, Terengganu and Pahang by mid-2015, aims to cover 85% of the population,  while  the  second  phase  will  target  98%  of  the  population nationwide by mid-2016. (Source: Bursa, Bernama)

Comment : Early this year, MYTV Broadcasting won the bid to digitalization television in Malaysia. This collaboration we believe is part of its efforts to ensure that the rollout and timeline is met. While positive for TM, impact to its bottom line will not be  meaningful. At approximately RM70m/year and assuming a net margin of 10% for this contract, this will account for less than  1%  of  TM's  FY15  net  profit.  Regardless,  we  like  TM  as  a  key beneficiary to the data consumption story, and keeping our Buy rating on the stock. Our target price of RM6.70 is under review, pending the release of  its  financial  results  next  week.

Source: Affin Hwang Capital Research - 19 Nov 2014