Last week, Maxis announced a strategic partnership with its sister company Astro to offer Astro B.yond IPTV and Astro On The Go services commercially. The collaboration transforms Maxis into a quadruple play service provider. The tie-up is exclusive for the first three years from the launch of the packaged services.

Collaboration not surprising. This piece of news did not come as a surprise, as we had long suspected that Maxis would move up the value chain after signing a fibre lease agreement with TM. Like Time dotcom (TDC), Maxis would now be able to tap on Astro to provide IPTV services to the mass market. Recall that in 2010, TDC entered into a similar agreement with the latter to commercially offer IPTV and fibre services across the Klang Valley and Penang.

Minimal impact to TDC. We often highlight our view that the TDC-Maxis collaboration would not take flight, as most Astro households would already have an existing broadband connection. Thus, we are not amused with Maxis coming into the picture. Furthermore, we had only assumed a 5% take-up rate for the service, based on the targeted 167,000 premises to switch to fibre by the end of the year. This makes up only 1.5%/-7.6% to our FY12 top-/bottom line forecasts respectively, a negative contribution to net profit due to frontloading of installation cost. In 2QFY12, revenue contribution from Astro was still minimal at RM1.3m (1.2% of 2QFY12 top-line).

No changes to forecasts, maintain BUY at RM4.52. We are not making any changes to our forecasts as we had conservatively factored contribution from Astro in our financial model. Thus, we are reiterating our BUY recommendation on the stock with a SOP FV of RM4.52.

Source: OSK