TM net profit surges in Q1

TELEKOM Malaysia Bhd's (TM) (4863) first quarter net profit for the period ended March 31 2010 jumped to RM242.9 million from only RM27.7 million a year ago, backed by strong growth from Internet, data and other related telecommunication services.

Revenue for the quarter rose by 0.9 per cent to RM2.12 billion from RM2.11 billion in the same quarter in 2009. In a statement, the telecommunication company said Internet revenue grew by 9.8 per cent to turn in RM422.6 million from RM385 million previously.

Data and leased services revenue increased by 8.4 per cent to RM397.7 million from RM366.9 million a year before. Other telecom services grew by 16.1 per cent to RM296.7 million from RM255.5 million.

The strong growth in these non voice revenue streams was partially offset by lower voice revenue and international inpayment. TM group chief executive officer Datuk Zamzamzairani Isa said Internet continues to be a strong revenue-driver for the company.

As at end-March 2010, its customer base stood at 1.48 million. The strong growth for the first quarter period was also boosted by favourable foreign exchange currency translation.

TM recorded an unrealised exchange gain on translation of foreign currency borrowings of RM166.6 million as compared to a loss of RM175.5 million in the period of 2009. Zamzamzairani said TM has been aggressively introducing new and innovative products over the last six months, to cater for the ever changing demand pattern as well as competition from other players in the broadband space. The notable ones are Super Upgrade Deals and the Blockbuster Deals.

The Super Upgrade Deals has so far registered about 55,000 existing broadband customers moving into higher Internet speed packages while the Blockbuster Deals has 24,000 new customers.

TM, however, registered a lower earnings before interest, tax, depreciation and amortisation (Ebitda) in the first three months of 2010 of RM715.3 million as compared to RM816.2 million previously.

This was due to, among others, higher advertising and promotion expenses for product promotion and UniFi related activities, higher international outpayment due to increase in traffic minutes, higher supplies and materials cost, as well as higher customer premises equipment and parts cost in line with increased Internet installations.

Zamzamzairani said Ebitda margin of 33.2 per cent for the first quarter of 2010, however, remains in line with key performance indicator of 33 per cent set for this year. Moving forward, he said TM was set to benefit from the economic recovery, especially in the broadband space.

"Penetration rate in the broadband market is still low at 34.2 per cent of households as of end-March 2010," he said, adding this gives TM the opportunity to further enhance its leading role in the industry.

Kim Jong Il Orders Military to Combat, Group Says

May 25 (Bloomberg) -- North Korean leader Kim Jong Il told the military to be combat-ready in a message that coincided with South Korea’s announcement that it blamed his regime for the sinking of a warship, a dissident group said.

Kim’s order was broadcast on May 20 by O Kuk Ryol, vice chairman of the National Defense Commission, according to the website of North Korea Intellectuals Solidarity, a Seoul- based group run by defectors from the communist country.

The Korean won weakened 3 percent against the dollar and the Kospi stock index dropped to the lowest in more than three months. The report added to perceptions of increased tension on the Korean peninsula following the March 26 sinking of the 1,200 ton Cheonan, with the loss of 46 lives.

South Korea yesterday announced plans for joint military exercises with the U.S. off the west coast where the ship sank, while North Korea today warned of military action in the area after accusing the South of violating its territory in the disputed zone.

“For Kim Jong Il to be giving such an order is pretty serious,” said Kim Yong Hyun, professor of North Korean studies at Seoul-based Dongguk University, adding that he doubted that such a direct order was given.

Secretary of State Hillary Clinton said today that China understands the gravity of escalating tensions with North Korea.

‘Working Together’

“We expect to be working together with China in responding to North Korea’s provocative action and promoting stability in the region,” Clinton told reporters in Beijing at the end of two days of talks with Chinese leaders. “We pledged to stay in very close consultation.”

Clinton said her discussions in Beijing about North Korea had been “very frank and detailed.” China has yet to publicly accept the finding of an international panel, which concluded that a North Korean torpedo sank the warship.

“We do not agree on every issue, we don’t agree even sometimes on the perception of an issue, but that is partly what this dialogue is about,” Clinton said, adding that this enabled the discussion to include areas of discord including missile sales to Taiwan and human rights.

Ready to Respond

While Kim doesn’t want war, North Korea is ready to counter any attacks, O said in the message, according to the dissident group, which cited an unidentified person in the country. The organization was among the first in South Korea to report on North Korea’s botched currency revaluation late last year.

Defectors formed North Korea Intellectuals Solidarity in 2008. It has about 250 members and is led by a former computer-science teacher in the communist country.

Threats of war by North Korea carried by the state-run Korean Central News Agency are commonplace. A March 26 report warned of “unprecedented nuclear strikes” against enemies while a June 9, 2009 bulletin warned of “merciless strikes” using the country’s nuclear deterrent.

Lee Jong Joo, a spokeswoman at the Unification Ministry in Seoul, said she couldn’t confirm the defectors’ report as the closed-circuit radio, on which the message was said to be delivered, cannot be monitored by South Korea’s government. A spokesman at the South Korean Defense Ministry, who declined to be identified, said the government can’t comment on North Korea’s military status.

Won Drop

The won fell 3 percent to 1,251.1 per dollar as of the 3 p.m. close in Seoul, the biggest drop since March 30, 2009, according to data compiled by Bloomberg. The Kospi index sank 2.8 percent to 1,560.83.

South Korean defense-related stocks rallied. Speco Co., a construction company that supplies the military, rose 14.9 percent to 5,520 won. Victek Co., which makes electronic warfare equipment, gained 4.9 percent to 4,300 won.

Tensions heightened on the Korean peninsula following last week’s report by a South Korean-led multinational panel that North Korea was the “only plausible” perpetrator of the attack.

“If South Korea continues to trespass our waters we will carry out real military action to protect our territory,” KCNA reported today. North Korea’s military sent the warning in a message to South Korea today, the agency said.

North Korea said it would shell South Korean positions that tried to blare propaganda over the demilitarized zone that marks the border between the two countries, which are still formally at war following their 1950-1953 conflict. The border is one of the most heavily armed in the world, with U.S. and South Korean troops facing off against North Korea’s million-strong army.

To contact the reporter on this story: Bomi Lim in Seoul at blim30@bloomberg.net

FBMKLCI 25 May 2010

FBMKLCI 24 May 2010

Next Cabinet meet to discuss changes to subsidy regime

KUALA LUMPUR: The Cabinet is to meet next week to discuss politically unpopular changes to its subsidy regime for petrol, natural gas, food and road tolls.

Subsidies alone chewed up RM24.5bil in 2009, 15.3% of the total operating spending, pushing Malaysia's budget deficit to a more than 20-year high of 7% of gross domestic product (GDP).

Plans to cut subsidy spending to RM20.9bil this year were dealt a blow by the Government's failure to implement planned petrol price hikes in May.

Adding other social spending in areas like education grants and health, total transfer spending is around treble the declared figure for subsidies.

Following are the options the Government may consider:

·Complete withdrawal of subsidies in one go

A big bang approach would impress investors in Malaysian bonds but is unlikely to be popular with voters as it would likely involve petrol prices, for example, rising by 15 sen per litre from their current RM1.80.

Prime Minister Datuk Seri Najib Razak is unlikely to opt for this choice, especially with Sarawak state polls looming this year. Sarawak provides a fifth of the Government's MPs and the state served as a bulwark against record losses to the opposition in the 2008 elections.

A sudden withdrawal of all subsidies would mean that Malaysia's economic recovery could be halted. Asia's third most export-dependent country relative to the size of its economy grew 10.1% in the first quarter of this year.

A “big bang” approach would also cause inflation to spike and could prompt the central bank to hike rates, although in the past Bank Negara has “looked through” food and fuel price spikes.

It left rates on hold from April 2006 to November 2008. If this happened there would likely be a big rally in Malaysian bonds.

·A gradual approach

This is far more likely. It would reassure markets fearful of budget indiscipline and limit political damage for Najib who must call a general election by 2013.

A small initial hike in petrol prices by say 15 sen per litre would not immediately hit wallets or derail economic recovery. Prices could then be hiked over a period of years on a regular basis. The timeframe for price hikes would have to be credible.

Savings from raising petrol prices alone in mid-year could be as much as RM1.4bil in 2010, based on a 15 sen hike.

To assist poorer people the government could pay cash benefits to owners of smaller cars or motorcycles.

The risk is that regular price hikes on a semi-annual or annual basis could cause a continual drip of discontent with the government.

For markets, the risk would be that the government would lose heart in the face of public opposition.

Electricity price hikes could be mitigated by putting a base consumption level under which people would not pay extra charges.

A tariff hike of 2.4 sen per kilowatt-hour could save RM800mil in 2010.

There would be a spike in annual inflation as a result of the start of the subsidy regime changes, although the base effect would diminish their effect over time. Inflation could spike up to 4.5% at the start of 2011 if petrol, gas, electricity and toll road prices were hiked.

Bullish for bonds if implemented. Could boost Tenaga Nasional Bhd's stock price.

·Just make minor changes or do nothing

Tempting for a government that has deferred planned price hikes due to fear of a voter backlash.

The fact that Najib has outsourced all of his economic reforms to independent bodies shows that there is little support within the government for painful decisions. Failure to implement two electricity price hikes has hit credibility.

With Malaysia's economy rebounding strongly, tax receipts will grow and the need for government stimulus measures will fall so the budget gap will narrow more quickly than the government's forecast of 5.6% of GDP this year. - Reuters

Proposal for new economic model

PRIME Minister Datuk Seri Najib Razak has proposed a new economic model for the Muslim world that will take into account the needs of the 57 Organisation of Islamic Conference (OIC) member countries.

The proposed model, underpinned by theoretical framework, should not only be inclusive and progressive, but also practical in terms of policy formulation and implementation, he said.

"In line with the concept - Gearing for Economic Resurgence - which is the theme of this World Islamic Economic Forum (WIEF), I propose that we plan as an entire ecosystem. We need to think anew and move beyond our conventional frameworks," he said in his keynote address when opening the 6th WIEF in Kuala Lumpur yesterday.

"This may require a new economic model for the region, if necessary, that is designed to meet the specific needs of the Muslim world," he added.

Najib shared the principles and objectives of Malaysia's own New Economic Model to over 1,000 delegates.

The prime minister, who is also a WIEF patron, also proposed for an OIC Economic Summit to be held in collaboration with the Islamic Summit Conference.

He said a dedicated, issue-oriented summit will breathe a new life and meaning into the OIC and overcome any cynicism towards it.

Najib also urged the private sector to take the initiative to mobilise capital through Islamic equities from regional and global sources to spur the development of emerging Muslim economies.

"And deploy the capital productively to ensure an appropriate return for investors," he said.

He said Muslim countries are well endowed with resources needed for economic growth and only adequate capital can exploit on these strengths to spur the growth of these economies.

Najib also offers to share Malaysia's experience and expertise to spur the development of Islamic finance on a worldwide basis.

He later moderated special addresses by head of governments. They include Brunei's Sultan Hassanal Bolkiah, Senegal President Abdoulaye Wade, Indonesia President Dr Susilo Bambang Yudhoyono, Kosovo President Dr Fatmir Sejdiu, Maldives President Mohamed Nasheed and Bangladesh President Sheikh Hassina. - By Hamisah Hamid

Read more: Proposal for new economic model http://www.btimes.com.my/Current_News/BTIMES/articles/wi1/Article/#ixzz0oTFzHUcb

Petronas awards 2 exploration blocks to Lundin, Nio, Petronas Carigali JV

KUALA LUMPUR: Petroliam Nasional Bhd (Petronas) has awarded two exploration blocks - Blocks SB307 and SB308 - offshore Sabah under a single production sharing contract (PSC) to a partnership comprising Lundin Malaysia B.V., Nio Petroleum Ltd, and Petronas Carigali Sdn Bhd.

Petronas said on Wednesday, May 19 that Blocks SB307 and SB308 measured about 6,230 sq km and was located in water depths of up to 70 metres.

It said both blocks had been explored since 1965 and had led to the discovery of the producing Barton, South Furious and St Joseph fields, currently operated by Sabah Shell Petroleum Company Ltd under a different PSC.

The PSC was signed here on Wednesday, with Petronas being represented by its vice president of exploration business Ramlan A Malek, Lundin Malaysia by its president/CEO Ashley Heppenstall, Nio Petroleum by its CEO Richard Hall; and Petronas Carigali by its managing director and CEO Datuk Abdullah Karim.

Petronas said under the terms of the PSC, Lundin Malaysia, with a participating interest of 42.5% would operate both blocks.
Nio Petroleum, a newcomer to the Malaysian E&P scene, will own another 42.5% interest whereas Petronas' exploration and production arm Petronas Carigali, will own the remaining 15%.

Petronas said the contractors were committed to drill one wildcat well to a minimum aggregate depth of 1,800 metres subsea, reprocess existing 400 line-km of 2D seismic data (for SB307) and 800 sqkm of 3D seismic data (for SB308), conduct geological and geophysical studies as well as to execute a development feasibility study for an existing discovered field in the blocks.

It added that the contractors’ minimum financial commitment was US$8 million.