Telekom Malaysia - Bidding for EPL broadcasting rights

News   Media news has reported that Astro, Telekom Malaysia (“TM”) and ABN have shown interests to fight for the rights to broadcast the English Premier League (“EPL”) new seasons.

Last week, EPL had emailed several potential bidders to inform them that the bidding process was set to begin for TV and mobile rights. The bidders have until Oct 12 to indicate their interests. The interested parties must submit their bids by Nov 8, after which there will be an e-auction in Nov or Dec. The actual date of the e-auction will be determined later.

The winner will be announced in January or February and the successful party will have to pay 5% of the bid price within 30 days to secure the rights.

There are three seasons for the EPL, the first beginning in August 2013 to May 2014, and the next two in the same corresponding period in 2014/2015 and 2015/2016. There are total of 380 matches form the new season. The current season ends in 2QCY13.

Astro has previously spent about RM800m for EPL contents for the last season according to press reports.

Comments   Although TM has shown its interest in EPL, we think that it is not a viable move for the group to do this alone as it will likely be unable to leverage the broadcasting rights effectively. Note that, TM’s Unifi only has 430k subscribers in contrast to Astro’s 3.2m subscribers.

As such, we believe, TM will need to jointly bid for the rights should the company decided to participate. Nevertheless, it is unclear whether the EPL rights owner will allow content sharing in Malaysia given that SingTel, the successful EPL bidder in Singapore, has been restricted from sharing its EPL contents.

Outlook    TM’s outlook remains solid despite the escalating competition in its home broadband segment.

Forecast    No changes in our FY12-FY14 earnings forecasts.

Rating   Maintain OUTPERFORM

TM continues to be our top pick in the telco sector due to its strong dividend yield, solid presence in the fibre-to-the-home market and lesser competition seen in its wholesale and fixed-line segments.

Valuation    Maintaining our Target Price at RM6.45 based on a targeted FY13 EV/forward EBITDA of 7.6x (+2.0 SD).

Risks    Higher than expected capex may affect our FY12 dividend assumption, where we are expecting TM to announce another capital initiative plan given its declining capex trend.

Source: Kenanga