TM unveiled two new FBB plans in line with the Government’s call for more affordable broadband packages. Maintain NEUTRAL, with revisedTP of MYR7.40 (1.4% upside). We believe the new products could further stimulate data uptake and subscriber growth, although overall ARPU could see some pressure in the short-term.

• More bang for the buck. TM has unveiled two new fixed broadband (FBB) plans in line with the Government’s calls for che aper broadband services. The new plans will be made available for subscription in midJune/July. Its new entry-level 1Mbps broadband plan which is priced at MYR38/month (ex-GST) and bundled with 1GB of data, is at a 57% discount to the current 1Mbps package of MYR88/month with no usage cap. It also lowered the price of its 10Mbps Unifi triple play FBB plan by 10% to MYR179/month (ex-GST) from MYR199/month.
• Casting a wider net. We believe the affordable plans will allow TM to tap onto a wider customer base and increase broadband/data uptake. This comes on the back of the slowdown in subscriber growth (4Q14: +0.7% YoY) in recent quarters and ahead of the rollout of high speed broadband phase 2 (HSBB2)/suburban broadband (SUBB) and its converged mobile offering, slated to be introduced by year-end. As the new plans are targeted at a new market segment with potential for upselling, we think the risk of cannibalisation and ARPU dilution will be minimised. We note there are some 300,000 subscribers (subs) (13% ofTM’s overall FBB base) on broadband packages of <1Mbps, which could down-trade to a cheaper plan although the revenue impact could be offset by more virgin FBB subscribers signing up. We think the new UniFi plan would compel subscribers on the 5Mbps line to trade-up given the better data experience and that they are currently paying close to MYR160/month (with GST).
• Earnings forecasts. We lift our FY15-17 net profit forecasts by 1-3% after imputing stronger FBB subscriber growth, although we expect ARPU to be slightly diluted by the FBB plans.
• Maintain NEUTRAL. Our DCF-based TP is revised to MYR7.40 (from MYR7.35) following the earnings revision. TM’s longer-term growth catalyst will be driven by the rollout of HSBB2 and SUBB, as well as the eventual rollout of P1’s converged mobile broadband product.