TM shares in a quandry

From the Edge:

Maintain neutral with a raised target price of RM7.40 from RM7.35 previously: TM has unveiled two new fixed broadband (FBB) plans in line with the government’s call for cheaper broadband services.

The new plans will be made available for subscription in mid-June/July. Its new entry-level 1Mbps broadband plan which is priced at RM38/month (ex-GST) and bundled with 1GB of data, is at a 57% discount to the current 1Mbps package of RM88 per month with no usage cap.

It also lowered the price of its 10Mbps UniFi triple play FBB plan by 10% to RM179 per month (ex-GST) from RM199 per month. We believe the affordable plans will allow TM to tap into a wider customer base and increase broadband/data uptake.

This comes on the back of the slowdown in subscriber growth (fourth quarter 2014: +0.7% year-on-year) in recent quarters and ahead of the roll-out 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 average revenue per user (Arpu) dilution will be minimised.

We note there are some 300,000 subscribers (13% of TM’s overall FBB base) on broadband packages of 1Mbps, who 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 RM160 per month (with GST).

Much confusion has been going on in the analyst community regarding TM.  Some say the broadband fee reduction is actually a bonus for TM.  Others say it really isn't.  

The long term investors for me says, yeah it probably will rebound.  After all the hunger for data will only grow with streaming, videos, IPTV, and 4K HD.  

The short term investor in me says.  Take some profits.  Two reasons.  One, the bull case for this analysis is optimistic and isn't really representative of what is happening now.  i.e. The trade up to the 10 MBps package from 5MBps will take months to years to play out.  

What is happening NOW, is TM is seeing fees reduced in the 10 MBps arena which will directly translate to crap revenue in the on coming quarterly report.  People may even downgrade to the cheaper package if they aren't using that much bandwidth.  

This combination of innate bullishness in events that have not happened yet, coupled with the obvious suffering in TM's next few quarterly reports make me want to dump shares at this point.