PETALING JAYA: The massive RM11.3bil high-speed broadband (HSBB) project may eventually cost Telekom Malaysia Bhd (TM) at least RM1bil less in expenditure than its original costing because it has implemented a tough procurement policy, according to sources.
“It is a form of savings as TM will not need to invest as much as it had earlier anticipated and that also means it does not have to borrow that much as well,'' said a source.
As it is, TM is rushing to wire up 1.1 million premises by the end of this year out of the 1.3 million premises it is supposed to connect under the HSBB.
Those in the know claimed TM was currently finalising the numbers but it declined to comment on the potential savings of RM1bil from the HSBB project. However, in reply to queries from StarBiz, it did say that “the PPP (public-private partnership) agreement itself provides for cost-savings sharing with the Government and there was mutual incentive (by the Government and TM) to achieve efficiencies and this seems to have worked.''
Essentially, it was about “efficient design architecture, good vendor relations, more cost-efficient roll-out plans, optimisation of resources,'' TM said.
Three years ago TM entered into a PPP with the Government for the HSBB which was about deploying fibre to 1.3 million premises within three years at a cost of RM11.3bil. The 10-year project also includes provision for expansion of the international connectivity, IP/core network improvements for nationwide reach.
The Government forked out RM2.4bil for the HSBB and TM's portion was RM8.9bil. After three years, TM has 184,000 residential and business subscribers and nearly 1.1 million premises passed.
Sources claimed that the investments made for the HSBB thus far by the parties were close to RM5bil. Based on the RM1bil savings, it translated into about 10% of the total cost of the project.
However, they claimed that if TM continued with its tough procurement policy, it could even save up to 20% upon completion of the project and that could mean savings of RM2bil. This could bring the original cost down from RM11.3bil to RM9.3bil.
“When the project was announced it was based on certain budgets but as they got going they realised there were some efficiency gains. Then there was much hue and cry about the project cost as some had thought that it was inflated.
If they manage to bring the cost down it is good, but the question that begs answering is what are they going to do with the savings?
“Will they give the money back to the Government or do they have the buy-in from the Government to expand coverage into new areas?'' asked a source.
TM said: “Suffice to say, whatever savings gained along the way may be ploughed back into the long-term project to increase the reach and expansion plans, and this will also be subject to further discussions with the Government and the PPP agreement.
“Rest assured, the mutually-shared objectives of the HSBB project as part of this historic PPP will be on the minds of all parties involved towards the future benefit of Malaysia and all Malaysians.''
The telco said it “would continue to strive towards improving its efficiencies in the project and also other parts of TM.”
“In line with our commitment towards good corporate governance, we also continue to be fully transparent on our spending for the project.
“As agreed with the Government, TM is reimbursed on the project expense based on an incurred claims basis depending on the project milestones reached by TM. All the reimbursements are done after stringent verification exercises by an independent auditor appointed by the Government. However, we are not in the position to disclose details as we are governed under the Official Secrets Act 1972 since this involves an agreement with the Government,'' TM said.
In its reply to StarBiz it cited a report by BT Teleconsult saying that “the capex cost of the TM network is one of the lowest in the world and this is due to choice of cascaded architecture, high proportion of overhead distribution and low labour costs and residential geotype allowing high-density homes to be served from rear service alleys.''
“It is a form of savings as TM will not need to invest as much as it had earlier anticipated and that also means it does not have to borrow that much as well,'' said a source.
As it is, TM is rushing to wire up 1.1 million premises by the end of this year out of the 1.3 million premises it is supposed to connect under the HSBB.
Those in the know claimed TM was currently finalising the numbers but it declined to comment on the potential savings of RM1bil from the HSBB project. However, in reply to queries from StarBiz, it did say that “the PPP (public-private partnership) agreement itself provides for cost-savings sharing with the Government and there was mutual incentive (by the Government and TM) to achieve efficiencies and this seems to have worked.''
Essentially, it was about “efficient design architecture, good vendor relations, more cost-efficient roll-out plans, optimisation of resources,'' TM said.
Three years ago TM entered into a PPP with the Government for the HSBB which was about deploying fibre to 1.3 million premises within three years at a cost of RM11.3bil. The 10-year project also includes provision for expansion of the international connectivity, IP/core network improvements for nationwide reach.
The Government forked out RM2.4bil for the HSBB and TM's portion was RM8.9bil. After three years, TM has 184,000 residential and business subscribers and nearly 1.1 million premises passed.
Sources claimed that the investments made for the HSBB thus far by the parties were close to RM5bil. Based on the RM1bil savings, it translated into about 10% of the total cost of the project.
However, they claimed that if TM continued with its tough procurement policy, it could even save up to 20% upon completion of the project and that could mean savings of RM2bil. This could bring the original cost down from RM11.3bil to RM9.3bil.
“When the project was announced it was based on certain budgets but as they got going they realised there were some efficiency gains. Then there was much hue and cry about the project cost as some had thought that it was inflated.
If they manage to bring the cost down it is good, but the question that begs answering is what are they going to do with the savings?
“Will they give the money back to the Government or do they have the buy-in from the Government to expand coverage into new areas?'' asked a source.
TM said: “Suffice to say, whatever savings gained along the way may be ploughed back into the long-term project to increase the reach and expansion plans, and this will also be subject to further discussions with the Government and the PPP agreement.
“Rest assured, the mutually-shared objectives of the HSBB project as part of this historic PPP will be on the minds of all parties involved towards the future benefit of Malaysia and all Malaysians.''
The telco said it “would continue to strive towards improving its efficiencies in the project and also other parts of TM.”
“In line with our commitment towards good corporate governance, we also continue to be fully transparent on our spending for the project.
“As agreed with the Government, TM is reimbursed on the project expense based on an incurred claims basis depending on the project milestones reached by TM. All the reimbursements are done after stringent verification exercises by an independent auditor appointed by the Government. However, we are not in the position to disclose details as we are governed under the Official Secrets Act 1972 since this involves an agreement with the Government,'' TM said.
In its reply to StarBiz it cited a report by BT Teleconsult saying that “the capex cost of the TM network is one of the lowest in the world and this is due to choice of cascaded architecture, high proportion of overhead distribution and low labour costs and residential geotype allowing high-density homes to be served from rear service alleys.''
