Telekom Malaysia wins €2.26bn broadband deal

State-owned Telekom Malaysia won a 11.31 billion ringgit (€2.26 billion, US$3.4 billion) deal from government to provide a broadband infrastructure over a 10-year period, an Associated Press report said.

But shares of state-owned Telekom Malaysia were lower despite the news, the report added.

The government will fund 2.4 billion ringgit (€481.3 million, US$727 million), or 21% of the project cost, with the rest to be footed by Telekom.

Telekom shares fell 1.7% to 3.50 ringgit (€0.7, US$1.1) in trading, the report said.

Analysts said this could due to concerns that the high capital expenditure may hurt Telekom's dividend payout but they foresee little risk.

Aseambankers Research described the national project as a 'safe bet' for Telekom.

'Unless operational indicators take a drastic turn for the worse, Telekom should generate sufficient free cash flows in 2008-2010' to pay dividend forecast of around 1 billion ringgit (€209 million, US$303 million) a year to shareholders, it said in a report.

About a fifth of Malaysia's 27 million people have access to personal computers. Broadband penetration is still low at around 5% of the population, but the government hopes to raise it to about 15% by 2010.