Shares of state-owned Telekom Malaysia were lower Wednesday (3 Sept) despite news that it had won an 11.31 billion ringgit (US$3.4 billion) high-speed broadband contract from the government.

In a statement late Tuesday (2 Sept), state-owned Telekom said it had received a letter of award to establish the broadband infrastructure over a period of 10 years.

The government will fund 2.4 billion ringgit (US$727 million), or 21 percent of the project cost, with the rest to be footed by Telekom, it said, adding that further details will be announced later.

Telekom shares fell 1.7% to 3.50 ringgit (US$1.1) at midafternoon Wednesday.

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 (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. (AP)