Written by Aishah Mustapha
Monday, 06 December 2010 14:38
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KUALA LUMPUR: While YTL Communications Bhd’s official entry into the telecommunications sector has generated a lot of buzz, it may take some time before it leaves a lasting mark on the incumbents, said market observers.
There certainly has been a lot of anticipation riding on YTL Comm’s new WiMAX network called Yes ahead of its launch on Nov 19.
Listed on the Main Market, YTL Power International Bhd, which has a 60% stake in YTL Comms, saw its share price run up a week ahead of the launch.
On Nov 9, the counter jumped 25 sen or 11% to close at the year’s high of RM2.60. Last Friday, it closed at RM2.47.
Meanwhile, WiMAX counter Green Packet Bhd, which has a stake in Packet One Networks Sdn Bhd (P1), closed at 79.5 sen on the same day.
However, many take the view that Yes may not leave an immediate impact on the industry. For one, the lack of 4G phones could pose a threat to YTL Comms’ voice and SMS offering despite its low tariff, according to an analyst.
“The nine sen pay-as-you-go is the lowest in town. But they are only offering one 4G phone next month. Although subscribers can make calls from the PC, users still need a phone. Right now, people want smart phones. There may be more offerings later but in the short term, there won’t be much impact,” he said.
YTL Comms is reportedly working on a Samsung phone that runs on the popular Android operating system.
Under the current pricing scheme, users pay nine sen for 3MB of data, or a one-minute call or one SMS, with rebates given as usage increase. Users need to spend a minimum of RM30 a month in order to maintain the account. Devices offered currently are a USB dongle and a mobile router.
“YTL Comms’ launch of its WiMAX service should not inflict big losses on the broadband or voice market share of the incumbent telcos despite its pricing flexibility and all-in-one bundled offering,” said CIMB Research.
OSK Research said it does not expect Yes to dramatically alter the steady revenue and subscriber market shares of the incumbent operators given that the mobile voice market is now saturated with multiple SIMs.
However, a price war has not been ruled out given Yes’ bundled “all-in tariff” (voice, data & SMS) which is significantly below the current headline voice tariffs in the market, it said.
According to CIMB Research, YTL’s Yes network is the cheapest for 3GB of data and below. Thus, heavy data users are better off with other incumbents. Of the incumbents, CIMB Research highlighted that P1 still offered the cheapest rate for mobile broadband above 10GB.
OSK investment puts “light data users” at 1.5GB data and below.
“From a broadband perspective (both mobile and fixed broadband services), we believe the impact would be modest given that Yes’ pay-per use plan is likely to appeal only to light data users with less than 1.5GB monthly usage. Our comparison indicates that Yes’ effective cost (measured in terms of sen/MB) falls within the existing market range of 0.46 sen-2.27 sen for usage of more than 2.5GB/month,” it said.
An industry observer added that YTL Comms’ trump card could be its speed and coverage, compared to WiMAX operator P1. It now has 65% coverage of the population in major states such as Selangor, Kuala Lumpur, Penang and Johor. On the other hand, P1 targets to reach 65% by 2012.
To up the ante, YTL Comms said it plans to offer 80% of coverage by next year. Meanwhile, 3G operators such as Maxis and Celcom have more than 90% population coverage.
The wireless broadband market is also still up for the taking, the industry observer noted. According to data from the Malaysian Communication and Multimedia Commission (MCMC), wireless broadband subscription as of the first half of 2010 stood at 1.4 million.
ADSL, a common form of fixed broadband, is at 1.61 million subscriptions. The total broadband penetration rate for the population is only at 11.2%
In terms of WiMAX subscribers, incumbent operator P1 in Peninsular Malaysia had chalked up 218,000 subscriptions as of Sept 30. Its target for this year was to get 280,000 subscribers or 62,000 more subscriptions for the current quarter. For 3Q10, it added 22,000 subscriptions. Year-to-date, it has added 80,000 subscriptions.
P1 has garnered much attention due to it running in the red since launching the network two years ago. Its CEO Michael Lai maintained recently that Green Packet would break even at the Ebitda (earnings before interest, tax, depreciation and amortisation) level by next year.
For 3QFY10 ended Sept 30, Green Packet managed to taper down its losses quarter-on-quarter to RM28.91 million in losses after tax.
Meanwhile, its revenue strengthened to RM100.9 million from RM90 million the previous quarter.
A telco analyst said that this is normal for an operator, especially in a competitive telecommunications sector.
“Technically, they have only launched the network two years ago.
If you look historically, even Maxis took years before it was making profits. Today, competition is even tougher. As for YTL, it will be the same story,” the analyst said.
The group will spend RM2.5 billion over five years on the network.
Research houses put the breakeven target for YTL Comms between 300,000 and 600,000 subscriptions based on average revenue per user (ARPU) of RM100 and by comparing it with P1’s performance.
Analysts are still waiting for better earnings visibility before factoring in YTL Comms’ contribution to parent YTL Power. So far, the contribution is negligible. YTL Comms’ management has said that its pre-registered users on the Yes network are “more than its expectations”. Apart from that, management has maintained that the RM2.5 billion investment is for the long term and has yet to divulge any internal targets.
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