YTL launches smartphone to capture WiMAX segment

Written by Aishah Mustapha    Thursday, 10 March 2011 11:29

KUALA LUMPUR: YTL Communications Sdn Bhd (YTL Comms) launched its first WiMAX phone last week in a move to cement its position in the industry.

The introduction of the WiMAX phone called Yes Buzz, a smartphone by Samsung, would plug a hole in the market that lacks WiMAX devices needed for a long-term catalyst.

Although viewed positively by analysts, the fact remains that both voice and data market is highly competitive.

According to an industry source, the churn rate for voice prepaid services can reach up to 50%, making the landscape tightly contested. Furthermore, mobile penetration is already at 110% of the population.

“Smart phone penetration is still low for the telcos. With just one phone out, YTL needs to ensure that it catches the market fast while it is still growing. The market lacks 4G devices as it is,” said the industry source.

The group will be looking at launching several smart devices throughout the year.

YTL has chalked up an estimated 100,000 active subscribers for its broadband services since its launch in November last year. Based on rough calculations, this gives a subscriber acquisition of over 25,000 a month since its launch.

To put this in comparison over three months of 4QFY10 ended Dec 31, mobile broadband leader Celcom added 54,000 subscribers, Maxis added 70,000 subscribers while WiMAX player P1 added 56,000 subscribers.

YTL Comms also registered maiden revenue contribution towards parent YTL Power International (YTLP) for its 1HFY11 results ended Dec 31. The WiMAX segment contributed a cumulative RM4.7 million to YTLP’s revenue with a cumulative pretax loss of RM27.7 million for 1HFY11. Meanwhile, Green Packet continued to be in the red, incurring a pretax loss of RM99.8 million for 4QFY10 ended Dec 31.

Analysts have noted that the WiMAX business will undergo a long gestation period to break even, especially given that RM2.5 billion will be invested into the network and operations over five years.

However, YTLP’s foray into the telco sector has made several research houses cautious of its future earnings, with the possibility of the WiMAX business hurting its stable earnings.

JP Morgan highlighted the potential risks to earnings from its WiMAX entry, thereby changing YTLP’s earnings profile. The research house has maintained an “underweight” rating on YTLP.

“We also remain particularly cautious on the group’s WiMAX operation (launched in Nov-10), which changes the earnings profile and could provide downside risk to earnings (and potentially dividends) should operational start-up losses escalate beyond expectations.

For now, the group’s gross cash position of RM7.8 billion and attractive payment terms for its capex should help minimise the risk of any material cuts in dividends,” it said.

ECM Libra maintained a “hold” on YTLP, and said it is awaiting management guidance on the new WiMAX business that could potentially introduce a downside to its net dividend forecast.

“As YTLP’s earnings are largely within expectations, we leave our earnings estimates unchanged. On its new WIMAX business, we await management guidance and have yet to impute it into our forecasts. Pending clarification from management, we highlight the potential downside risk to our net dividend forecast of 15 sen,” it said.


This article appeared in The Edge Financial Daily, March 10, 2011.