How come RTM is working with YTL on 4G?

YTL Communications Sdn. Bhd. is set to be launching their ‘Yes’ 4G connectivity today. Bullish about giving connectivity to Malaysians at lower cost and ‘run for their money ‘against existing competitors.

The Star reports:

Friday November 19, 2010

Lower prices for Internet services?

By LEONG HUNG YEE
hungyee@thestar.com.my

PETALING JAYA: Competition in the mobile and Internet business is expected to heat up with the entry of YTL Communications Sdn Bhd’s Yes service, and some analysts believe that a price war may erupt.

There’s a potential (for a price war). With YTL coming into the market, the probability is higher, CLSA Securities Malaysia Sdn Bhd head of research Clare Chin said.

She said the new entrant would also raise competitiveness among telecommunications companies while broadband operators would be worried about their margins.

Expectations surrounding the launch of Yes sent shares in YTL Comms’ parent company, YTL Power International Bhd, to their highest level in almost three years in early trade yesterday. The counter ended eight sen, or 3.19%, to RM2.59 but off the intra-day high of RM2.64.

An analyst said the new entrant did not bring in competition automatically. He said telcos would up the ante against each other to woo customers in a saturated market and that was where the competition or price war would kick in.

In crowded markets where penetration (of voice) exceeds 100%, it can be difficult for an operator to distinguish itself from its competitors if it can only offer the same services.

To differentiate, it needs to be able to offer something new and different with better value proposition, the analyst said.

While competition is good for the consumer, it is not so for the local telcos which have spent the last few years battling each other in a price war, where consumers ultimately reaped the benefits in terms of low mobile call and SMS rates.

Every player’s nightmare would be a price war, as margins would be pushed lower, hurting revenue, an analyst said.

YTL Comms’ Yes 4G wireless broadband service would charge customers nine sen for a minute of call, one SMS or 3MB of data.

And that’s before our rebates kick in, YTL Comms said in a teaser yesterday.

According to analysts, at nine sen a minute the service could be the cheapest in the market. However, they prefer to await confirmation from YTL on the price.

Sources said YTL would also be throwing in a rebate as high as 30% for its subscribers.

The more you use, the more rebate you’ll get. For example, if you hit a threshold of 3GB, the price will drop and if you hit another threshold at 5GB, the price will continue to drop, the source said.

A simple calculation shows that nine sen per 3MB works out to about RM90 for 3GB, giving users roughly about 2,000 emails.

CLSA Securities’ Chin did not discount consumers migrating to the latest network since cellular voice had already reached saturation.

She said consumers may want to choose a service provider that could offer them a better value proposition.

Investors are getting too excited, too early, Chin said, adding that today’s event was just a launch and the hybrid TV would only be launched by end-2011.

Analysts said the triple play, which offers television, Internet and telephone in a single connection, would be the next wave that could change the traditional consumption pattern among Malaysian users of telecommunications services.

Apart from coming up with new products and services to steal customers from rivals, they would also have to entice their existing customers to spend more.

Yes is expected to cover up to 65% of the peninsula from day one. The other areas would be covered later.

The company has spent some RM2.5bil for the Yes 4G infrastructure.

The 4G network will be SIM-less with the 018 prefix.

In a report, OSK Research said that YTL Comms would need to capture at least 300,000 subscribers based on the assumption of average revenue per user of RM100 a month, given the steep initial investment outlay and operating expenditure.

Although the prices of WiMAX equipment and devices have fallen by over a third in the last two years, we believe YTL Comms would probably have to provide a steep upfront subsidy to lure subscribers given the stiff market competition as well as high mobile penetration rate, it said.

YTL Comms is also launching its flagship store at Lot 10 in Kuala Lumpur today after the official launch of the new service.

************
YTL is a new-kid-on-the-block for either telco or ISP business. This launch was carefully planned in the same week that YTL Communications signed MOU for the content of the soon to be launched hybrid TV with RTM and Media Prima. On Monday, YTL Communications signed up an MOU with RTM and Prime Works to provide content for their hybrid TV.

Business Times story three days ago:

 

YTL to secure content from RTM, Media Prima

By Tan Choe Choe
Published: 2010/11/16

The content is for YTL Communications’ Internet television services that are due to be launched at the end of 2011

YTL Communications Sdn Bhd plans to partner RTM and Media Prima Bhd to secure content for its Internet television services that are due to be launched at the end of 2011.

The new partnerships may also jointly create new productions and bid for more interesting content.

YTL Comms, which is gearing to launch its fourth-generation mobile Internet service on November 19, will combine its new wireless broadband with the terrestrial digital broadcast television system platform to provide its new hybrid TV service.

It claims to be able to combine traditional TV, on-demand movies and Internet content for delivery to all screens – be it a mobile, a personal computer or a TV set.

The company inked a memorandum of understanding with RTM and Primeworks Studio of the Media Prima Group yesterday.

The agreements would effectively make Malaysian content available to the region and “propel Malaysia towards becoming a regional, digital broadcast hub”, said Tan Sri Francis Yeoh, executive chairman of YTL Comms.

At the signing ceremony, Primeworks was represented by director Datuk Amrin Awaluddin, also the group managing director of Media Prima Bhd, while RTM was represented by its director-general Datuk Ibrahim Yahaya.

“The collaboration will complement our existing reach, enabling us to maintain our distribution and market share. It will also create opportunities for new distribution channels for Media Prima’s TV networks and content,” said Amrin.

Together with YTL, he said Media Prima intends to make Malaysia the regional hub for digital media and content.

“I’m confident this will generate new revenue streams for us as we continue to establish our position as the country’s premier content provider,” Amrin added.

Primeworks is Media Prima’s content creation arm and Malaysia’s largest production company. It generates over 5,000 hours of TV content and about 10 movies annually.

RTM is a state-owned public broadcaster, which runs various radio channels and two free-to-air TV channels.

As of 2007, Media Prima controlled about 54 per cent of the TV viewing market in Malaysia, followed by Astro 29 per cent and RTM 17 per cent.

Read more: YTL to secure content from RTM, Media Primahttp://www.btimes.com.my/Current_News/BTIMES/articles/ytlprima/Article/#ixzz15gpF3UMG

*****************

It was said that YTL Power Bhd. via YTL Communications is ready to invest RM 2.5 billion for all these. Skeptics and critics are already getting their working hat on. Will YTL Communications be able to compete against existing and entrenched providers for the new markets, more over at lower retail charge?

Economically, Telco and ISP business es have serious technological and capital barrier into entries by new firms. New firms must invest on systems, which include human capital to get it right as if and when launched, consumers expect the services would be up and running seamlessly.

Will RM 2.5 billion enough on infrastructure for such a bold and ambitious project?

If it is not enough, then how much is? Where will the investment be realised from? How about the content?

Just for comparison, Telekom Malaysia is expected to ask RM 1 billion in new media content for 2011-2013.  This is considering that the infrastructure spending is separate budget.

Skeptics fear that YTL Communications be applying into the MCMC USP Funds for this purpose. Rumours already surfaced that ‘Yes’ claimed access to 300,000 IPTA/S students but actual subscription is unable to be determined at this point of time nor projection of the take-up rate. It was said that MOE’s studentnet is also a target for take over for complementary purpose to this exercise as a whole. Ability to capture the market is essential for any form of grants to be awarded for what ever reasons.

If any of these were true, then it would give enough excuse to warrant dipping into the lucrative USP Funds, readily available to develop the industry.

MCMC has already been under a lot of new and media scrutiny lately that even MPs are raising issues on how, where, when and how much of the RM four-plus billion coffer is spent on and how much is left.

The other important question, how come RTM and Media Prima is working with YTL Communications on this instead of existing players such as Telekoms Malaysia, Celcom and/or Maxis. It can’t be helped if the suspicion is about the USP Funds since RTM is an agency under the same Ministry of Information, Communications and Culture (KPKK) which Malaysia Communications and Multimedia Commission (MCMC) is answerable to. MCMC is the custodian of the USP Funds, collected from 6% of derived profits from licensed telcos and ISP firms.

These are the sort of speculations that KPKK and MCMC could no longer afford to bear.

After all, TM and Celcom are GLCs under Khazanah Holdings Bhd. RTM and Media Prima Group should look within the GLC providers first since they are the custodian of the rakyat’s fund. So is MCMC.

Advertisements
Published in: on November 19, 2010 at 09:25  Comments (12)