Three WiMAX licensees fined, MCMC is a joke

From the Star Business:

Three of the four WiMAX licensees have been slapped with fines for not rolling out their networks on time, industry sources said.

The Malaysian Communications and Multimedia Commission (MCMC) is said to have issued letters on the fines to the WiMAX operators more than a week ago.

The players fined are YTL e-Solutions (RM1.9mil), AsiaSpace (RM1.7mil) and REDtone International (RM200,000) for failure to meet the 25% population coverage by the end of March.

The quantum correlates to the level of coverage achieved as at the deadline. However, all three players are appealing against their fines.

Tan Sri Francis Yeoh, head of the YTL Group, told StarBiz that YTL e-Solutions would appeal against the decision on the basis that the company would be ahead of the next roll-out target of 40% by mid-2011.

“We believe in having an extensive network up and running as we don’t see the point in having incremental coverage.

“We take this business seriously. We will have 60% coverage (more than the needed 40%) by the next deadline,” he said.

Another industry player, who declined to be named, said his company had faced a myriad of issues in rolling out its network, especially in relation to obtaining approvals and the land needed to put up the base stations.

“It takes a long time for these government approvals. And if the land is privately owned, prices can be prohibitive for us. This makes it almost impossible to roll out.

“If we were helped with these issues, then it would be fair to impose a fine on us. But these problems are beyond our control,” he said.

Last December, then Energy, Water and Communications Minister Datuk Shaziman Abu Mansor said the Government would withdraw licences from players who could not show good reasons why they are not able to roll out according to proposed plans.

More recently, Information, Communications, Culture and Arts Minister Datuk Seri Dr Rais Yatim said the MCMC should ensure that providers had delivered on what they had promised.

YTL plans to invest up to RM2.5bil over the next five years for its WiMAX roll-out while AsiaSpace is looking at raising RM300mil, having invested close to RM100mil so far. REDtone is looking at raising RM40mil.

It has also been questioned whether the authorities had been lackadaisical in enforcing deadlines and withdrawing the spectrum rights from those who did not use them.

However, as this case indicates, rolling out a telecommunications network can be fraught with difficulties and complications.

It will be just as challenging to manage that spectrum.

I mentioned before that wimax is basically fool's gold. It's an entry into the already crowded wireless arena. The wimax providers are in fact competing with the established telcos in providing wireless internet services. Furthermore, they are handicapped as they don't have the infrastructure built. Betting people would not gamble on wimax competitors taking a substantial market share from the telcos.

The logistics problem of wimax is a pain and an experienced telecom provider would have an easier time implementing than the current batch. The MCMC is another joke of an telecommunications body. How can they have picked so many failing companies? Not only are there infrastructure problems, but the companies have no experience in telecommunications. If I am a government body, I want someone who will have the best chance to build up capacity for the nation. If that means another telco company winning wimax, then so be it.

In light of all the follies of both companies and the MCMC, the only people who will really be affected is the investors who ponied up the capital for this costly wimax infrastructure. Talk about building bridges to nowhere.

YTL power making a bad move for shareholders, AmResearch downgrades YTL Power to Sell

From the Edge Malaysia:

AmResearch has downgraded YTL POWER INTERNATIONAL BHD [] (YTLP) from Hold to a Sell with a lower sum-of-parts (SOP) based fair value of RM2.05 a share on concerns over funding risks for the group's WiMax investment.

The research house also said YTLP's share price had risen 25% over the past 12 months and outperformed the 30-stock FBM KLCI by 17%.

"We have lowered our FY10F-FY12F earnings by 6%-7% to impute potential losses arising from the new start-up wireless broadband service (WiMAX - worldwide interoperability for microwave access).

AmResearch said while it was generally comfortable with the group's existing operations in power generation and water/waste management services after a meeting the YTLP management recently.

"But we were surprised by the possibility that YTLP may be used as a vehicle to fund the group's venture into WiMax," it said.

In June this year, YTLP made an inconspicuous announcement that the company was buying a 60% stake in YTL Communications Sdn Bhd (formerly known as Y-Max Infra Sdn Bhd) for a mere RM300,000 - from YTL E-SOLUTIONS BHD [].

YTL group plans to invest RM2.5 billion over a five-year period on launching its WiMax service - with RM1bil to be spent over the first year.

"While no further financial details have been revealed yet, we note that YTLP's capex plans are two times more than Green Packet's proposed outlay of RM1 billion over four years," it said.

AmResearch said it believed the higher capex is earmarked for a greater number of base stations throughout the country to ensure that its WiMax services provide faster access and wider coverage.

Hence, the group likely needs the cash from YTLP to fund the WiMax rollout given YTLE's minimal resources.

"In our view, this is a negative development as YTLP will be extending its business - which provides stable recurring income streams - to uncertain revenues of a TECHNOLOGY [], which has yet to fully kick-off even in developed countries.

"Clearwire Wireless - YTL's technology partner - and Nextwave are currently loss-making and registering negative EBITDA. Green Packet,the first to introduce WiMax in Malaysia, is also suffering losses currently.

"Even with the potential cash outlay, we note that the group's free cashflow of RM2 billion annually could comfortably service its annual dividend payout of around RM500 million. But the potential of a slower than expected take-up or any cost overruns in its WiMax services could possibly constrain the group's acquisitive growth strategy over the longer term," it said.

YTL power is sitting on a good thing in the power infrastructure business. WiMax is untested and has to compete with competitions from mobile operators. They should look to acquire what they know.

If they are looking to inject a little higher growth in its revenues, they should find a business with a little more risk reward and buy something that is tested. It is very cheap to buy companies at this point in time. There are plenty of cyclical industries right now which will benefit in a recovery and are cheap now. Best of all, they have predictable revenue streams that are tried and tested over time. YTL power shows no sensibility in regards to the WiMax venture.

Green Packet's Wimax folly?

I'm looking at this article.

Of course, WiMax is turning out to be anything but cheap. Consider Clearwire's challenge in Portland. WiMax works best in flat landscapes where a single communications tower can beam a signal for miles.

To deliver service in Portland, with its hills and tree-lined streets, Clearwire had to outfit 300 transmission towers at about $150,000 each, bringing the price tag to about $45 million

If what the article says is true, rolling out WiMax in places such as KL could be very costly, much more than originally thought.

KL compared to Portland is about 2/3 the size, so about 200 towers is probably needed to cover the entire city at a minimum. KL is actually much more mountainous compared to Portland and would probably need more towers.

A report by InsiderAsia analyst quoted Green Packet's investment in WiMax towers for 2008 at RM 171 million with 181 sites running, which would translate into a cost of around 1 million per tower or about USD250,000 per tower.

Green Packet plans to roll out 600 towers nation wide. That can barely cover 3 cities the size of KL. I don't see how they can do nationwide coverage with only 600 towers.

Furthermore, in this The Edge Daily article, they estimate RM 80 million in expenditure to cover the whole of Klang Valley. It roughly works out to be about 80 towers at 1 million per tower. I don't see how 80 towers can cover the entire Klang valley if it won't even cover half of KL.

It looks like someone extremely underestimated the number of towers needed to implement Wimax nationwide.

TM extremely confident?

From Bloomberg:

Telekom Malaysia Bhd., the nation’s state-owned fixed-line phone company, jumped the most in 10 months on the Kuala Lumpur stock exchange after saying it will return 3.5 billion ringgit ($955 million) to shareholders.

The stock rose 6.6 percent to 3.56 ringgit at the close, the biggest gain since Telekom split from its mobile-phone unit in April. Investors will receive 98 sen for each share they own.

Telekom is compensating shareholders after spinning off its faster-growing international cellular unit, TM International Bhd. Now faced with slowing growth as it sells fixed-line phone and Web connections at home, the company needs to return excess cash to shareholders or risk losing them in a worldwide slowdown.

As you all know, I made a comment earlier about how Green Packet's WiMax project might overextend itself. As hyped up as WiMax is as an alternative to Telekom's streamyx, I believe it'll be a bit of a bust. At most, it will compete with cellular companies 3g and hsdpa broadband. It's also only a matter of time until the cellular companies here go to LTE which offers wimax bandwidth capability.

Plus wireless broadband is inferior in some cases to landlines in that the connection can be erratic and unreliable. People want landlines for stability. They will not be able to compete with Telekom at all, and I think Telekom knows this. They will be competing for the same piece of the pie that Celcom, Maxis, and Digi are scrounging for.

Besides that, they offer the dual package of phone line plus broadband. In the US, some of the cable providers had very strong competitive advantages when they were able to offer phone+broadband+cable television and whooped the competition. Seeing as how TM is currently working on the HSBB project that will enable it to become a triple play provider, they may prove hard to compete against with in the future. Perhaps even Astro might be in trouble as well. But we are talking much into the future.

Faster streamyx broadband on the way?

TM as a company so far has dragged its legs in providing reasonable broadband service for Malaysia. But as an investment, their opportunities are endless. So far, they've gotten themselves in a hole by not anticipating the demand of current users by signing up more than their bandwidth can handle. The speed is almost unbearable at times. But read this from the Business Times:

Zamzamzairani added that

the emergence of wireless broadband service provider, such as the WiMAX players and mobile phone operators, would not be a threat to its fixed-line broadband business, like HSBB services and Streamyx.

"I believe that people in the office or at home would still prefer to surf the Internet using fixed-line. Wireless broadband will be useful for those who are on-the-go," he said.

Meanwhie, the Asia America Gateway (AAG) cable - in the consortium of which TM has a stake in, will be operational in August.

"Once the cable comes on stream, it will make Malaysia attractive for content providers to host here, to provide services to their customers in the region," Zamzamzairani said.

The AAG is a high-bandwidth fibre-optic submarine cable system linking Southeast Asia to the US. Other ope-rators in the AAG consortium include AT&T in the US, Australia's Telstra, India's Bharti and Telkom Indonesia.

So we can hopefully expect faster broadband come the end of the year. I hope the gateway really helps and we get the broadband we pay for. This project is well behind schedule. So at least TM has something coming in the pipeline for broadband relief.