HSBB coverage on track

Saturday December 4, 2010



By JEEVA ARULAMPALAM

jeeva@thestar.com.my





AS Telekom Malaysia Bhd (TM) builds an ecosystem in the telecommunications industry with the roll out of its high-speed broadband (HSBB), it hopes to enhance customer experience by creating new innovative services and changing the way customers communicate.



Since its HSBB launch in March, TM has also been transforming the way it approaches its business and customer expectations, TM group chief executive officer Datuk Seri Zamzamzairaini Mohd Isa says in an interview with StarBizWeek.





Datuk Sri Zamzamzairani Mohd Isa ... ‘We will need some form of a wireless solution to help our customers enhance their experience when they buy our services.’



He expects exponential growth for HSBB to come in the next two to three years, as TM rolls out to more exchange areas.



I've been asked why we have seen low closed orders. But this is a brand new service launched eight months ago and was commercially available in June. We are hoping for stronger take-up next year and beyond, he adds.



HSBB will cover some 34 exchange areas by next week and is on track to hit 48 areas by year-end. The target is to hit 750,000 premises (in terms of network available should a customer need it) before the year is out and TM has surpassed 700,000 premises presently.



We have closed roughly 30,000 orders, of which 30% are new TM subscribers. The aim is to more than double the orders for next year, says Zamzamzairani.



The HSBB service, also known as UniFi, comes with triple-play services of high-speed Internet, video (Internet Protocol Television and Video-on-Demand) and phone.



ECM Libra Investment Research says in a report this week that UniFi subscriber growth should be about 20% to 30% compound annual growth rate over the next two years.



Next year will be a ramp-up year for UniFi, while 2012 will see significant revenue contribution from UniFi.



TM's emphasis for the rollout of HSBB in high-economic areas, which contribute some 70% of the country's gross domestic product, will be more cost effective in terms of investment.





The HYPPTV internet protocol television service for all UniFi high speed broadband residential customers.



Under its public-private-partnership (PPP) initiative with the government, TM will invest RM8.9bil in total while the government will contribute some RM2.4bil in developing the country's next generation HSBB infrastructure and services.



TM estimates that it could take between eight to 10 years before a fibre network becomes its mainstay due to high proliferation of the fibre usage.



The premise of HSBB under the PPP agreement is about changing it from a demand driven to supply driven scenario. If there is demand beyond the PPP agreed areas, then we will continue to roll out HSBB, says Zamzamzairani.



On whether TM would look to implement a Fair Usage Policy for UniFi users, he says that TM was still studying the pattern of usage by its customers.



The issue is how we are going to implement it and not whether we should or not. Most customers would understand that there needs to be an equilibrium in usage among users, he adds.



Zamzamzairaini says that some 40% of UniFi customers have had trouble free experience, against other market benchmarks which hover around 20% for similar services.



Meanwhile, TM has been in talks with other operators for wholesale HSBB purchases but securing potential buyers has not been easy as the wholesale business has considerations such as of volume and term commitments.



All of us would like to reduce capital expenditure because you want to preserve cash. So everyone is looking at what would be the most business effective way in providing connectivity, says Zamzamzairaini.



Broadband fight heats up



With the broadband market growing bigger and competition heating-up, TM wants to present itself to customers as the preferred choice.



In the last two years, we have become more customer centric and the next challenge for us is to excite and improve the customer experience, says Zamzamzairaini.



As market competition intensifies in the mobile broadband space, TM will focus on bettering its wireless solution by growing its WiFi hotspots.



We are strong in the fixed network, both in copper and fibre, but alongside this network, we will need some form of a wireless solution to help our customers enhance their experience when they buy services from us, said Zamzamzairani.



TM will increase its Streamyx hotspots and hotzones to 10,000 from 8,800 by the year-end.



Eighty per cent of the time when people are mobile and want to access the Internet, they would be seated somewhere, either in a cafe, hotel lobby or at an airport, Zamzamzairani says.



This means these people are located in a building and that gives us the opportunity to serve those customers using our WiFi solutions.



However, TM believes customers will use both mobile and fixed broadband solutions, depending on their needs. Customers want mobile solutions when they are moving around while fixed-line services would be ideal for home or office needs.



The latest wireless solutions provider in the market is YTL Communications Sdn Bhd, which launched its 4G Mobile Internet service with voice last month.



TM, which initially dominated the local Internet market share with Streamyx, has seen its retail market share erode with the entry of other mobile and wireless players.



Market share is important to us and when you start at 100%, the only way to go is down. So the challenge for us is to try to slow down that reduction, Zamzamzairani says.



While we note that the pie has gotten bigger, we have gone down to 63% (in market share) and will continue to see erosion.



Revenue growth from broadband and data



Moving forward, Zamzamzairaini reiterated that revenue growth for the company will come from its broadband and data services, while traditional voice will continue to remain a challenge.



According to IDC data, TM's market share for data was 27% and 24% for voice.



TM recently reported its third quarter results, which saw its net profit surged 145% to RM438.49mil from RM179.07mil a year ago mainly due to higher operating revenue and higher gain on disposal of investments.



Revenue for the quarter ended Sept 30 increased to RM2.19bil from RM2.10bil a year earlier mainly on higher revenue from data and other telecommunications-related services, which mitigated the impact of lower revenue from voice and non-telecoms services.



Its data revenue increased by 24.6% in the third quarter to RM440.9mil compared with RM353.9mil in the same quarter 2009 arising from demand for higher bandwidth services.



Other telecommunications- related services revenue increased by 34.2% in the third quarter to RM320.7mil compared with RM238.9mil a year ago mainly due to higher revenue from customers' projects such as MERS 999 and income from HSBB grant.



Revenue from Internet and multimedia rose 1.4% to RM411.1mil arising from the increase in broadband customers to 1.6 million during the quarter from 1.4 million in the corresponding period of 2009.



AmResearch Sdn Bhd in its report states that TM's normalised earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin moved up against second quarter of financial year ending Dec 31 to 33.2% (from 31.5%) due to higher cost of supplies and materials, marketing expenses and other operating costs, mainly due to the faster rolling out of UniFi.



Apart from managing current business that we have, we also have to invest in the future. HSBB is the future and there will be high investment for now, which will increase our cost and see some pressure on our EBITDA, says Zamzamzairaini.


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