Thursday February 3, 2011
Its Arpu declined on heavy advertising and promotion activities
PETALING JAYA: Higher sales and marketing costs as well as declining average revenue per user (Arpu) are expected to drag down telecommunications company Green Packet Bhd's fourth-quarter ended Dec 31, 2010 (4Q10) results, according to a research house.
HwangDBS Vickers Research said in a report that Green Packet would likely record another Ebitda (earnings before interest, tax, depreciation and amortisation) loss in 4Q10 although broadband subscribers achieved was close to its 280,000 target.
“We think its broadband Arpu for the quarter may have been dampened with the promotion for 50% discount for second and third month bills, while sales and marketing costs may have jumped as the group began advertising heavily in the quarter to ramp up the number of net adds.
Puan Chan Cheong says details on Green Packet break-even levels will be announced this month.
“We estimate that Green Packet has achieved a record 56,000 net adds in the quarter, significantly higher than 22,000 to 35,000 quarterly net adds recorded in the first three quarters of 2010,” it said in a report yesterday.
Net adds refer to the number of new subscribers, or gross adds, minus the number of customers that dropped service.
Given the expected weak 4Q10 results, HwangDBS said it had raised the company's LBITDA (loss before interest, tax, depreciation and amortisation) for financial year ended Dec 31, 2010 by 13% to RM71.1mil.
However, it said core net loss (for financial year 2010) was reduced by 35% on higher minority interests based on first nine-month results of 2010 accounting adjustment (which includes the impact of SK Telecom's entrance as one of the major shareholders in Packet One Networks (M) Sdn Bhd in the third quarter of 2010).
Green Packet subsidiary Packet One and SK Telecom entered into a strategic alliance in June 2010, whereby SK Telecom invested US$100mil in Packet One for a 25.8% equity stake.
On Ebitda turnaround, HwangDBS said it would likely be much later this year.
“We think that with higher-than-expected sales and marketing costs as well as declining Arpu in the broadband segment, it may take a while before Green Packet achieves profitability.
“Maintaining Arpu will be crucial for Green Packet. However, competition from other players may continue to exert pressure.
“Green Packet's Arpu has fallen from a high of RM94 in first quarter of 2009 to RM81 in the third quarter of 2010 and we expect it to continue to fall as the group cuts its prices to grow its subscriber base especially, in the wireless segment (via its Wiggy plans) where competition is more intense. We project Arpu to fall to RM65 in the current financial year and RM60 in 2012. Although we project Green Packet to be Ebitda positive in the second half of 2011, there could still be downside risk from increasing competition, especially in the wireless broadband segment,” the research house said.
The estimated Arpu for the financial year 2010 is around RM77.
For the first nine months of financial year 2010 ended Dec 31, Green Packet posted a net loss of RM56.8mil compared with a net loss of RM81.9mil for the same period in 2009.
Revenue for the period under review stood at RM277.7mil against RM161mil in 2009.
However, in the middle of last month, StarBiz reported that the company was on track to be Ebitda-positive by this year, especially since it had achieved its milestone subscriber base of 280,000.
The news report said the company had been registering lower Ebitda losses for the past three consecutive quarters on the back of a growing subscriber base and revenue contribution.
The report, quoting its group managing director and chief executive officer Puan Chan Cheong, said Green Packet would reveal more details on its break-even levels when it announced its full-year results for 2010 this month. When contacted, Puan declined to comment.
http://biz.thestar.com.my/news/story.asp?file=/2011/2/3/business/7926780
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