GPACKET ... Jan10

California-based The Capital Group Companies Inc, with assets of around US$1 trillion, has through its subsidiary, Capital Research and Management Co, taken a stake in Green Packet Bhd.

Sources said Capital Research took up about 30 million Green Packet shares, or close to a 5% stake at RM1.15 per share, for an investment outlay of RM34.5mil. Capital Research wanted a substantial and much larger stake. But there were not enough shares to go around. The existing majority shareholders also took up shares to maintain their percentage ownership.

Green Packet is now (Jan 2010) undertaking a 10% private placement involving 84.8 million shares.

The majority shareholders are Green Packet Holdings Ltd with a 34.26% stake and OSK Technology Ventures Sdn Bhd with 16.23%.

It is not surprising that The Capital Group has confidence in Green Packet and its WiMAX business model. Unlike other WiMAX players, Green Packet’s fourth-generation (4G) WiMAX operator arm, Packet One Networks (M) Sdn Bhd (P1), can leverage on an in-house developer and provider of 4G WiMAX products with software solutions for a competitive advantage.

This dual-pillar business model has supported P1 in its aggressive rollout and service package delivery that has given 3G operators such as Telekom Malaysia Bhd, Maxis Bhd and Celcom Axiata Bhd a run for their money.

Capital Research saw value in Green Packet’s WiMAX business model locally and globally. In Malaysia, there is also no expensive licensing fees for WiMAX operators unlike for the 3G operators.

According to the source, Capital Research recognised that P1 was way ahead of the game among the four WiMAX players in Malaysia. It is not investing for the short term as it sees intrinsic value in P1’s subscriber base and infrastructure,” he said.

P1, which launched its mobile broadband service in August 2008, has been growing with remarkable speed. It added 25,500 users in its first quarter ended March 31, 2009. It maintained 25,000 net adds for the second quarter 2009 and posted a 44% jump to 36,000 net adds in the third quarter 2009.

However, in the last two months of the year (2009), P1 faced a technical backlog of its systems because of the swelling demand. While this problem has been fixed, it may have resulted in a shortfall on its 200,000 subscriber target. However, it is believed that P1’s net adds are still higher in the fourth quarter 2009 than the 36,000 reported in the third quarter.

According to a source from the company, P1 did get fairly compensated by the vendor. With the technical backlog fixed, subscriber rates will likely see another ramp up this month (Jan 2010).

Meanwhile, The Capital Group’s investment approach is simple: Discover it early, buy it and wait. Some of its recent investments in Asia include BHP Billiton Plc, Weichai Power Co Ltd, Ascendas India Trust and Anhui Conch Cement Co Ltd.

As measured by assets under management, The Capital Group rivals Fidelity Investments, touted as the largest mutual fund company in the world.