Tuesday, October 12, 2010

Gpacket ... Oct10

In Sept 2010, privately held Asiaspace signed an MOU with Qualcomm Inc to explore the deployment of another technology – Long Term Evolution Time Division Duplex (LTE TDD) – in Malaysia .
 
WiMax poster child GPacket stated the possibility of upgrading to LTE Advanced within the next two years (2011-2012). This sounded almost like an about turn by a company that has been a strong advocate of WiMAX over the last two years (2008-2009).
 
The company said the technology that best serves its customers is its choice technology, P1’s network is easily upgradable to WiMAX 2 or LTE Advanced with manageable incremental capex.
 
What is worth noting is that an upgrade to LTE Advanced rather than WiMAX 2 will require 1 15% increase in capex from 2012 onwards.
 
As at June 30, 2010, GPacket’s capex stood at a considerable RM517 million. To hit 65% coverage of the population, another RM500 million will be needed over the next two years (2011-2012).
 
GPacket has ample funds, especially after South Korea ’s SK Telecom took a 25.8% stake in Packet One Networks (M) Sdn Bhd for US$100 million in June 2010.
 
As at June 30, 2010 Gpacket had cash and cash equivalent of RM102 million and bank and vendor financing facilities of RM423 million. With the sale of its P1 stake to South Korea Telecom, the group’s cash and cash equivalent are expected to increase to RM426 million by 3QFY2010 ended Sept 30.
 
But its earnings before interest, tax, depreciation and amortization are still in the red, can the company justify the extra spending to upgrade to another technology?
 
Ebitda will break even by 1QFY2011 ending March 31, assures its CEO. It had budgeted annual capex of about RM250 million to RM300 million for the next two years (2011-2012) to expand its network capacity and to reach 65% population coverage.
 
It said it will be another two or three years before WiMAX 2 or LTE Advanced is deployed, considering the readiness of the technologies and ecosystems. By then P1 is expected to be cash flow positive. It will be prepared to invest what it feels is manageable incremental capex as planned for its technology road map.
 
Q-to-Q, the group stemmed Ebitda losses by 33% to RM19.9 million in 2QFY2010. Revenue rose 59.4% y-o-y to rm90 million.
 
On the face of it, it seems like consumer have taken more to 3G broadband than WiMAX and it is noteworthy that the much touted LTE is said to be a natural progression of 3G.

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