What’s NEXT! GPacket

GPacket

What’s NEXT! … dated Jan 2011
Green Packet Bhd is on track to be EBITDA (earnings before interest, tax, depreciation and amortisation) positive by 2011, especially since it has achieved its milestone subscriber base of 280,000.

The company has been registering lower EBITDA losses for the past three consecutive quarters on the back of a growing subscriber base and revenue contribution. Average revenue per user is approximately RM80.

Green Packet will reveal more details on its break-even levels when it announces its full year results to Dec 31, 2010 in Feb 2011.

Green Packet's subsidiary, Packet One Networks (Malaysia) Sdn Bhd (P1) has increased its subscriber base by approximately 60,000 subscribers in the last quarter of 2010, thus surpassing the important milestone of 280,000 subscribers for its P1 4G broadband service.

The 60,000 subscribers in the fourth quarter is the highest net add per quarter in P1's history, the second highest being 43,000 in the fourth quarter of 2009 as a result of the highly effective but controversial “Sudah Potong?”

Meanwhile in a move to increase broadband coverage to 52 per cent in West Malaysia and enhance capacity, Packet One Networks (M) Sdn Bhd (P1) is investing RM200 million this year to further boost its services.

Currently, P1 has 45 per cent coverage in West Malaysia .

P1's partnership with Korea-based SK Telecom (SKT) since June 2010, to enhance its network and operations in the 4G broadband business, had further contributed and strengthened the company's growth.

SKT, Korea 's largest national mobile telecommunication company has invested US$100 million in P1 for a 25.8 per cent equity, to become its second largest stakeholder after Green Packet.

P1, with its Korean business partner, achieved a new milestone in 4G wireless broadband by securing 280,000 subcribers to date.

P1-SKT partnership is to accelerate P1's 4G deployment to 65 per cent of the Malaysian population by 2012.

Besides SKI, Intel is another P1 investor that invested RM50 million in 2008, to work together to deploy Malaysia 's first nationwide WiMAX network.

Meanwhile having achieved the best quarter it has seen in terms of subscriber additions, does GPacket have more positive prospects in store for the rest of the year?

The key question now is whether GPacket is able to sustain this rate, which at the moment is highly unlikely given the rapidly changing and increasingly competitive landscape.

Not only have the big three telcos stepped up their efforts to jostle for broadband market share, but the entry of YTL Comm into the fray has thrown up GPacket’s first head to head competitor.

While most have lauded Yes 4G’s competitive rates, GPacket has worked to keep its own rates down.

However, while there might be some impact on revenue, it is compensated by the growth of the subscriber base, which at the moment is still growing.

GPacket would like to ride on the bandwagon of high nomadic broadband growth ny focusing its strategies and resources to capture more nomadic users.

Despite its rapid growth, the fact still remains that P1 has not yet broken even and GPacket has been loss making for the past two years. Even more importantly, for 3QFY2010, Gpacket saw negative net cash of rm86.6 million for operating activities which is higher than the previous year. Its cash and cash balances for the period stood at rm146 million.

The negative operating cash flow as one of the main reasons why investors remain wary of GPacket despite the rising adoption of mobile broadband.

The company performance is still that of a start up.

However, GPacket has indicated that it expects P1 to break even by the end of 2011 with a target subscriber base of 510000 by then.

In the meantime, it not only has its hands full with its current business, but is also pondering how to manage the new LTE spectrum – better known as 4G spectrum – that was awarded to it late 2010.