A pure broadband play


  • Business
  • Saturday, 14 Nov 2009

FOR the longest time, consumers had been crying for more competition in the market for their broadband services. And time and again, the competitors to incumbent Telekom Malaysia Bhd, had not come up to mark or fizzled out altogether.

But things are changing. Not only are celco’s – Celcom, DiGi and Maxis – growing their mobile broadband services, so too are WiMAX operators such as Packet One Networks (M) Sdn Bhd (P1).

P1 is known for its aggressive campaign prompting users to “cut” their Streamyx service and opt for P1’s, although TM has hit back with its own advertising campaign.

The fact is TM has lost customers and may continue to do so for some time. For its second quarter ended June 30, 2009, TM only added 37,000 new Streamyx customers, a slowdown from the average 53,000 net additions it achieved last year, according to a report by Macquarie Equity Research.

P1, which launched its mobile broadband service last August, added 25,500 users in its first quarter ended March 31, 2009. It maintained 25,000 net adds for the second quarter and grew the net adds to 36,000 in the third quarter. P1 has stated that it is on track to achieve 200,000 subscribers by year-end.

The celco’s are doing just as well if not better. Celcom’s mobile broadband attracted 114,000 net additions in its second quarter ended June 30, 2009.

Needless to say, customers are opting out of Streamyx due to dissatisfaction with service and quality levels. It is almost cliché to hear Malaysian consumers complain about low speeds from their Streamyx service.

However, TM had predicted this trend and had guided analysts earlier in the year that it expected a reduction in the growth of Streamyx from alternative service providers.

Still, TM received a bit of bad press recently when a global study on broadband by the Said Business School at the University of Oxford showed that Malaysia fared dismally in broadband leadership. (See charts).

Furthermore, a recent report by CIMB Research stated that there is a large and underserved market for broadband in Malaysia, which is reflected by the low fixed broadband penetration and, to some extent, “poor user experience with the incumbent provider.”

Malaysia’s broadband penetration of 21% of households as at the end of last year, trails behind most of its regional counterparts.

But Datuk Zam Isa, group CEO of TM, says that the Oxford reports findings should not be a reflection solely of TM’s broadband service. “The study covers both fixed and wireless broadband,” he says, adding customers should note that TM has always maintained that Streamyx subscribers should receive at least 70% of the subscribed speed most of the time.

He adds that Streamyx download and upload speeds vary and depend on several factors such as the location of the website, capacity of the visited website’s servers, network congestion and the running of other applications simultaneously.

Analysts say that while some of this reasoning makes sense, the proof of it will lie in the user experience customers will have with alternative service providers.

TM’s strategy is to keep upgrading its network in order to better serve its Streamyx customers and banking on its belief that wireless technologies have limitations in terms of quality of service and coverage, especially when their user numbers go up.

But TM’s ultimate trump card lies in the much-hyped high-speed broadband (HSBB) project.

To the broadband starved, this seems like just what the doctor ordered. TM has even got the sweet deal of having the Government partly fund its initial lay out cost to the tune of RM2.4bil. (That amount is paid by the Government on a ringgit-for-ringgit matching ratio and works as a disbursement.)

TM is gearing up for a triple play offering, where a customer will be offered telephone access, Internet protocol-based TV (IPTV) and high-speed broadband. This should also enhance TM’s average revenue per user, considering that it will be offering more products and services to the same customers. However, a few issues will determine HSBB’s success. Execution will be key although Zam says that it is on track to rolling it out to the high user pockets in the Klang Valley and major cities by the first quarter of next year.

Pricing of the products will also be important. To be fair to TM, there is reason to doubt that it can roll out HSBB without much glitch. It already manages the current nationwide copper-based fixed line network spanning almost every nook and cranny of the country. It has also been upgrading this old network in order to squeeze their Streamyx service through it.

As for pricing, TM has already set the benchmark pricing for broadband services in the country. But HSBB is going to be a different ball game, as it will be incurring significantly higher costs in its roll out – estimated at RM11.3bil (compared to the costs involved in providing Streamyx). TM has hired consultants to help them with the pricing to customers and is keeping their strategy close to their chest.

It is likely though that TM would be absorbing some of the cost initially as customers may be unwilling to pay much more than current broadband rates.

TM’s Zam himself admits that the HSBB project is a long term one, in terms of returns.

“We are after all a telco and are used to making long term investments in our network. This is what we do best. We are moving from a legacy digital network to a fully IP-based one. Typically, for any infrastructure projects of this size, the gestation period is about 10 years,” he says.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 1
Cxense type: free
User access status: 3
Join our Telegram channel to get our Evening Alerts and breaking news highlights
   

Next In Business News

As scrutiny mounts, crypto exchange Binance to wind down derivatives in Europe
Oil price climbs, notches fourth monthly gain on growing demand
Chevron tops profit estimates, joins share buyback stampede
Indian billionaire's new airline may give Boeing a chance to regain lost ground
Global Markets: US stocks slip, US# has worst week in almost two months
All hopes pinned on the National Recovery Plan
Axiata seeks 66% stake in Indonesia's Link Net
Pos Malaysia appoints Charles Brewer as new Group CEO�
Bursa ends July on a disappointing note, KLCI closes below 1,500
Gamuda Engineering, Bosch Rexroth to raise construction benchmark

Stories You'll Enjoy


Vouchers