KUCHING: The telecommunications sector is seeing an interesting play of late with Time dotCom Bhd (TDC) stepping up to the plate to be in the same playing field with Telekom Malaysia Bhd (TM).According to an analyst from CIMB Investment Bank Bhd (CIMB Investment), TDC’s emergence would put more competitive pressure on TM, which was already facing contest from mobile players in the consumer broadband and corporate voice markets.
“Mobile operators and emerging players such as U Mobile Sdn Bhd, Green Packet Bhd and YTL Communications Sdn Bhd should benefit from TDC’s expansion,” explained the analyst during an online interview yesterday.
“They should benefit by having a choice of fibre optics to choose from, apart from competition in service and strategic pricing between TM and TDC.”
TDC competes with TM on several levels, particularly in the wholesale, corporate and government segments.
The analyst noted that the group had only an estimated 16 per cent share of its addressable market and was poised to grow this figure on the back of a play on booming wireless broadband or mobile data packet.
“Due to the explosive growth of wireless broadband and mobile data, mobile operator companies needed to upgrade the transmission capacity of their networks by using fibre optics.
TDC helped to provide fibre optic capacity to telecommunication companies which choose to lease the lines instead of building them,” he said.
This segment contributed 38 per cent of TDC’s 1Q10 revenue, which it classified as wholesale.
The research house believed that TDC had plenty of room for growth as the group had only a 19 per cent share of its addressable market even though its network covered 80 per cent of the addressable market.
Also in this segment was the backhauling of traffic between Thailand, IndoChina and Singapore as its network ran up to the Thai and Singapore borders.
TDC also had access to the Unity cable consortium, through one of its shareholders Global Transit, making it the only operator other than TM, which had direct access to an international link.
This Unity cable spanned from Singapore to Japan and the US.
The corporate and government data services sector contributed 46 per cent of TDC’s revenue through its managed services and leased circuits to large corporations and the government.
For instance, financial institutions with branch and automated teller machine (ATM) networks need to be connected and multi-national corporations (MNCs) need to be linked to their home countries and regional offices.
TDC was either the main network provider or a back-up/redundancy provider.
Its network covered 25 per cent of the corporate and government buildings and currently only had 15 per cent share of the revenue of the addressable market.
TDC was eyeing the higher education institution market and wanted to ‘break the monopoly’ that TM had with government offices.
Looking at the small and medium enterprises (SMEs) markets, CIMB Investment summarised that TDC held only a small market section of both.
In view of this, TDC hoped to revolutionise this segment by simplifying its services to the small and medium businesses.
On the other hand, the group saw limited growth in the consumer market given its lack of last-mile connectivity to homes.
In retrospect, CIMB Investment outlined the key threats to TM’s revenue included wholesale data, which comprised six per cent of TM’s revenue.
Given TDC’s 80 per cent coverage in the areas where cellular operators were likely to want fibre optic coverage, the research house believed that five per cent of TM’s revenue was at risk.
Apart from that, voice and data revenue from corporate and governments contributed 33 per cent of TM’s overall revenue.
As TDC was in the position to address about 25 per cent of the market for this, CIMB Investment estimated about eight per cent of TM’s revenue to be at risk.
Also, the fact that voice and data revenue from SMEs chipped in about 20 per cent of TM’s total revenue, TM might see about three per cent of its revenue at stake given that TDC could address 15 per cent of the market.
As a conclusion, the research analyst expected to see the struggle between the two telco players for market capitalisation to bring an interesting perspective over the next few months with a better variety of suppliers for smaller players.
by Ronnie Teo
Borneo Post
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