Success, it seems, may have its downside. Billionaire T Ananda Krishnan, who controls both Malaysia’s top mobile operator Maxis Bhd and dominant pay-television provider Astro All Asia Networks plc, has some tough decisions to make to stay ahead even as rules of the pay-TV game changes with the coming together of the telecommunications, broadcast and Internet worlds.
While a seasoned hand in the media business, Ananda has more to lose relative to most aspirants in the convergence game precisely because of how successful his flagship operations have been in their respective turfs here.
Already, the advent of fibre line-powered broadband that’s enabling high-quality video streaming had forced Astro — which beams its TV programmes into half of Malaysia’s six million households via satellite — to offer a competing Internet Protocol Television (IPTV) service that’s bundled with high-speed Internet access and home phone service.
Now, his No 1 mobile operator Maxis is slated to launch yet another IPTV alternative. “Home broadband will help Maxis grow its revenue and profits in the longer term, especially with a backdrop of falling voice revenues,” CIMB Research analyst Kelvin Goh wrote in a note on Tuesday.
Among other things, the service is hoped to derive more business from its existing 12.76 million mobile phone subscribers. And having signed a 10-year wholesale agreement, Maxis will have access to some 973,000 premises passed on Telekom Malaysia Bhd’s (TM) high-speed broadband (HSBB) network. CIMB’s Goh reckons the short-term costs to acquire fixed broadband users will dampen margins and profits, though.
TM, which markets a rival broadband-home phone-IPTV bundle (UniFi), has an 18-month headstart on Maxis, noted OSK Research’s analyst Jeffrey Tan. He too expects Maxis’ envied above 50% Ebitda margins “to come under pressure” in 2H2011 from higher operating expenditure and marketing activities to create awareness.
“We expect take-up [rate] to be gradual as it faces direct competition from TM’s UniFi service, which is currently available in over one million homes,” OSK’s Tan wrote in a note yesterday. “The current cautious economic environment may also dampen demand for premium broadband services as users cut down on non-essential spending,” he added, pointing out that Maxis is now targeting 50,000 subscribers for home broadband by end-2012 — shifting its target by a year owing to the multiple delays in handover of ports from TM.
Pending the official launch of its home broadband IPTV bundle, expected to happen by end of this month, Maxis had launched a 30Mbps broadband plan at RM398 per month with 300GB data quota. CIMB’s Goh thinks the plan “will have limited appeal given the high price”.
Be that as it may, Maxis may just have at least an edge over rivals, even as analysts wonder if there will be enough appetite for the next generation services.
Much of the one million subscribers Maxis previously said it was looking to bag within six years to see Ebitda break even for its home broadband service will likely come from the crème de la crème of the 2.62 million postpaid mobile the operator has on contract.
In a recent interview with The Edge, Maxis CEO Sandip Das called these big spenders the company’s “family silvers”, and appropriately so. While they make up only one-fifth of Maxis’ total subscriber base, their average phone bill is at least three times that of its average pay-as-you-use prepaid users.
More importantly, their average monthly bill (at RM108 as at end-June) is at least RM10 to RM24 higher than that of an average postpaid subscriber on rivals Celcom’s and DiGi.Com Bhd’s books. There is room for upside, it seems: average revenue per user (Arpu) for TM’s HSBB UniFi service was RM186 per month as at June 30, 2011.
As it is, Ananda’s companies seem to have chosen to go with different partners for IPTV. Astro is riding on the fibre networks of Time dotCom Bhd for its IPTV broadband bundle. Maxis, on the other hand, will work with an associate of Astro called FetchTV — the IPTV start-up Ananda is using in his attempt to reshape Australia’s media sector.
Dynamics on the content aspect of the media business will also be interesting to watch as the IPTV war builds up.
For now, Astro enjoys exclusivity to most of the mainstream content consumers are used to, with a customer base some 60 times larger than what TM has. With only 30% of its 142,000 UniFi customers using the pay-TV offering as at mid-August, TM CEO Datuk Seri Zamzamzairani Mohd Isa told The Edge Financial Daily it is “still too early” for it to fork out serious money on content.
He also denied TM having ever bid for the English Premier League broadcast rights thus far, though admitting that the company will continue to evaluate similar content bids as normal course of business. He pointed out, though, that regulation in Europe, Singapore and elsewhere in the world are moving towards having popular content shared by more broadcasters, instead of allowing one exclusive broadcaster.
The big bucks traditional pay-TV operators like Astro have been paying content owners for exclusivity on mega sporting events, for instance, may indeed soon be a thing of the past — forced by technology, if not regulation like the case in Singapore.
Already, instead of paying for TV, consumers are increasingly looking towards Internet sites offering unlicensed and pirated content to consumers across geography borders for largely less to nothing. And at the time of writing, the European Court of Justice had just delivered a verdict — allowing TV viewers to watch the English Premier League using a decoder card from anywhere in Europe — which undermines the practice of selling broadcast rights on a country-to-country basis.
Known to be sharper than the average sharp entrepreneur, Ananda isn’t one to back down from a challenge, though. His presence among players in the IPTV war alone is a promise the developing scene would be one worth watching.
Written by Cindy Yeap, theedgemalaysia.com
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