IPTV market in Malaysia

The more the merrier in the IPTV market

Hopefully the battle gets fierce so that quality and content will improve to offer more choices to consumers.

IT has taken two companies - Astro and Maxis - within the same stable a long time to come out with their Internet Protocol TV (IPTV) offering.

The Maxis/Astro IPTV/broadband services were originally expected to be launched by end-2012 but were postponed to the end of the first quarter in 2013.

Astro and Maxis entered into partnership for IPTV/broadband collaboration in September 2012.

The good news is that both companies launched the Astro B.yond IPTV offering this week, riding on Telekom Malaysia Bhd's (TM) high speed broadband (HSBB) network.

Now there is another choice in the market place and Astro/Maxis will compete head-on with TM for market dominance in the IPTV segment. There are several other smaller players offering IPTV but not on the scale of these two.

A report said the continuous improvement on the speed of broadband and the availability of interactive applications would play a crucial role in the expansion of IPTV market around the globe.

Broadcasters and telecoms players globally have a new way to increase customer average revenue per user with the expansion of broadband and IPTV. The forecast is that the global IPTV market will rise to about US$106mil (RM323mil) in 2014. European countries are the biggest markets for IPTV, with France, the UK, and Germany leading the growth.

Asia is also responding strongly to this new phenomenon. This week, South Korea's SK Telecom saw its earnings rise, with its media business securing 600,000 paid subscribers for its mobile IPTV service in the first quarter. Astro claims to have a subscriber base of 3.5 million households representing 52% of Malaysia's total households of 6.7 million.

It is entrenched in the market place and TM's UniFi subscribers are readily accessible market for the Astro B.yond IPTV product as both are carried on the same HSBB network.

The caveat is that TM UniFi residential subscribers are locked in a two-year contract.

TM has to date activated more than 548,000 UniFi subscribers on the back of 1.39 million premises passed, covering 102 exchanges nationwide which translates to a 38% take-up rate. TM offers IPTV via HyppTV.

The choice is out there today, hopefully the battle gets fierce so that quality and content will improve to offer more choices to the consumers. As for pricing, it is still steep despite the value propositions and for a wider mass market appeal, the rates need a review.

And while Astro/Maxis claim they have a value proposition, TM may want to look to getting a bigger content library, and certainly, a cellular tie-up is recommended to counter the bundling that Astro/Maxis is offering.

Celcom Axiata is waiting on the sidelines. It also needs to get into the IPTV game and both TM/Axiata should begin talking seriously.

Friday Reflections - By B.K. Sidhu  
Deputy news editor B.K. Sidhu is still thinking about how and when the digital cable TV operator will enter the fray.


Astro upgraded on IPTV potential 

Target price: RM3.38 

ASTRO Malaysia Holdings Bhd has finally launched its Astro B.yond Internet protocol TV (IPTV) with Maxis Bhd, which could complement its services to subscribers with more value proposition and significant savings.

Although the Maxis-Astro IPTV offering enjoys lower earnings before interest, tax, depreciation, and amortisation (EBITDA) margin compared to Time-Astro IPTV, synergistic benefits to be reaped from this collaboration should be more than enough to offset the shortfall.

It was reported that Astro Malaysia Holdings has officially launched its Astro B.yond IPTV with Maxis Bhd as an alternative for consumers to have access to home fibre broadband internet and home voice services.

On this Maxis-Astro IPTV offering, we understand that the fibre broadband packages provided by Maxis will range from 10Mbps to 30Mbps.

The B.yond IPTV content packages provided by Astro will be on SuperPack, Value Pack and Family Pack with prices ranging from RM37.95 to RM100 per month with an optional Home Voice Package of RM20 per month.

We understand that Astro will recognise 100% of the average revenue per user (ARPU) from this IPTV collaboration.

For instance, assuming customer A subscribes to the basic 10Mbps broadband package with a SuperPack1 content selection, the total ARPU will be RM248 per month (RM148 from the broadband package and RM100 from the content package) and Astro will recognise 100% of this total ARPU of RM248

Subsequently, in the cost of sales component, Astro will recognise 75% of the broadband ARPU (which is equivalent to RM111 in this case) as the cost to be distributed back to Maxis.

Based on our back-of-the-envelope calculation, the EBITDA margin of the Maxis-Astro IPTV collaboration will be circa 29% versus the circa 38% of the Time-Astro IPTV's EBITDA margin.

This implies that with a likely increasingly higher take-up for the Maxis-Astro IPTV offerings, the EBITDA margin of the group on the overall will be diluted on a percentage basis.

As this Maxis-Astro IPTV will be complemented by Maxis' extensive reach of 1.3 million homes compared to Time's reach of 100,000 homes, we believe that it could immediately give a boost to its revenue.

This should increase its absolute profit despite the EBITDA margin dilution should the product be well taken up.

We also understand that 1.1 million (or 85%) of the current high-speed broadband (HSBB) home premises are on Astro's subscribership.

That said, for current Astro subscribers who are also having the TM Unifi package, they could achieve better value propositions and cost savings by subscribing to this new IPTV packages.

We are sanguine on this collaboration as it has bundles of win-win benefits for the subscribers and synergistic benefits for Astro and Maxis.

In conjunction with that, we are assuming circa 65,000 and circa 175,000 subscribers to take up this IPTV offering (mainly on SuperPack packages), taking cues from the management's guidance of circa 60,000 to 70,000 and 170,000 to 180,000 subscribers in 2014 and 2015 respectively.

Consequently, our net profit has been increased by 2.4% to 9.9% in 2014 and 2015 despite a lower EBITDA margin of 32.4% (from 32.7%) and 33.4% (from 34.2%) for the two years.

Consequently, our DCF-derived target price has now been increased to RM3.38 from RM3.10.

As the target price offers a decent capital upside of circa 15%, we are upgrading our “market perform” call on Astro to an “outperform.”

By Kenanga Research

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MBA today is disrupting the competition?

The in word in business school today is disruption

AFTER seven weeks of cool spring weather, our Malaysian sun finally arrived in Boston. As I basked in the warm sunshine in the courtyard of McArthurs Hall, Harvard Business School (HBS), a gentle breeze reminded me of Awana Genting back to 2004, where I last enrolled in a two-week HBS management programme organised by our Malaysian HBS Alumni Club. Four HBS professors taught us then.

Here I am, eight years later, being taught by no less than 15 senior Harvard professors covering almost 120 case studies and numerous lectures. To justify their hefty fees, HBS threw their full arsenal of specialist professors at us. From basic strategy, finance, marketing subjects to deal making negotiation to social media to entrepreneurship. We have had the presence of former and current CEOs of Merck, Cisco, Carl Zeiss and many others attending our discussions on their company followed by their explanation and defence on their course of actions/decision making as per their case study.

Today, we covered the Facebook case study to coincide with its listing. And we had the director of FBI giving us a lecture after attending the case study on FBI reorganisation after Sept 11. To say that I am impressed would be an understatement.

It was like a Hollywood movie. There must be at least 10 FBI agents with their standard issued earpiece and dark suits staring at us at the entrance and exit. And then a standing ovation at the end of the speech to send off The Director. Captain America has saved the universe again.

HBS is the post graduate business school of the Harvard University. It has arguably the most revered MBA programme in the world. With a fixed annual enrolment of 900 students, an applicant has a 7% success rate and he or she will be at least 27 years old with an average of four years working experience. It is a two-year programme with full residential accommodation provided in campus. Depending on ones preferred living standards, the expected investment should be between US$160,000 and US$200,000 (RM480,000 and RM600,000) over two years.

It is in the executive education that HBS has amazed me the most. They have built a business model that is difficult to replicate when in the world, all kinds of education business is being commoditised. They have differentiated themselves in terms of positioning, reputation and school fees. High, higher, highest.

HBS is a money making machine. They have built an organisation that is always evolving, very sensitive to the external environment. If necessary, they are not afraid to modify their strategy, realign people, structure, processes and their unique culture to face the new environment. All the time, staying close to their core strategy of providing a unique learning experience to their target market. They practise what they preach.

Sensitive to change

So are you sensitive to the changing environment' When do you think is a good time for your organisation to adjust your strategy and realign your organisation to face new challenges' Is it during the good times or only when your organisation is in intensive care'

On hindsight, just look at Malaysia Airlines over the last 15 years. What do you think the management should have done then' When Southwest Airlines and Ryanair in the United States and Europe respectively have successfully taken their markets by storm, they should not have ignored the threat set by AirAsia. When you see air ticket prices being commoditised, you will be flying into a smaller gross margin zone. Which means you need a leaner and lower cost structured organisation to face a new challenging environment. So what do you think happened' And is their current organisational cost structure lean enough to face even tougher challenges today' We will find out within 15 months.

In the current world where many products and services are moving towards commoditisation, how are you differentiating your products and services from the competition' More importantly, how do you continue to differentiate to stay ahead of your competition' Look at Astro. From a virtual stranglehold grip on cable TV market, their monopoly status has been threatened by new entrants offering lower cost options straight to your homes. Astros response must be swift and decisive. As a true market leader, Astro should pre-empt and disrupt the competition. With new technology and smart devices like iPad and smartphones, Astro will deliver contents to their consumers anywhere their consumers find it convenient to consume. Just like The Stars ePaper.

Then from the competitors viewpoint, just imagine Malay Mail relaunched as an ePaper. Massive savings on newsprint and delivery costs. Does that mean that this is the beginning of the end of free physical newspaper' Absolutely intriguing. Technological advances have disrupted businesses all over the world. And HBS is actually reviewing amongst themselves whether e-learning will disrupt their current successful executive education model' Will your business be disrupted by new technologies' If it is, be afraid. Be very afraid.

High margin 

I have always emphasised that entrepreneur wannabes should go into high margin business. Which means avoid businesses that is being commoditised and having the ability to differentiate your products or services from your competition. The in word in business school today is disruption. Disrupt others before they disrupt you. Disrupt yourself to stay ahead. Stay ahead of technology disruption. Be the disruptor not the disruptee. There are no such words. I just disrupted the dictionary.

So is the HBS executive education programme as good as they claimed' Does it justify the high positioning and high cost charged' Honestly, I have no idea. They have kept us so busy from day one to stop us from thinking about it. And they have piled a tonne of case studies and notes onto us. Plus many free books written by the professors. So much so that this bunch of senior executives with an average age of 47 years face information fatigue, CPU overload and degrading eyesights.

Case studies still piling in until the last day. John Kotter still to speak next week. But spirits are high as we look forward to the close of the programme. This programme has been a major disruption to my life. Miss my country, my sunshine, my food, my friends and colleagues. And most of all my family.

Have a happy weekend.

ON YOUR OWN By TAN THIAM HOCK

The writer is an entrepreneur who hopes to share his experience and insights with readers who want to take that giant leap into business but are not sure if they should. Email him at thtan@alliancecosmetics.com