Green Packet Bhd’s 55%-owned subsidiary, Packet One Networks (M) Sdn Bhd (P1), is looking at aggressively expanding its footprint in the region to fulfil its mission of becoming the leading 4G WiMAX (worldwide interoperability for microwave access) operator in Southeast Asia.

In addition to its recent foray into Sabah, Sarawak and Singapore, P1 has plans for three new markets within the region by 2012, with targets of one million to two million subscribers for each country. To this end, the group is monitoring WiMAX licences up for grabs in neighbouring countries and is hopeful of acquiring two more licences in the region by end-2010.

“With this aim, we are constantly looking for the right opportunities," Green Packet’s group managing director and CEO Puan Chan Cheong tells The Edge in an email response.

P1 began its commercial rollout — the first in the country to  do so — in the peninsula in August 2008 following the acquisition of one of Malaysia’s four WiMAX licences in March 2007.

Last month, it received approval from the Malaysian Communications and Multimedia Commission (MCMC) to roll out its WiMAX services in East Malaysia, previously the domain and privilege of REDtone International Bhd. This  represents a great opportunity for P1 as household broadband penetration rates in Sabah and Sarawak are reportedly only at a low 9.5% and 13.6% respectively as at end-2008.

A week later, P1 announced the purchase of a telecommunications licence from Singapore-based Pacnet Internet Corp (S) Pte Ltd for RM6.9 million. Pacnet will transfer its facilities-based operator (FBO) licence and the corresponding wireless broadband access (WBA) spectrum rights to Packet One (S) Pte Ltd, giving P1 an inroad into the attractive broadband market in Singapore.

Although there is no confirmation of its next target market, Puan had earlier hinted of his interest in Indonesia should its WiMAX business here top the 250,000-subscriber mark by the end of this year.

It has surpassed the 100,000 mark with net subscriber additions jumping 44% to 36,000 in 3Q against 25,000 in 2Q. Puan believes that with its aggressive network expansion, the quantum will continue to improve to close in on 200,000 subscribers by year-end.

Although this would mean it may not achieve its 250,000 initial target by this year, P1 has come a long way from its 10,000 subscribers as at end-2008.

It is also learnt that Green Packet is renegotiating the terms for its tie-up with Huawei Tech Investment Co Ltd. Green Packet was set to sign an agreement with Huawei Tech last week to speed up P1’s current WiMAX coverage from 35% to 60% of the population by 2011, but this did not materilaise.

“The delay is partly due to timing as well as negotiations to improve the terms to make Malaysia a WiMAX hub,” a company official explains to The Edge.

To date, P1 has spent more than RM337 million of its planned RM400 million capital expenditure for 2009 to cover 38% to 40% of the population in Peninsular Malaysia. Puan has revealed plans for another RM650 million in expenditure within the next two years to develop its network to provide up to 65% coverage by 2011, from the current 35%.

“We are working on our business plan for Singapore, and expect to share more details at the end of 4Q.  However, I can say upfront that we recognise the great potential of the Singapore market due to the island republic’s advanced mobile data demand,” Puan says.

According to a report by research outfit Informa Telecoms & Media, high-speed mobile subscriptions for Singapore’s top three operators increased on average by close to 150% to 710,000 subscribers from 2008 to 2009. This phenomenal growth is expected to continue as subscribers move from home to personal broadband.

“Fundamentally, we will want to focus on Southeast Asia where our base is very strong and we can leverage economies of scale from proximity, shared resources and so forth. Of course growth is also coming out of Asia, where aside from Singapore, broadband penetration is still extremely low,” Puan adds.

Nonetheless, with P1 yet to break even, concerns arise as to whether it can fund its ambitious plans.

Green Packet posted a wider net loss of RM32.9 million for the three months ended Sept 30, 2009, although revenue more than tripled to RM63 million from RM18.2 million in the previous corresponding period. For the cumulative three quarters of FY2009, its broadband business contributed some 63% to group revenue of RM161 million. However, the segment also made up the bulk of Green Packet’s losses for the past seven quarters.

Puan says the losses were expected, considering this is the first full year of operations for P1. He adds that funding was not an issue as it has been successful in its fundraising efforts so far, raising some RM480 million in equity and RM270 million in borrowings.

“We have been able to raise funds successfully in the past two years because we have proven the 4G WiMAX technology and our business model. Based on P1’s strong track record, we do not foresee an issue with funding our future expansion plan with a prudent mix of internal funds via equity and vendor financing,” he adds.

Last week, Green Packet announced a private placement of up to 10% of its total issued and paid-up share capital to raise up to RM117.9 million to fund its WiMAX deployment in Sabah, Sarawak and Singapore next year. Subsequently, it agreed to subscribe for 419,500 Class A Islamic Irredeemable Convertible Preference Shares (Class A ICPS) in P1 for RM110 million.

Additionally, Puan says it may seek strategic partnerships to expand its services in Singapore after the first 1½ years of initial investments.

Apart from funding, competition remains a big concern as large telcos continue to dominate the market. To this, Puan says although large telcos seemingly have the upper hand for now, it would not come as a surprise if legacy mobile telcos partner with a leading 4G WiMAX provider to strengthen its competitive position.

“I believe collaboration is the way to go in today’s business environment, especially for us who like to work back from the future. P1 and Green Packet are always open to collaborative partnerships locally and internationally if it helps us deliver innovation, generate cost savings, or just deliver business competitiveness,” he says.

He remains positive on the potential of WiMAX and P1’s ability to keep to its expansionary mission. “We will invest our last dollar on 4G WiMAX... that’s how much we believe in its potential.”

This article appeared in Corporate page of The Edge Malaysia, Issue 782, Nov 23-29, 2009.