Wednesday 21 Feb 2024
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KUALA LUMPUR: After nearly six years of making losses, YES is finally launching a new 4G LTE network for mobile phones. Can it redeem YTL Power International Bhd's much-criticised RM4 billion investment in elecommunications?

The cover story of The Edge Malaysia for the week of June 27-July 3, 2016, written by Ben Shane Lim, looks at the upcoming launch of YES's new 4G LTE network on June 30.

The group's RM4 billion mobile broadband venture has cost YTL Power some RM3.4 billion in loss before tax since its launch in 2010, dragging YTL Power's balance sheet and share price in the process. The multi-billion capex has also drained the group's once-enviable coffers and frozen dividends for a few years.

The immediate good news for minority shareholders is that capex on the network has ended, Datuk Yeoh Seok Hong, YTL Power's executive director who has been overseeing the group's telecommunications venture over the years, told the weekly.

But is stemming capex enough, at a time when the company is facing uncertain earnings outlook? For one, the British exit or Brexit has resulted in the pound sterling to fall as much as 6.17% against the ringgit, which will adversely impact the group's largest earnings contributor, Wessex Water.

Further, its power generation assets, have not been performing well. Its operations in Singapore has been hit by a capacity glut, which affected the profitability of its energy unit there — YTL Powerseraya Pte Ltd — the weekly wrote.

Back in Malaysia, the group's power concessions have also expired, though one of its power plants — the Paka power station in Terengganu — has been given a nominal extension, land disputes with Tenaga Nasional Bhd have delayed the signing of a power purchase agreement.

So it may be that YTL Power will have to turn to its heavily criticised telecommunications business for an earnings boost. But can it deliver?

Especially at a time when the telecommunications sector is being choked by stiff competition, with even established players feeling the strain.

"We will be offering the most data for the best prices," said Yeoh, indicating that YTL Power is ready to jump into the price and data war that has been in full swing since the beginning of the year.

To give a sense of the scale that YES can achieve, Yeoh said its existing infrastructure can support about five million users with an average usage of 5GB a month. The average data consumed across all networks is estimated to be less than 2GB a month at this juncture.

But how else will its offering be packaged? What kind of ARPU (average revenue per user) does it expect to generate? What other strategies will it employ to grab a bigger slice of the market? In essence, what is its game plan?

Meanwhile, is outlook really dreary for YTL Power's other segments? Are there any bright spots that minority shareholders can look forward to? After all, financially, its massive capex spend has come to an end, so YTL Power will now have more free cash. It has also significantly reduced its net debt by RM913.7 million from a year ago to RM14.8 billion.

To find out more, pick up a copy of The Edge Malaysia at newsstands around you.

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P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.

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