YTLe and YTL Power

The mini posting on YTLe and YTL Power elicited some savvy comments from reader Jason. RM2.5bn WiMAX rollout. For leveraged exposure to WiMAX, YTL e-Solutions’ fee arrangement with YTL Power appears quite attractive. YTL Power will roll out WiMAX nationwide on 18 Nov.

It will provide free service to 400,000 university students for usage within their campus for a limited time. YTL e-Solutions will be paid an annual fee of RM75m and a 10% share of revenue above RM500m for its WiMAX licence. Fees will flow directly to the bottomline.

YTL Communications Sdn Bhd, which is gearing to launch its WiMAX-based services on Nov 18, is expected to sign an agreement with US-based Sezmi TV for a new personalized digital television content offering on its network. The agreement will give YTL Comms exclusive rights to offer hybrid TV services, comprising traditional TV, on-demand and Internet content to Malaysia and the Asian region. It may take YTL Comms a year to roll out the services in Malaysia. The overall cost of bringing digital TV on its network to TV screens and also extending services to the region may be whopping RM1b to RM2b.

Jason:

1) YTL Communications is 60% owned by YTL Power and the remaining 40% was sold by YTLe to other party in June 2009 (never mentioned buyer of 40% in YTLe annual report and never announced to Bursa at all)

2)Y-Max Networks (holder of Wimax spectrum) is 60% owned by YTLe and remaining 40% must be owned by those "capable people up there".

3) Emailed to YTL Power Public relations over my disappointment because IF YTL power have to fork out ALL the money to the tune of RM1 billion so far, yet have to share so much with YTLe, no reply or confirmation yet from YTL on profit-sharing with YTLe.

4) I think the business model of YTL wimax will be very disruptive to exiting celcos. Imagine, for your moblie phone charges, you are charged not on per minute anymore, (I hate existing celcos charge me based on per 30-second block) but on per unit cost based on kilobyte or megabyte, just like your electricity, except the more you use, the cheaper unit cost will be. Anyware 100 hours talktime roughly equals to 1 GB, so talk is cheap then.

5) However, the risks are interconnections as existing celcos such as Celcom and Digi have yet to provide interconnection even though agreement are signed. I mean, do you want your competitor easy time? The second risk is related to wimax handset as not many out there yet, even though the wimax ecosystem is quite mature compared with LTE. In fact YTL wimax will be the world first deployment with mobile voice and data over wimax. Initially, i think Mobile VOIP will be the killer app.

6) Based on existing celco ARPU of around RM55 and P1's ARPU of RM60, If YTL can get 4 millions users say after 3 years, the annual revenue will be RM55 ARPU X 4 millions x 12 months=RM2.64bil lions. Assuming 27% nett (Digi and Maxis have around 27% to 33% nett), this will translate to around RM740 millions per annum, not bad for an investment of RM2.5 billion. Business model of P1 and YTL is different. P1 only has fixed/nomadic data + fixed voice that bring little value to consumers. How many needs fixed voice nowadays?

So, the value really lies in mobile VOIP with YTL's 018. Wimax's low latency and QoS makes it easy for voice. The question is not so much about technology with LTE or wimax. Existing carrier will go for LTE as it is compatible with 3G and greenfield operator such as YTL will go for wimax as wimax equipment is at least 4 times cheaper than LTE equipments today. Both will co-exist just like GSM and CDMA with wimax especially more popular among developing countries as it is cheaper to deploy and LTE will be more popular in devekoped world. Don't forget, both are 100% IP and OFDMA based.