Telecommunication Weekly Review: 5th – 11th January 2009

January 13, 2009 at 6:14 am Leave a comment

• Green Packet worth a second look?
Green Packet has had a forgettable 2008, as the company recorded net losses each consecutive quarter due to high start-up costs for its WiMAX roll-out and weak solutions sales to China as a result of delay by the Chinese government in issuing 3G licenses. Consequently, Green Packet’s share price tumbled 58% since beginning 2008. However, with 3G licenses finally issued in China, perhaps Green Packet may be worth a second look. However, we are still cautious about the company’s prospects given lower economic growth and intensifying competition.
The Chinese government last week, after much delay, finally issued 3G licenses to China Mobile, China Unicom and China Telecom. With that, Green Packet’s key customers China Unicom and China Telecom may finally resume orders for Green Packet’s wireless networking solutions, and thus boost the company’s profitability in the near term.
Orders from its key Chinese customers would provide some relief for Green Packet, considering that its WiMAX roll-out has not gone smoothly. It was reported last week that Green Packet has signed up only just over 2,000 subscribers for its broadband services since the launch in August
2008. This was mainly due to some teething problems in securing the appropriate sites for its base stations.
The subscriber numbers certainly are not very encouraging, and unless Green Packet gets it act together and achieve critical mass, Green Packet will face another tough year in view of lower economic growth and more importantly intensifying competition from DiGi’s impending 3G roll-out. Valuations appear undemanding as the shares currently worth RM1.17, trade near the net asset value of RM1.18 per share. Perhaps there is a lack of conviction of whether the company can achieve sustainable profits with its WiMAX operations. We prefer to wait for news of wider roll-outs and bigger subscriber gains before turning bullish on the company.
• XL may shelve private placement
TM International’s Indonesian unit Excelcomindo (XL) may shelve plans to undertake a private placement and instead undertake a rights issue to increase its free float. TMI currently owns 83.8% of XL while Etisalat holds a 15.97% stake.
XL may sell a 5-15% stake through a rights offer in 2Q09 instead of undertaking a private placement due to unfavourable market conditions. The proceeds from the rights issue would be used to repay XL’s bank borrowings and fund its capex.
It is also believed that the proposed sale of 7,000 communications towers by XL is currently at the final stage, and the sale may be concluded in 1Q09.
• MAINTAIN NEUTRAL on the sector

EPF extends buying spree. Share prices of telecom stocks experienced little volatility throughout the week. Apart from that, EPF extends its buying spree of TM and TMI. In a filing on December 31, EPF bought an additional 722,000 shares in TM, bringing its equity stake to 15.6%. On the same day, EPF also added another 2.06m TMI shares to its portfolio and now owns 14.7% in TMI.

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12 January 2009 Newz Bits Banking Weekly Review : 5th – 11th January 2009

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