=DJ INTERVIEW: Green Packet CEO: Profit May Take Time, Eyeing Foreign Partners
By Benjamin Low
Of DOW JONES NEWSWIRES
KUALA LUMPUR (Dow Jones)--Malaysian high-speed broadband services provider Green Packet Bhd (0082.KU) expects positive earnings before interest, tax, depreciation and amortization this year, underpinned by growth in its network and device businesses, but high start-up costs would delay a turnaround in net profit for at least another year, its founder said.
Group Managing Director and Chief Executive Puan Chan Cheong also told Dow Jones Newswires in a recent interview that Green Packet is close to securing new foreign equity partners for its two core businesses--operating the company's WiMAX broadband networks and the supply of devices and software to other operators.
WiMAX, which stands for worldwide interoperability for microwave access, is a high-speed wireless broadband technology.
"This year will be a turning point for the company. This is the year when we will begin to see the fruits of the investments we have been putting in," said Puan, who started the company in California in 2000 before moving it to Malaysia in 2001.
Green Packet's investors include Santa Clara-based chip giant Intel Corp (INTC), the Saudi Economic and Development Company and U.S. investment management giant The Capital Group Companies. It is the largest WiMAX operator by subscribers in the Asia Pacific region and the third-largest device supplier by volume after Motorola Inc. and Samsung Electronics Co.
Green Packet has suffered losses for the last two consecutive years as a result of the heavy upfront investments and high operating and marketing expenses incurred for its Malaysian WiMAX network, which was launched in August 2008.
Since the launch, Packet One Networks (Malaysia) Sdn Bhd, Green Packet's wholly-owned WiMAX operating unit, has captured 140,000 subscribers at the end of 2009 and continues to add about 30,000 new subscribers every quarter.
"At that rate, we will hit the 280,000 subscribers milestone -- which is the number we need to be EBITDA break-even -- by the third quarter, if not the fourth quarter," Puan said.
He said average revenue per user--a key industry gauge to determine the long-term growth rate of telelcom operators--will likely be maintained at above MYR80 (US$25) in 2010 and in the coming years.
That means Green Packet's EBITDA for this year will likely turnaround from negative EBITDA of about MYR120 million in 2009, Puan said.
"For the full year, on a group-wide basis, we expect a small positive EBITDA. The WiMAX operator segment will still be slightly in the red for the full year period, but this will be offset by the devices and solutions segment, which is expected to achieve triple digit percentage growth this year," Puan said.
Green Packet expects to spend a total of MYR1 billion in capital expenditure to fully roll out Packet One's network. It has spent MYR450 million as of the end of 2009 and expects the expenditure to reach MYR700 million by the end of this year.
Green Packet's ongoing talks with potential foreign equity partners is not motivated by a need for funds as the company has already secured sufficient vendor financing from China's ZTE Corp. (000063.SZ) to meet its capital expenditure requirements, Puan said. ZTE supplies telecom equipment to carriers.
"We have been approached by various strategic investors. We are considering which are the ones that will be the best fit as we want investors not only to bring in money, but that can help us move up to the next level," Puan said, adding talks with some parties were at an advanced stage.
He said the group is looking to secure "one or two partners" this year to accelerate the expansion of both its WiMAX network and device and software businesses, and that their entry will involve the sale of equity, either in Green Packet and unit Packet One, or both.
Green Packet secured a WiMAX licence in Singapore in 2009 and may begin in 2011 to put a firmer plan in place for its operations there. It also has its sights on a potential venture in Indonesia next, Puan said.
In the WiMAX device segment, Green Packet has been almost exclusively doing business with customers in Asia-Pacific and the Middle East, but aims to break into the U.S. and European markets starting this year.
The entry of a new partner this year would be in keeping up with the trend of having a strategic investor emerging every two years.
Saudi Economic and Development Company bought a 10% stake in Green Packet in 2006. Two years later, Intel paid MYR50 million for convertible bonds that can be swapped for the equivalent of a 6% stake in Green Packet or a 9% stake in Packet One.
===> Click Subscribe to Bursa Chat by Email
BACK TO CHAT BOX