PLDT DIGITEL Merger in Philippines

Source: PLDT

I was quite busy over the past few days at work & home so I din't talk about this news. But no surprise to me. After the AT&T deal, I am looking forward to more consolidation and Philippines started the ball rolling on.

This is certainly a very good deal for PLDT & Digi. Digi is the new entrant in the market and the third largest player or the smallest among big three (Smart, Globe, Sun). Now the market becomes pre-2005 situation where the Smart & Globe were head-on with each other. If I're to do a simple SWOT from Globe perspective,

Strengths:


* Globe is aggressively expanding the network and with the new network it can better handle the competition
* Good support from investors and possible learn from Optus (part of SingTel group in similar situation in Australia) to break the dominance of PLDT
* Potential NG-NBN which may create more opportunities


Weakness:


* Old networks, and the expansion taking few more years, Coverage still a problem in remote areas & country side.
* New technologies require huge capex and difficult to head-on with rival with deeper pockets
* PLDT has end to end value chain (Broadband, Wireless, Fixed, Satellite & Media firms) and owns lots of content. Globe WiMAX - LTE strategy is still not clear and lacks content.


Opportunities:


* Duopoly is better and those customers who doesn't like Smart may look at Globe
* Without SUN, the price erosion may be stopped. The bucket strategy may be gone :) and margins may see improvement


Threats:


* Globe will face the PLDT in it's strongest form.  & with the scale of PLDT can manage their costs and in turn still can offer cheap prices which Globe cannot offer. Market share erosion/stagnation
* New entrant in to the market/regulatory intervention(?)

Overall for Globe, the situation is not as bleak as it looks. If Globe can change the processes and optimize its structure they have a very good opportunity to improve their situation.

I always believe that the TELCO core competency is transporting packets from one end to another end and if they can deliver efficiently and effectively they don't have to worry about OTP or whatever new entrants. Given the fact that todays business driver is 'Data', it makes perfect sense for Globe to look internally to optimize their cost structure. One easy way is to look at Bharti and their managed services model. Bottom line is either need to increase the revenue or decrease the cost. Given the situation I doubt Globe can increase the revenue (they can stabilize) but they can reduce the cost. Being part of the Singtel group, I believe they can get the details of Bharti deal with relative ease/Or they can simply start working with vendors (e.g. Ericsson, NSN, ALU, Huawei) to optimize their cost structure

In year 2009, Globe's EBIDTA margins're healthy 54% (Look here for a comparison) and if they can maintain that would keep them in the top league of performers.

SingCash increases its share capital (Singtel injects more cash)

Source: CNA

SingTel's wholly-owned subsidiary, SingCash has increased its share capital from SGD 1 to SGD 100,000 via the allotment and issue of 99,999 ordinary shares to SingTel Singapore. SingTel established the subsidiary earlier this month for mobile commerce related services, including mobile remittances and payments.

SingCash is a new creation by SingTel. The company was created just couple of weeks back and goals seems to be 'me too' kind of focus. Why I'd think this is going to be a short term buzz,

1) M-Commerce - Consumer: We all know TELCO's tried very hard to entice consumers to purchase stuff using mobile phones (?) and WAP portals. This was 3G days and what can make this happen? I wouldn't bet on bigger screen or hsdpa speeds. It's the actual stuff and mobile or telco's are just plain access media only.

2) M-Commerce - Remittances: If singcash trying to partner with existing players, there is no unique value it can create for singtel group. If they want to go head-on with them, again I'd say they need to do their home work..
Most of the foreigners/residents who remit back home falls in to two categories. PMETS or workers. If you are a PMET the chances are very high that they'd use the internet banking and send money in thousands or hundreds. Here the interface & ease of use is the key.
For workers, its a different story. Western Union so far managed a fair share in the very low end market. Another popular way is the traditional bank draft. Why people use this is mainly due to the 'ease of access' at destination. By using western union the parents/spouses/dependants back home can get the money within their village or town and most of the times on the same day.

3) M-Commerce - Payment: No comments here. We've seen how well Starhub, Singtel did with NFC mobile phones and partnership with Ezlink & Nets.
If Google & Apple were to introduce the NFC stuff in their upcoming releases there will be momentum but how singcash can benefit from that is unknown and I don't have any +ve expectations about singcash here.

Singapore electricity prices - 2000 to now

Singapore power services or SP Services announced that their charges will increase by 6.1% from April. (News Report from Channelnewsasia here)

I've tried to do a simple graph showing the historical prices of electricity tariff over last ten years here and here goes the image.

I've tried to add the inflation (From MAS) too but seems no big impact over time. My calculation of inflation adjusted is pretty raw and I've used excel and PV/FV to 'adjust'. So if any of the financial experts/gurus see better way to do please don't get furious and I am willing to learn..

Huawei Strategy

Source: Caing.com

I've posted briefly on Huawei on their open letter to US & VHA decision. According to the post, a Huawei executive mentioned that they need to change their strategy and I fully agree with them.

"A product- or technology-centered approach to corporate strategy is correct in an era of insufficient supply,"  "But in an era of excess supply, (strategy) needs to have customer demand at its center."


Also, Huawei successfully transformed the mobile & telco industry. There was a day, when the vendors demand hefty prices for the equipment, software price, license charges & maintenance charges. I remember a classic example where we started negotiation with an European vendor for UAT Charges. After Huawei entered in to the market, the situation became more and more competitive and they effectively commoditized the hardware market.

Some key points from the report.

* Huawei plans to work with major customers to jointly develop "customer innovation centers," assigning staff members with expertise in various product lines and technical factors to work directly on-site with customers and so far they've setup in Vodafone, Telefonica & China Mobile.

* Increased focus on terminal. Revenues of the division grew 24 percent from 2009 to US$ 4.5 billion last year, and now comprise 16 percent of the company revenues.

* Cloud computing is another arena and they want to be in the top 3 players. And at a press conference, Huawei CEO Ren Zhengfei said his company's cloud platforms would "catch up with and surpass Cisco's in not too long a time."

Though I believe in Huawei abilities, my concern will be on their execution & their image.

Their biggest problem is execution and typically in communication & process. Most of the times either the communication breaks or mis-interpreted or totally missing. While the process seems to be very fluid and different project managers seems to follow different structures. This was evident in the mail from Telekom Malaysia CEO letter to Huawei Chairman in last year.

"Image" is another challenge for Huawei. They have to handle it and it's pretty sensitive...

NTP 11 - New Telecom Policy of India

Source: Hindu

The early indications show, that the government is moving in the right direction. They are recommending, Preferential status to "Made In India" goods. Noting that we are increasing depending on services sector its a good move to improve the manufacturing sector. I wish to have an equivalent of Huawei/ZTE or Samsung/LG in India. We are spending billions of dollars every year on telecom equipment but failed to develop a complete eco system. Given the scale of market it puzzles me and wish to get some info on it.

AT&T to buy T-Mobile. Signs of consolidation in the telco markets??

Source: LA Times

If approved by regulators, this would create the largest telco in US with 130 million subscribers (Verizon - ~94 mil subscribers) and the market will see more such attempts.

IMO, if there is any country with real requirement (from $ & c perspective) that would be India. Right now there are more than 15 operators with licenses and at least 4 to 5 major players in any of the region. Bharti, Reliance, Vodafone, Idea, Aircel & BSNL controls majority share. Regional players like Spice, MTNL, BPL gained respectable share and continue to create competition in their respective markets. New entrants like Etisalat, Videocon, Unitech, S Tel have not started their operations but showed great ambitions. Also TRAI didn't rule out the possibility of opening up for more MVNO's.

I don't think any other country has such a huge number of players in the market and there is a great need of consolidation. Big guys like Bharti, Voda, Rcom may target regional players and small players. But a perfect surprise would be if they manage to merge. They can streamline their operations, reduce their capital expenditure and improve profitability which is good for them as well as the overall market.

Singapore, I don't see any such possibility with the three players in a perfect Oligopoly market. I remember IDA tried to introduce a fourth player but finally distributed the spectrum to the three players.

Malaysia, Thailand, Indonesia, & Philippines markets are similar in nature with high barriers and lots of uncertainties.

So overall in the ASEAN region I don't hope for M&A but in the South Asia I do hope that M&A activities rise and create a balanced market.

HUTCHISON PORT HOLDINGS TRUST Opens at 0.97

HUTCHISON PORT HOLDINGS TRUST N (NS8U.SI ) opens at 0.97 on it's trading opening. The IPO price is 1.01 makes its about 4% discount :)
Just within the five minutes the total trading volume is > 100 million shares and HPH became the top volume stock in the market. The low is 0.960 so far with the high being 0.980 so far.

I think this continues the trend of stocks opening at less than the IPO price in SGX.

As I am writing this post the volume hit150 million.....May be it'll hit more than 500 million before end of the day..

Update: After three hours, the total volume is 616 million & value 591 millions and close @ 0.950


I think this is a record for a stock to hit that volume/value. By the way I won't believe that the price dropped due to the happenings in Japan. This is a perfect way for the promoters to dispose their assets and get hard cash.. 

some photos from India - Ongole, Motumala

In my recent trip to India, we managed to find some time to visit one of the villages. Some photos from the trip.

Government School in the village

Though the cities and urban areas changed a lot, the rural side still keeps the traditions, cultural practice and relations. The photo here is the school children celebrating the National Day and you can see the beautiful kids 'praying' for the nation. These schools used to be the backbone of nations education system, but recently with the privatization most of the qualified teachers opted for cities and higher pays. Still we can find some of the best teachers in rural areas, but the numbers are dwindling so does the quality of education.

-Famous kotha patnam beach.

This is a beautiful beach near Kotha Patnam town, and when we're kids the place was quite peaceful. Now pretty commercialized with weekend crowds and business men occupying most of the place. The terrible thing I noticed is most of the beach front areas are occupied by political leaders (understood the market rate for acre is close to 300 grand).

Kotha patnam beach - fishing boats

Another view of the beach with fishing boats in the back. Traditionally the besta community stays near the sea and they are exceptionally good in understanding the signs and symptoms of sea. This place was hit by Indian Ocean Tsunami in 2004, and thanks to the wisdom of old folks who understand that there is a problem with the 'sound & color of ocean' and moved to higher grounds. Significant damage was done to the boats, fishing nets and assets but now its back to normal.

                                                                                                                                                                                                                                    

Vempali Chettu

This plant used to occupy almost all the empty lands when I was a kid and the farmers used to plow the land with this plant. This contains lots and lots of minerals and offers the necessary nutrients for the paddy. This is the real 'organic booster'

Vempali Chettu. (Sci: Tephrosia Purpurea), in Hindi it's called Saraphonkh

Cost/Reach gap. Good post from Cisco Blog

Here is an excellent post from cisco blog, and it talks about the "Cost/Reach" gap. Today most of the organizations be it public or private or finding themselves increased responsibilities/requirements while their ability to pay is reduced. This was not new to Singapore as our labor head put it in our slang, Cheaper, Better, Faster. While this is targeted at the employers, and true to certain extent what I'd love to see is the governments & large organizations adapting the same and taking the lead for rest of the small players.

I've mentioned that in Singapore we are lagging in adopting new technologies due to various reasons, and this is where the public sector can play a very good role. They can show the rest, that by adapting new technologies they can cut cost and pass on their savings to the public.

UK ISP's & TELCO's release a CoP for industry.

Just realized that the service providers released a Code of Practice (CoP) on traffic management transparency of broadband services. The full paper can be downloaded from here.

I've mentioned about net neutrality in Singapore & Operator responses  here. This is after IDA request them for information/submissions. The UK CoP is voluntary and supported by service providers; BSkyB, BT, O2, TalkTalk, Three, Virgin Media and Vodafone – these service providers account for 90% of all fixed-line broadband customers and 60% of all mobile customers in the UK. The group's first priority is to publish a common Key Factor Indicator table (KFI), summarizing the traffic management practices by June 2011.

The mobile operators T-Mobile & Orange didn't participate and I believe they'll share their policy on traffic management soon.

The principles of CoP are below.


*Firstly an  explicit  commitment  to  provide  more  information  to  consumers  about  what practices are used in networks to (a) help maximise capacity for everyone’s benefit and (b) to support adherence by customers to terms and conditions


* Secondly, an agreed set of good practice principles that will inform how ISPs communicate 
that  information  to  consumers.    Signatories  agree  that  the  information  they  provide  about 
traffic management to their current and prospective customers will be: 
Understandable, Appropriate , Accessible , Current , Comparable , Verifiable 

* Thirdly,  to  deliver  on  the  comparability  principle,  signatories  commit  to  publishing  a 
consistent  Key  Facts  Indicator  (KFI)  table,  summarising  the  traffic  management  practices 
they use for each broadband product they currently market. 

CoP on implementing Traffic management.

* To manage the overall network  - Prioritize/deprioritize time-critical applications (e.g. video streaming)
* In relation to Customer's contract - Data Caps, or As per T&C's of the contract

The actual means of implementation is not shared but I am sure it's by using DPI (Deep Packet Inspection) tools (e.g. Cisco-SCE8000, Allot, Sandvine, Arbor, Procera, & lot more Mobile vendors). However DPI tools does have their own limitation and tend to generate lot of false positives. For example a simple SSL tunnel (If you use HTTPS instead of HTTP) cannot be inspected, so if P2P uses tunneling or VPN or TOR kind of networks, the DPI's are not very useful.