YTLE (0009) - Analysts positive on YTL’s Yes 4G strategy

This article first appeared in The Edge Financial Daily, on July 11, 2016.

KUALA LUMPUR: Analysts are positive on YTL Communications Sdn Bhd’s Yes 4G LTE network and view it as a step in the right direction. However, they will wait for clearer visibility on the loss-making company’s turnaround plan before flagging a rerating in YTL Power International Bhd’s shares.

Recall that YTL Communications, a wholly-owned unit of Bursa Malaysia-listed YTL Power, has spent RM4 billion in capital expenditure over the past five years to build its 4G brand Yes. It has been incurring losses for the past five years, with an accumulated net loss of RM509.31 million as at June 30, 2015.

When contacted by The Edge Financial Daily, most analysts were encouraged that YTL Communications is moving in the right direction by venturing into the LTE arena, but noted that it’s premature to say whether it will help the company make a turnaround and recoup the RM4 billion incurred while building the network.

“The most obvious plus point for Yes 4G is its pricing. Its Double Data bucket price plan, that allows all users access to both 4G LTE and 4G broadband networks with a single service plan at RM70 per month, is one that would attract the masses, but whether this is sustainable in the long term for Yes, we would have to wait and see,” a telecommunications analyst with a local research firm said.

“If you are asking if Yes did rile up its competition, well U Mobile came out with its new Hero P98 post-paid plan the very next day after the commercial launch of the Yes 4G LTE plan on June 30. I think that speaks for itself, and I believe other telcos would be following suit as that is the seemingly apparent strategy now in the telecommunications industry, that is, staying ahead of the price war,” he added.

Telekom Malaysia Bhd’s (TM) Packet One Networks (M) Sdn Bhd (P1), which has since rebranded itself as webe, also announced its 4G LTE services on the same day of YTL Communications’ 4G LTE commercial launch, although its promotional prices for 4G LTE are targeted at select TM and P1 WiMax subscribers only.

Analysts said another advantage of Yes is the launch of Yes Altitude, which the company said is a full-fledged 4G Voice over LTE (VoLTE) smartphone for seamless mobile LTE connectivity. Yes also claims that the VoLTE voice and video calls are up to 3 times better quality than 3G networks.

“Yes has marketed the Altitude as the lowest priced VoLTE phone in Malaysia. I think what Yes is doing here is transforming itself from a niche player which had vested in the expensive but poorly received WiMax network before, to a LTE player with a mass market appeal,” the analyst said.

“At RM399, the Altitude is affordable and would appeal to price-conscious consumers; also it comes with a dual-sim functionality which gives users the convenience in managing their sim cards for the best data and best voice call rates in markets, so it’s not the WiMax story again where there was a lack of affordable mobile devices to support a premium technology” he added.

Affordability aside, another telecommunication analyst said Yes’s credibility in the seemingly crowded telecommunications industry is going to come down to the bread and butter of the industry — coverage. Yes claims to have an 85% nationwide population coverage through a combination of both its WiMax and LTE networks.

“If you look at webe, it has a domestic roaming partnership with Celcom Axiata Bhd in which its users can roam on Celcom’s 3G network if they are out of a 4G-coverage area, but for a Yes user that is out of a 4G-coverage area, it then poses a problem as Yes does not have a roaming partner,” he said.

However, Yes’s chief executive officer Wing K Lee likened Yes’s pure 4G network to a highway in which its users have the advantage in terms of speed.

“We have a pure 4G network which means everyone will have their own highway lane, and there is no need to share with other 3G users,” he said during his keynote speech at the launch of the Yes 4G LTE recently.

Meanwhile, a possible setback for Yes would be compatibility of devices, said another analyst.

“Though Yes had mentioned that its service is compatible with certain Samsung, Lenovo and Xiaomi devices, there has been no mention of Apple phones which are also widely used by Malaysians. So, that may be a setback for Yes in comparison to its competitors,” he said.

The excitement and buzz surrounding Yes has yet to reflect in the share price of YTL Power, which is 47.6% controlled by its largest shareholder YTL Corp Bhd.

YTL Power saw its net profit fall 6% to RM665.93 million for the cumulative nine months ended March 31, 2016 (9MFY16) from RM711.72 million a year ago, due to a significant drop in its power generation revenue as a result of the completion of a power purchase agreement on Sept 30, 2015. Revenue for 9MFY16 was down 11% to RM8.08 billion from RM9.08 billion in 9MFY15.

YTLE (0009) - Analysts positive on YTL’s Yes 4G strategy