Business

Friday August 28, 2009

Telcos major contracts expenditure to exceed RM5.6bil

By B.K. SIDHU


Intense competition ahead with players going for big jobs

PETALING JAYA: The domestic telecommunications vendor market is set for intense competition with players expected to slug it out to win major contracts over the next one year in a market where capital expenditure (capex) spending is forecast to exceed RM5.6bil.

“It is the deployment phase next year and all major players in the vendor business will be looking for business,” said Ericsson Malaysia president and country manager Krishna Kumar. “Competition will get intense and we hope to get a fair share of the contracts.’’

Next year is a crucial year for many telecom players, especially WiMAX companies, as they have to meet their deadline for the roll-out of services to consumers or risk being penalised because the Government is keen to see the broadband penetration rate reach 50% by end-2010 from 26% now.

That means a lot more contracts will be dished out so that the roll-out can take place next year but the real focus will be on who gets the big contracts from the two high speed broadband (HSBB) projects.

Ericsson Malaysia president and country manager Krishna Kumar ... 'It is the deployment phase next year'.

“The HSBB is a high-profile job and every vendor is targeting to get a slice of it. There were not many contracts earlier this year and when something like HSBB comes, it is sure to excite the market place,’’ a source said.

In the running are all the foreign and local vendors.

Foreign vendors normally provide equipment while civil construction works mainly go to local contractors.

Kumar reckons 75% of the HSBB fibre-to-the-home (FTTH) jobs will be in civil construction and the rest, equipment supply.

For the wireless sector, it is expected to be a 50:50 for equipment and site acquisition contracts.

The capex spending by operators is normally broken into two parcels – equipment purchases and service roll-out.

Equipment purchases involve areas like access, back-haul, international gateway and content, while service roll-out entails cable laying works and site acquisitions.

“We reckon the real fight will be at the foreign vendors’ side. There will be intense lobbying even though now there are now more transparent procurement procedures in some of the companies,’’ said a source.

The global players vying for equipment contracts include Ericsson, Huawei Technologies Co, Alcatel-Lucent, Nokia Siemens, Motorola, Cisco and Nortel.

“When there are opportunities, there will be competition. Delivering the right product from the latest technology to meet the population needs is every vendor’s objective. In this arena, the competition is intense among the traditional equipment vendors; more so with the appearance of newcomers,’’ said Alcatel-Lucent Malaysia managing director Patrick Veron.

When selecting an equipment vendor, price is a major consideration but equally important are compatibility of systems, customisation and integration.

Maintenance is also a major area of investment as an increasing number of Malaysian telcos and celcos outsource the maintenance of their networks to foreign vendors.

Globally, the equipment industry has been hurt by falling demand and intensifying price competition.

A London-based analyst at Credit Suisse Group AG in a report said Huawei, aided by its lower cost base, now ranked third in the industry with a global market share of 14%, behind Ericsson 35% and Nokia Siemens 20%.

“Today, Huawei is one of the top three telecoms suppliers in Malaysia, cooperating with major telecom operators such as Maxis Communications Bhd, DiGi.com Bhd, Telekom Malaysia Bhd (TM).

“Last year, we won most of the new wireless contracts awarded across Asia Pacific, in key markets such as India, Indonesia, Bangladesh, Vietnam, Malaysia and Singapore,’’ said Huawei vice-director (PR) Asia Pacific marketing Thong Poh Wah.

In Malaysia, Ericsson is market leader in some areas and last year grabbed RM1bil worth of business.

Ericsson has already been named a contractor by newcomer High Speed Broadband Technology Sdn Bhd via Jalur Lebar Nasional Sdn Bhd (Jalenas) for its HSBB project roll-out in Kuantan but no value has been announced for the contract.

But bigger contracts are still up for grabs as TM and Jalenas are expected to invest about RM1bil each over the next one year, and that’s just for the HSBB segment alone.

Beyond that, there are other contracts as the four WiMAX players – Asiaspace Sdn Bhd, Packet One Networks (M) Sdn Bhd, RedTone International Bhd and YTL-e Solutions Bhd – will need to speed up their roll-out and the capex they would invest is about RM150mil each.

The cellular players will also continue to invest every year for coverage and capacity and they need to remain in the broadband game, so investments will be needed to upgrade their broadband offerings.

Their one-year capex is normally RM1bil each.


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