Quick update
1) LTE devices on Maxis' network continued to increase at a good pace, with 2.037mil LTE devices in 2Q15, up 26% from 1Q15.
Figure 1: Compiled Maxis data from 1Q14-2Q15
Source: Maxis quarterly results presentations. 1&2 are my own calculations/assumptions.
1 Taking the blended (post- & pre-paid) smartphone penetration rate (%) × the number of mobile subscribers. I’m assuming ‘smartphone penetration rate’ means the percent of Maxis mobile subscribers using smartphones.
2 LTE devices could be other than smartphones devices, e.g. tablets. But I imagine the bulk of LTE devices should be dominated by smartphones.
2) Something I missed out in my previous post was that the teleradiology service in Indonesia had started in Pertamedika Sentul City Hospital (http://www.pertamedikasentul.co.id/en). Last month, Indonesian daily The Jakarta Post highlighted how the hospital's teleradiology technology helped a patient escape amputation (link to news at bottom).
3) Redtone shares have been on a downtrend since the takeover offer at 80sen closed on 22 May 2015. Redtone's 4Q15 results, which should be announced at the end of the month, could catalyze the stock (assuming results beats expectations).
References:
"Maxis Berhad 2nd Quarter 2015 results presentation," Maxis Berhad, July 15, 2015, https://www.maxis.com.my/content/dam/maxis/en/about-maxis/investors/financial-results/pdf/2nd-quarter-2015/2Q15_IR_Deck.pdf
"TelkomSigma Gandeng Perusahaan Malaysia Garap Teleradiology," Republika Online, May 16, 2015, http://www.republika.co.id/berita/ekonomi/korporasi/15/05/16/nofhih-telkomsigma-gandeng-perusahaan-malaysia-garap-teleradiology
"REDtone dan Telkomsigma Implementasikan Solusi Teleradiologi," Marketeers, May 18, 2015,http://marketeers.com/article/redtone-dan-telkomsigma-implementasikan-solusi-teleradiologi.html
"Putting it briefly: Fadli recuperates after heavy serious crash," The Jakarta Post, June 20, 2015, http://m.thejakartapost.com/news/2015/06/20/putting-it-briefly-fadli-recuperates-after-heavy-serious-crash.html
2 LTE devices could be other than smartphones devices, e.g. tablets. But I imagine the bulk of LTE devices should be dominated by smartphones.
2) Something I missed out in my previous post was that the teleradiology service in Indonesia had started in Pertamedika Sentul City Hospital (http://www.pertamedikasentul.co.id/en). Last month, Indonesian daily The Jakarta Post highlighted how the hospital's teleradiology technology helped a patient escape amputation (link to news at bottom).
3) Redtone shares have been on a downtrend since the takeover offer at 80sen closed on 22 May 2015. Redtone's 4Q15 results, which should be announced at the end of the month, could catalyze the stock (assuming results beats expectations).
References:
"Maxis Berhad 2nd Quarter 2015 results presentation," Maxis Berhad, July 15, 2015, https://www.maxis.com.my/content/dam/maxis/en/about-maxis/investors/financial-results/pdf/2nd-quarter-2015/2Q15_IR_Deck.pdf
"TelkomSigma Gandeng Perusahaan Malaysia Garap Teleradiology," Republika Online, May 16, 2015, http://www.republika.co.id/berita/ekonomi/korporasi/15/05/16/nofhih-telkomsigma-gandeng-perusahaan-malaysia-garap-teleradiology
"REDtone dan Telkomsigma Implementasikan Solusi Teleradiologi," Marketeers, May 18, 2015,http://marketeers.com/article/redtone-dan-telkomsigma-implementasikan-solusi-teleradiologi.html
"Putting it briefly: Fadli recuperates after heavy serious crash," The Jakarta Post, June 20, 2015, http://m.thejakartapost.com/news/2015/06/20/putting-it-briefly-fadli-recuperates-after-heavy-serious-crash.html
REDTONE INTERNATIONAL BHD
Part 2: The healthcare angle – teleradiology
Redtone’s venture into teleradiology is the other thing that caught my eye while browsing through the Independent Advice Circular (dated 27 April 2014) in relation to the conditional takeover offer by Berjaya Corp.
Based on my hypothetical assumptions/scenarios, I wouldn’t be surprised if Redtone’s teleradiology segment could generate earnings of more than RM20mil a year in the near to medium term (*see update note at bottom).
Extracts from circular below.
The potential earnings
Since there are no details on the fees and contract value of Redtone’s teleradiology venture, we can only extrapolate from what’s been mentioned in news reports, analyst reports, etc. to paint a clearer picture of the potential earnings.
Things to look at:
1) Potential market size
2) Contract value per hospital for installing teleradiology system/equipment
3) Net profit margins for teleradiology system/equipment
4) Annual maintenance fee
5) Average fee per scan/report
1) Potential market size
Redtone is targeting both public and private hospitals in Malaysia, and also those in the region.
In Malaysia, there were 214 private and 132 public hospitals as of end-2013, according to Ministry of Health Malaysia. So that’s a total of 358 hospitals for Redtone to target.
In the region, Indonesia and Philippines both have around 1,900 hospitals each.
The potential for teleradiology could be huge especially in Indonesia and Philippines as a high percentage of both countries’ population live in remote areas. So for Redtone to target these two countries would make a lot of sense.
According to data by The World Bank, it was estimated that the percentage of people living in urban areas in Indonesia and Philippines in 2013 was 52% and 45% respectively. As a comparison, the figure for Malaysia was 73%.
This is not surprising with Indonesia having some 17,000 islands (but only around 1,000 are permanently inhabited) and Philippines having around 7,000 islands of which about 2,000 are inhabited.
Redtone had already made a move to get into the Indonesian market. Last month, it inked an MoU with Indonesia’s largest telco company, Telekomunikasi Indonesia, to explore business opportunities including exploring the possibility of jointly developing a teleradiology exchange in Indonesia. Redtone said the teleradiology exchange is expected to help Indonesian hospitals strengthen radiology service delivery and create cost savings in health care delivery.
While the regional potential is huge, I believe Redtone, for now, would prioritize on securing hospitals in Malaysia first.
2) Contract value per hospital
According to a report by The Star early this month, Redtone expects revenue contribution from its health care services to be about 3% to 5% in 2015 and 10% in 2016 vs. a few million ringgit in 2014.
It wasn’t stated if this was for the financial year or calendar year, but I’m assuming it meant FY.
I reckon this contribution amount is for the initial installation of teleradiology equipment/systems.
“There are hundreds of government hospitals in the country that may not be fully equipped with CT Scans or even MRI machines, so that is what Redtone is after, besides private hospitals in the country.”
Assuming FY15 revenue remains flat y-o-y at RM142mil, that 3%-5% contribution from health care services would translate to around RM4mil-7mil.
Currently, Redtone’s teleradiology clients “include several hospitals in the country including the KPJ group of hospitals, some in Vietnam and Philippines.”
Assuming Redtone has 7 hospitals as clients and those hospitals contribute that RM4mil-7mil to revenue in FY15, it would mean, on average, the contract value of each hospital could be between RM570k to RM1mil.
I think the contract value is dependent on the type and quantity of radiology equipment installed. Radiology/imaging equipment are expensive, an MRI scanner can cost about a few million ringgit or more (see:http://offers.blockimaging.com/imaging-equipment-sales-prices).
3) Net profit margins
I’m guessing net margins should be high between 20%-40%. I’m thinking along the lines of the profit margins of Vitrox, MMS Ventures, Willowglen, MyEG, and some other tech companies.
Using those companies as a comparison may not be quite right as they are manufacturers of their own machinery/systems, whereas Redtone is said to be partnering with Hinacom (http://www.hinacom.com/EN/). However, the teleradiology platform will be built on Redtone’s telecommunication infrastructure, and thus I feel this serves as a value add.
4) Maintenance income
I believe Redtone should receive annual maintenance income for its teleradiology systems, in addition to the service fees it charges for each scan (CT, MRI, etc.). After looking at the maintenance fee income some other tech companies impose, I feel a decent range would be 10%-20% of the contract value.
5) Average fee per scan
A quick Google search indicate that the charges for CT and MRI scans can cost from hundreds of ringgit to more than a thousand ringgit (per body region) in Malaysia, with the latter costing much more.
It's hard to guess how much fees Redtone could receive for each scan/report. But because the cost of the scans are high, even if Redtone receives a small percentage of the cost as fees, it would add up to quite a meaningful number (provided it secures a sizeable number of hospitals).
Putting the pieces together
If I assume the following below, how much could teleradiology potentially contribute to Redtone's earnings in the near to medium term?
1) Secures 30% of the 358 private and public hospitals in Malaysia as clients, or about 107 hospitals
2) Average contract value: RM700k per hospital
3) Net margins: 30%
4) Maintenance income: 15% of contract value
5) Fee from scans: Average RM1,000 per scan, net 5% fee, each hospital performs an average of 5 scans per day.
A) Earnings from installing teleradiology equipment (one-off)
= 107 hospitals × RM700k per hospital × 30% net margin
= RM22.5mil
If this is achieved over the next 2 years, it would mean average earnings of around RM11mil per year over the next 2 years.
B) Earnings from maintenance (recurring)
= 107 hospitals × RM700k per hospital × 15%
= RM11.2mil
C) Earnings from scans (recurring)
= RM1,000 per scan × 5% net fee × 5 scans per day × 107 hospitals × 365 days
= RM9.8mil
Based on the hypothetical assumptions/scenarios above, Redtone could potentially be looking at earnings of more than RM20mil a year from its teleradiology segment alone.
This, coupled with the LTE spectrum sharing fees (see:Redtone, part 1), could potentially boost Redtone's earnings significantly in the coming years.
“Other catalysts that are expected to fuel REDtone’s growth include teleradiology services which started at the end of FY’14. This involves offering radiographic images interpretation services to both local and regional hospitals. We believe there’s tremendous growth potential in this area as currently there’s an acute shortage of radiologists in Malaysia and regionally.”
– Redtone Annual Report 2014
*********
Update, 31 May 2015:
I realized the teleradiology segment is under Redtone's 56%-owned subsidiary, REDtone MEX Sdn Bhd. So the earnings contribution from teleradiology to Redtone's total earnings is not 100%.
Also discovered in Redtone's 2014 annual report that REDtone MEX had been granted tax exempt status for a period of 10 years.
The MoU with Telekomunikasi Indonesia was through Redtone's 70%-owned REDtone Data Centre Sdn Bhd.
*********
References (not exhaustive):
“Bigger plans in store for REDtone,” The Star, May 2, 2015, http://www.thestar.com.my/Business/Business-News/2015/05/02/Bigger-plans-in-store-for-REDtone/?style=biz.
“RHB remains ‘neutral’ on Malaysian telcos,” KINIBIZ, July 9, 2014, http://m.kinibiz.com/story/corporate/94779/rhb-remains-%E2%80%98neutral%E2%80%99-on-malaysian-telcos.html
“REDtone to declare dividend later this year,” theantdaily, August 30, 2014, http://www.theantdaily.com/Main/REDtone-to-declare-dividend-later-this-year#sthash.m5nwHAOG.dpuf
“Health Facts Book,” Ministry of Health Malaysia, http://www.moh.gov.my/english.php/pages/view/411
“Cost of Magnetic Resonance Imaging (MRI) and Computed Tomography (CT) scan in UKMM,” BioMed Central,http://www.biomedcentral.com/1472-6963/12/S1/P11. MRI
“Philippine Startup Takes On Global Radiologist Shortage,” Techonomy, November 5, 2014,http://techonomy.com/2014/11/philippine-startup-takes-global-radiologist-shortage/
“Teleradiology provider aims to widen reach in rural areas,” The Philippine Star, March 16, 2015,http://www.philstar.com/business-usual/2015/03/16/1434074/teleradiology-provider-aims-widen-reach-rural-areas
“Urban population (% of total),” The World Bank, http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS
Part 2: The healthcare angle – teleradiology
Redtone’s venture into teleradiology is the other thing that caught my eye while browsing through the Independent Advice Circular (dated 27 April 2014) in relation to the conditional takeover offer by Berjaya Corp.
Based on my hypothetical assumptions/scenarios, I wouldn’t be surprised if Redtone’s teleradiology segment could generate earnings of more than RM20mil a year in the near to medium term (*see update note at bottom).
Extracts from circular below.
The potential earnings
Since there are no details on the fees and contract value of Redtone’s teleradiology venture, we can only extrapolate from what’s been mentioned in news reports, analyst reports, etc. to paint a clearer picture of the potential earnings.
Things to look at:
1) Potential market size
2) Contract value per hospital for installing teleradiology system/equipment
3) Net profit margins for teleradiology system/equipment
4) Annual maintenance fee
5) Average fee per scan/report
1) Potential market size
Redtone is targeting both public and private hospitals in Malaysia, and also those in the region.
In Malaysia, there were 214 private and 132 public hospitals as of end-2013, according to Ministry of Health Malaysia. So that’s a total of 358 hospitals for Redtone to target.
In the region, Indonesia and Philippines both have around 1,900 hospitals each.
The potential for teleradiology could be huge especially in Indonesia and Philippines as a high percentage of both countries’ population live in remote areas. So for Redtone to target these two countries would make a lot of sense.
According to data by The World Bank, it was estimated that the percentage of people living in urban areas in Indonesia and Philippines in 2013 was 52% and 45% respectively. As a comparison, the figure for Malaysia was 73%.
This is not surprising with Indonesia having some 17,000 islands (but only around 1,000 are permanently inhabited) and Philippines having around 7,000 islands of which about 2,000 are inhabited.
Redtone had already made a move to get into the Indonesian market. Last month, it inked an MoU with Indonesia’s largest telco company, Telekomunikasi Indonesia, to explore business opportunities including exploring the possibility of jointly developing a teleradiology exchange in Indonesia. Redtone said the teleradiology exchange is expected to help Indonesian hospitals strengthen radiology service delivery and create cost savings in health care delivery.
While the regional potential is huge, I believe Redtone, for now, would prioritize on securing hospitals in Malaysia first.
2) Contract value per hospital
According to a report by The Star early this month, Redtone expects revenue contribution from its health care services to be about 3% to 5% in 2015 and 10% in 2016 vs. a few million ringgit in 2014.
It wasn’t stated if this was for the financial year or calendar year, but I’m assuming it meant FY.
I reckon this contribution amount is for the initial installation of teleradiology equipment/systems.
“There are hundreds of government hospitals in the country that may not be fully equipped with CT Scans or even MRI machines, so that is what Redtone is after, besides private hospitals in the country.”
Assuming FY15 revenue remains flat y-o-y at RM142mil, that 3%-5% contribution from health care services would translate to around RM4mil-7mil.
Currently, Redtone’s teleradiology clients “include several hospitals in the country including the KPJ group of hospitals, some in Vietnam and Philippines.”
Assuming Redtone has 7 hospitals as clients and those hospitals contribute that RM4mil-7mil to revenue in FY15, it would mean, on average, the contract value of each hospital could be between RM570k to RM1mil.
I think the contract value is dependent on the type and quantity of radiology equipment installed. Radiology/imaging equipment are expensive, an MRI scanner can cost about a few million ringgit or more (see:http://offers.blockimaging.com/imaging-equipment-sales-prices).
3) Net profit margins
I’m guessing net margins should be high between 20%-40%. I’m thinking along the lines of the profit margins of Vitrox, MMS Ventures, Willowglen, MyEG, and some other tech companies.
Using those companies as a comparison may not be quite right as they are manufacturers of their own machinery/systems, whereas Redtone is said to be partnering with Hinacom (http://www.hinacom.com/EN/). However, the teleradiology platform will be built on Redtone’s telecommunication infrastructure, and thus I feel this serves as a value add.
4) Maintenance income
I believe Redtone should receive annual maintenance income for its teleradiology systems, in addition to the service fees it charges for each scan (CT, MRI, etc.). After looking at the maintenance fee income some other tech companies impose, I feel a decent range would be 10%-20% of the contract value.
5) Average fee per scan
A quick Google search indicate that the charges for CT and MRI scans can cost from hundreds of ringgit to more than a thousand ringgit (per body region) in Malaysia, with the latter costing much more.
It's hard to guess how much fees Redtone could receive for each scan/report. But because the cost of the scans are high, even if Redtone receives a small percentage of the cost as fees, it would add up to quite a meaningful number (provided it secures a sizeable number of hospitals).
Putting the pieces together
If I assume the following below, how much could teleradiology potentially contribute to Redtone's earnings in the near to medium term?
1) Secures 30% of the 358 private and public hospitals in Malaysia as clients, or about 107 hospitals
2) Average contract value: RM700k per hospital
3) Net margins: 30%
4) Maintenance income: 15% of contract value
5) Fee from scans: Average RM1,000 per scan, net 5% fee, each hospital performs an average of 5 scans per day.
A) Earnings from installing teleradiology equipment (one-off)
= 107 hospitals × RM700k per hospital × 30% net margin
= RM22.5mil
If this is achieved over the next 2 years, it would mean average earnings of around RM11mil per year over the next 2 years.
= 107 hospitals × RM700k per hospital × 15%
= RM11.2mil
= RM1,000 per scan × 5% net fee × 5 scans per day × 107 hospitals × 365 days
= RM9.8mil
This, coupled with the LTE spectrum sharing fees (see:Redtone, part 1), could potentially boost Redtone's earnings significantly in the coming years.
“Other catalysts that are expected to fuel REDtone’s growth include teleradiology services which started at the end of FY’14. This involves offering radiographic images interpretation services to both local and regional hospitals. We believe there’s tremendous growth potential in this area as currently there’s an acute shortage of radiologists in Malaysia and regionally.”
– Redtone Annual Report 2014
*********
Update, 31 May 2015:
I realized the teleradiology segment is under Redtone's 56%-owned subsidiary, REDtone MEX Sdn Bhd. So the earnings contribution from teleradiology to Redtone's total earnings is not 100%.
Also discovered in Redtone's 2014 annual report that REDtone MEX had been granted tax exempt status for a period of 10 years.
The MoU with Telekomunikasi Indonesia was through Redtone's 70%-owned REDtone Data Centre Sdn Bhd.
*********
References (not exhaustive):
“Bigger plans in store for REDtone,” The Star, May 2, 2015, http://www.thestar.com.my/Business/Business-News/2015/05/02/Bigger-plans-in-store-for-REDtone/?style=biz.
“RHB remains ‘neutral’ on Malaysian telcos,” KINIBIZ, July 9, 2014, http://m.kinibiz.com/story/corporate/94779/rhb-remains-%E2%80%98neutral%E2%80%99-on-malaysian-telcos.html
“REDtone to declare dividend later this year,” theantdaily, August 30, 2014, http://www.theantdaily.com/Main/REDtone-to-declare-dividend-later-this-year#sthash.m5nwHAOG.dpuf
“Health Facts Book,” Ministry of Health Malaysia, http://www.moh.gov.my/english.php/pages/view/411
“Cost of Magnetic Resonance Imaging (MRI) and Computed Tomography (CT) scan in UKMM,” BioMed Central,http://www.biomedcentral.com/1472-6963/12/S1/P11. MRI
“Philippine Startup Takes On Global Radiologist Shortage,” Techonomy, November 5, 2014,http://techonomy.com/2014/11/philippine-startup-takes-global-radiologist-shortage/
“Teleradiology provider aims to widen reach in rural areas,” The Philippine Star, March 16, 2015,http://www.philstar.com/business-usual/2015/03/16/1434074/teleradiology-provider-aims-widen-reach-rural-areas
“Urban population (% of total),” The World Bank, http://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS
Redtone, part 1
REDTONE INTERNATIONAL BHD
Part 1: To ride on 4G smartphone growth?
Browsing through Redtone’s Independent Advice Circular (dated 27 April 2014) in relation to the conditional takeover offer by Berjaya Corp, a few things mentioned made me look further into the potential of Redtone.
Firstly, its 4G LTE spectrum.
Figure 1: Extract from Redtone Independent Advice Circular (27 April 2015)
Source: Extracted from Redtone’s Independent Advice Circular (dated 27 April 2015)
How much could this “significant source of recurring income” potentially be, I wonder?
What I understand after reading reports on Redtone is that Redtone is to receive annual recurring fees based on the number of Maxis subscriber devices utilizing LTE technology, and this fees would go straight to Redtone’s bottomline. LTE devices include 4G/LTE smartphones, which are getting more and more widespread as newer smartphones get launched and with mobile users replacing their older non-4G phones with newer 4G enabled smartphones.
Based on information provided in Maxis 1Q 2015 results presentation (found here:https://www.maxis.com.my/en/about-maxis/investors/overview.html), it does look like LTE devices on Maxis’ network are increasing rapidly (see Figure 2).
Figure 2: Compiled Maxis data from 1Q14-1Q15
Source: Maxis quarterly results presentations. 1&2 are my own calculations/assumptions.
1 Taking the blended (post- & pre-paid) smartphone penetration rate (%) × the number of mobile subscribers. I’m assuming ‘smartphone penetration rate’ means the percent of Maxis mobile subscribers using smartphones.
2 LTE devices could be other than smartphones devices, e.g. tablets. But I imagine the bulk of LTE devices should be dominated by smartphones.
LTE devices on Maxis network has more than doubled from 667k in 1Q14 to 1.613mil in 1Q15, and has been increasing at double-digit rates q-o-q since 1Q14.
Analysis on 1Q15 figures:
Potential fees from spectrum sharing (hypothetical)
Because details of the fee structure are not made public, I'm not able to gauge the potential fees Redtone could receive from Maxis.
So, for my own entertainment, I assumed some hypothetical fees and scenarios, to imagine what Redtone could potentially get. I created a table (Figure 3) showing how much Redtone could receive if it gets paid a certain fee each month for the number of LTE devices on Maxis' network.
Figure 3: Annual fees Redtone could potentially receive based on hypothetical fees and LTE devices
As a hypothetical and illustrative example, let's assume:
Based on these assumptions, Redtone would receive fees of RM30mil straight to its bottomline (but of course this is assuming the numbers remain static, e.g. number of LTE devices remain the same from the start to the end of a given year). In this hypothetical scenario, the RM30mil may sound like a hefty sum, but it is less than 2% of Maxis' 2014 net profit of RM1.7bn. On the other hand, it is a relatively signifant sum to Redtone's FY14 (ended May 2014) net profit of RM22.2mil.
Some have said the 4G LTE spectrum could be worth a few hundred million ringgit, so it wouldn't surprise me if Redtone receives spectrum sharing fees in the tens of millions of ringgit in the future.
*********
“Beginning from FY15, REDtone’s network sharing and alliance agreement (NSA) with Maxis is also expected to contribute to group earnings. This will be over a 10-year period as per the agreement.”
– Redtone Annual Report 2014
“Riding on our 10-year infrastructure and spectrum sharing deal with Maxis signed in 2012, we hope to launch mobile broadband services soon. We are also receiving income as a result of the Network Sharing and Alliance Agreement with Maxis based on its number of 4G subscribers.”
– Redtone Annual Report 2013
Part 1: To ride on 4G smartphone growth?
Browsing through Redtone’s Independent Advice Circular (dated 27 April 2014) in relation to the conditional takeover offer by Berjaya Corp, a few things mentioned made me look further into the potential of Redtone.
Firstly, its 4G LTE spectrum.
Figure 1: Extract from Redtone Independent Advice Circular (27 April 2015)
Source: Extracted from Redtone’s Independent Advice Circular (dated 27 April 2015)
How much could this “significant source of recurring income” potentially be, I wonder?
What I understand after reading reports on Redtone is that Redtone is to receive annual recurring fees based on the number of Maxis subscriber devices utilizing LTE technology, and this fees would go straight to Redtone’s bottomline. LTE devices include 4G/LTE smartphones, which are getting more and more widespread as newer smartphones get launched and with mobile users replacing their older non-4G phones with newer 4G enabled smartphones.
Based on information provided in Maxis 1Q 2015 results presentation (found here:https://www.maxis.com.my/en/about-maxis/investors/overview.html), it does look like LTE devices on Maxis’ network are increasing rapidly (see Figure 2).
Figure 2: Compiled Maxis data from 1Q14-1Q15
Source: Maxis quarterly results presentations. 1&2 are my own calculations/assumptions.
1 Taking the blended (post- & pre-paid) smartphone penetration rate (%) × the number of mobile subscribers. I’m assuming ‘smartphone penetration rate’ means the percent of Maxis mobile subscribers using smartphones.
2 LTE devices could be other than smartphones devices, e.g. tablets. But I imagine the bulk of LTE devices should be dominated by smartphones.
LTE devices on Maxis network has more than doubled from 667k in 1Q14 to 1.613mil in 1Q15, and has been increasing at double-digit rates q-o-q since 1Q14.
Analysis on 1Q15 figures:
- 7.56mil mobile subscribers used smartphones (calculated based on 13.26mil mobile subscribers and a blended smartphone penetration rate of 57%).
- Since LTE devices could include 4G enabled tablets, I don't know how many of the 1.613mil LTE devices are 4G smartphones, but it’s my guess that the bulk of LTE devices are dominated by smartphones.
- Assuming all LTE devices are 4G smartphones, it would imply 4G smartphones accounted for 21% of total smartphones on Maxis’ network in 1Q15, a figure which I see increasing rapidly as mobile users upgrade/replace their older non-4G phones with newer 4G phones.
Because details of the fee structure are not made public, I'm not able to gauge the potential fees Redtone could receive from Maxis.
So, for my own entertainment, I assumed some hypothetical fees and scenarios, to imagine what Redtone could potentially get. I created a table (Figure 3) showing how much Redtone could receive if it gets paid a certain fee each month for the number of LTE devices on Maxis' network.
Figure 3: Annual fees Redtone could potentially receive based on hypothetical fees and LTE devices
As a hypothetical and illustrative example, let's assume:
- Maxis' smartphone penetration rate hits 77% and it has 13mil mobile subscribers, implying 10mil smartphone users.
- Out of that 10mil smartphone users, 50% are using 4G smartphones, so there’ll be 5mil 4G smartphones on the network.
- The average fee is RM0.50/user/month or RM6/user/year.
Some have said the 4G LTE spectrum could be worth a few hundred million ringgit, so it wouldn't surprise me if Redtone receives spectrum sharing fees in the tens of millions of ringgit in the future.
*********
“Beginning from FY15, REDtone’s network sharing and alliance agreement (NSA) with Maxis is also expected to contribute to group earnings. This will be over a 10-year period as per the agreement.”
– Redtone Annual Report 2014
“Riding on our 10-year infrastructure and spectrum sharing deal with Maxis signed in 2012, we hope to launch mobile broadband services soon. We are also receiving income as a result of the Network Sharing and Alliance Agreement with Maxis based on its number of 4G subscribers.”
– Redtone Annual Report 2013
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