Tuesday, March 25, 2014

About OCK

In the face of it, industry observers opine that telecommunication contractors OCK look likely to benefit the most from the government’s plan to spend rm1.5 billion on boosting rural internet connection over the next three years from 2014.

The Budget 2014 aims to increase internet coverage in the rural areas by building 1000 telecoms transmission towers.

This is bound to create opportunities for OCK to secure contracts which will contribute positively to their margins.

However the two companies could lose some of the jobs to smaller unlisted competitors that are already in the field. After all, telecoms are not difficult to build.

It is believed that OCK and Instacom would not be able to take on the whole project because the two companies could bite off more than they could chew by taking on the whole projects.

Principally, involved in the provision of telecoms network services, OCK has been handling projects for MAXIS, Celcom and DIGI. The group has also been awarded the necessary licenses by the MCMC to be a network facilities provider.

Its Prospects …

Companies in the telecom infra businesses are likely to emerge as the better bet in terms of returns.

Owners of telecoms tower assets are one such example. While OCK may not be in the same league as the largest telecoms tower asset owner in the world, it is a good proxy to the infra play.

Having obtained a Network Facility Provider (NFP) license from MCMC in late 2011, OCK is able to capitalize on the opportunity of the growing cell tower lease business.

NFP license allows OCK to build, own and rent out telecommunication towers and rooftop structures, whereas the equipment is provided by the mobile operator but it maintains and install for them.

Essentially, with this license, OCK is also enjoys recurring income from leasing the towers to the operators. The license allows it to move from task based revenue (one time payment) to rental based revenue.

This business model is in line with the government’s directives to mobile operators to share infra in order to reduce cost. MCMC is encouraging telcos to shift from the traditional practice of owning infra to network infra sharing and renting from third party owners to reduce infra development costs.

OCK builds the structure which allows three to four operators to share. For example, if onw operator owns the site, they will have to pay for rental, maintenance and utilities. The mobile operators need to spend about a billion yearly on such capital and operation expenditures as they have thousands of sites.

With OCK owning the site structures, the cost of rental and maintenance will be shares among the tenants of the towers, allowing the mobile operators to focus on gaming larger market share of their business.

OCK can have steady revenue while operators benefit from lower capital and operation costs. This is a win win situation.

In the immediate term, the company has plans to further bring down costs for these players by owning and leasing the equipment to the mobile operators.

It had proposed for new and existing 4G/LTE operators to bring down costs. It is working together with technology providers to share the equipment which can further reduce operators capex.

The company has budgeted some rm150 million to invest in NFP, which also allows it to own basic equipment such as antenna and microwave link for operators to share.

With NFP, it wound not contribute significantly to its business but will give it steady income.
OCK position itself as management service provider. They need a third party to maintain their towers. As for tier two telcos like P1, U-Mobile and YTL, the ucan free up cash by selling the towers to OCK. It is in talk to some of these players (March 2013).

The tier two players can reduce their capex as it will be investing instead of the telcos. It has more justification to get bank loans. It get sure rental for every tower OCK build.

While OCK is slowing building its recurring income business, the company is not short of business from its current (March 2013) contracts. The bulk of its revenue is derived from its network planning, design and optimization and network deployment businesses.

As technology advances there is always a need to upgrade infra. Upgrading is a continuous and done in stages.

With the deployment of 4G/LTE and further enhancements of 3G, these contracts will keep OCK busy for the next four to five years from 2013.

The challenge for OCK is to continuously drive down its own cost so that it can provide its services at cheaper rates to the operation.

1 comment:

Anonymous said...

"OCK position itself as management service provider. They need a third party to maintain their towers" i believe they maintain the towers as well..

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Please note that all data given are merely blogger's opinion. It is strongly recommended that you do your own analysis and research before investing.