Redtone

It has been on a losing streak for the past four years, is on track for a profitable year, driven by its government projects and WIFI infra business.

It is aiming to make a profit in FY2012 and all the signs are pointing in that direction. In fact, its latest results are a strong indication that the company is turning around.

Nonetheless, it will be FY2013 that will prove fruitful for the company. This is when the company expects to see the positive impact from its collaboration with other players in 4G/LTE.

Redtone had entered into a 4G/LTE network collaboration and partnership agreement with at least two other telcos. Sources indicate that DIGI and CelCom Axiata could be the company’s potential partners, with possibly a third cellular provider waiting in the wings.

The collaboration agreement will ultimately help reduce the capex and operating expenditure in the long run. At this juncture … final details are still being worked on and will include a commercial agreement. Such agreements usually involve a minimum guaranteed payment, which means that even if the bandwidth is not used, there will still be some cash flow for the companies.

The company can then go to the bank and use the agreement to raise funds for future capex. If there is any excess, there is a possibility that it could eventually be returned to shareholders.

Aside from the 4G/LTE collaboration, Redtone has other plans that will help it to return to the black. It is shifting away from the traditional voice business to data.

The company’s current focus is offering its data services to the government and the small and medium enterprises, which often have a more complex requirement when it comes to managing their bandwidth, which requires multiple types of connectivity.

Redtone is currently bidding for rm800 million worth of government jobs. Its order book currently (Jan 2012) comprises around 10 government contracts worth about rm20 million.

Redtone’s other earnings driver going forward is its WIFI infra business, where the company helps to set up Internet Hot Spots that help to cater for the nomadic broadband segment. These hotspots are to be used by both itself and its partners.

In addition to a one off lump sum payment for building the network, Redtone will also generate recurring income from managing the sites. The company is also making inroads into China where it offers not voice services bit also a prepaid shopping card.

Its current major shareholder is deputy chairman Datuk Wira Syed Ali with 28.6% stake in Redtone.

It is also in the midst of identifying the businesses that not profitable and non core, and the mandate is to divest them.

Redtone is also looking at adopting its strategy for its IPTV service which specialises in offering content from China .