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Sunday, March 12, 2006

Digital Set-top Box Prospect in Malaysia

Future Forecast:

1. IDC: US market shipment of STB will grow from 30 million units in 2001 to 50 million units in 2007.
2. ITAA : Digital STB market will grow from $3.1 billion in 2003 to $9.3 billion in 2008.
3. Motorola to buy Linux set-top box specialist

MCMC's MyICMS 886 Strategy:
Under the 8 services segment, the item for "Digital Multimedia Broadcasting"

Background
1. Digital Multimedia broadcasting will cover both terrestial and satellite TV and Audio services. Digital multimedia broadcasting will provide quality audio and video services over TV sets as well as handheld devices or mobile phones and other radio receivers.
2. The digital TV broadcasting in Malaysia will see the introduction of standard definition TV(SDTV) and High Definition TV(HDTV)
3. In line with the digital TV broadcasting strategy, the introduction of Digital Video Broadcasting Handheld (DVB-H) devices, covered under the Mobile TV services, will be facilitated.

Goal and Strategy
1. Commercial launches of Digital Television Terrestrial Broadcasting (DTTB) in selected areas and pilot trials for Digital Sound Broadcasting will take off in 2006.
2. From 2007 onwards the regional rollouts of digital TV broadcasting will take place. A pilot on High Definition TV(HDTV) will commence before the end of 2008. This will set the stage for further commercial digital TV broadcasting take-off.

Expected Result:
1. The household coverage for Digital Terrestrial Television Broadcasting is expected to reach 60% by 2008. Digital Sound Broadcasting is to provide nationwide coverage within 2008.
2. The introduction of digital multimedia broadcasting will set the initiatives for the growth of local content industry and local production of Set-Top Boxes(STB) and digital multimedia receivers (for both radio and TV)
3. Ultimately, the digital multimedia broadcasting will provide converage to 95% of households.

Recent Devleopment in Malaysia:
MiTV had been awarded with 3G spectrum for RM 50 million.

It defeated favourite bidders Digi. Many touted it as rotten governance, however, in a press statement from Minister of Energy, Water and Communications, Malaysia YB Dato' Seri Dr. Lim Keng Yaik, he mentioned political-biasness publicly as the reason for the lost of Digi's bid towards obtaining the 3G licenses. The press statement was documented by The Edge Financial Daily as the following:

It is learnt that in making its decision, the government had wanted to maximise the value of its national asset, namely the 3G spectrum, by granting the licences to local companies. The view is that foreigners can still participate in 3G by partnering with the local players.

Therefore, there is no point feeling disappointed when it had been made clear that Malaysia want to demonstrate the meaning of protecting own people.

What would MiTV want to do with its 3G license ?

First of all, MiTV has been a MVNO ever since it registered itself as Malaysia No.2 pay TV providers. Rumour has it that Astro has own satelite and MiTV has to borrow network resources to facilitate its content-providing business.



Now since the government of Malaysia comforted Digi's disappointment with the excuse that the latter can always become a MVNO for this aspect. Nevertheless, Digi seems to be less than fascinated by the condolence because that would be too cost ineffective.

Therefore, in other words, playing the MNVO game may not be profitable in the long run even though The Cloud has proven otherwise, while Redtone prefers MNVO to becoming 3G provider.

MiTV must have been able to benefit tremendously from cost-saving towards its business of content-providing, when it is ready with the infrastructure for 3G. This spirit is further lifted when funding is not really a problem to them.

According to MiTV's E.D Kenneth Chang, funding is not an issue.. "From shareholders, vendor financiers to sponsors.. I can tell you that they are knocking at our doors and offering us financing packages. Financial institutions have shown interest as early as during the bidding process. The options are available." Another possibility, he says, is also an initial public offering over the medium to long term.


Expected Outcome:

Malaysia has about 5.5 million television homes. Astro has captured approximately 1.5 million subscribers.
1. MiTV is looking to capture the remaining 4 million that has yet to be penetrated. Currently, it only has 2k subscribers as compared to their target of capturing 100K subscribers by the year of one financial year since August 29, 2005. Thus they have now another 6 months to recoup investment, by lobbying for another 98K subscribers.
2. With the introduction of its new set top box priced at RM 399 by the second half this year, MiTV is confident of garnering a subscriber base of 10K by end year. They will still be 90% off-key from initial tunes.
Original source

Thus, the growth of set-top boxes in Malaysia is expected to be slow at 10K unit to be sold by year ending 2006. Malaysia is still a big untapped market.

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