KUALA LUMPUR: Altel Holdings Sdn Bhd, part of Puncak Semangat Sdn Bhd, which in turn is controlled by tycoon Tan Sri Syed Mokhtar Al-Bukhary, is expected to award some RM1 billion worth of tenders beginning this year to build the infrastructure and network facilities for Puncak Semangat’s digital terrestrial television (DTT) project. The tender period has closed and the company is in the process of evaluating the tenders, said Altel group chief executive officer Nik Abdul Aziz Nik Yaacob.

Puncak Semangat was awarded a 15-year concession to develop and operate DTT services last year, and has announced that it will spend RM2 billion on the project during the concession period. The DTT business is operated by MyTV Broadcasting Sdn Bhd, whose shareholders are Altel, Tan Sri Zainol Anwar and Datuk Abdullah Kadir Bacha.

“MyTV is a relatively unknown company as DTT is the first business of its kind in the country. We are financing this project with our own funds and the return on investment will take quite a long period,” Nik Abdul Aziz told The Edge Financial Daily in an interview.

“The revenue model is that we will build the infrastructure and the broadcasters will pay us to use our services,” he said.

Altel is required to develop a DTT infrastructure that includes a digital multimedia hub, and a network of high, medium and low powered digital television transmitters nationwide that is able to carry up to 45 standards definition or 15 high definition television channels.

The initial migration from analogue to digital will be for government-owned and private stations, which include TV1, TV2, TV3, NTV7, 8TV, TV9, TV Al-Hijrah and Bernama TV. Nik Abdul Aziz said the DTT services will be rolled out in four phases, starting with Phase 1 in Kelantan, Terengganu and Pahang by mid-2015. Phase 2 will cover Sabah and Sarawak, while Phase 3 will cover Perlis, Kedah, Penang, Negeri Sembilan, Melaka and Johor. Phase 4 will cover Selangor, the Klang Valley, Putrajaya and all other capital cities and suburban towns.

“When the migration is completed, the Malaysian Communications and Multimedia Commission (MCMC) expects MyTV to cover 98% of the populated areas. This is a promise that we must deliver to the regulator,” he said.

Nik Abdul Aziz said Altel will be launching its mobile post-paid service in the current quarter, which was delayed from the fourth quarter of 2014 to ensure that the necessary infrastructure is in place.

“My focus this year is to drive and synergise the three businesses that we are in, which are telecommunication, media and fibre services. We anticipate a challenging year in 2015, but also an exciting one, as we launch new products and services that will excite the market,” he said.

Altel is one of eight companies awarded with the 2,600 MHz spectrum band by the MCMC in December 2012, which could offer mobile broadband speeds in excess of 100 Mbps.

Nik Abdul Aziz said Altel’s subscriber base stood at 400,000 as at Nov 19, 2014, of which 287,000 are active.

The company targets to hit the one million mark in three years, with a plan to acquire 3,000 new customers daily.

“When we first launched our prepaid service, we had a modest target of 150,000 subscribers. Since then, our registered customers have tripled, while our active customers have doubled. This is an achievement for a new start-up like us and going to 2015, we will focus on subscriber acquisition and quality customer retention,” he said.

Nik Abdul Aziz declined to reveal the company’s average user per revenue (Arpu), except to say it is below RM50. Similar players such as XOX Bhd have a prepaid Arpu of RM24 currently, Maxis Bhd (RM35), Celcom Axiata Bhd (RM33) and DiGi.Com Bhd (RM41).

On capex, Nik Abdul Aziz said Altel has managed to halve its five-year capex by half to RM500 million, as it rides on the infrastructure services provided by Celcom Axiata Bhd.

“Our capex is on the downside, but not our operating expenditure [opex]. Altel will realistically not make any money as long as we are in expansion mode, with high expenses to be incurred during the early stage of our operation,” he said.

Despite incurring start-up losses, Nik Abdul Aziz said Altel has a positive cash flow, with a target to break even in less than five years.

Filings with the Companies Commission of Malaysia reveal that Altel’s net loss for the financial year ended Dec 31, 2013 (FY13) fell to RM107,439, from RM1.23 million in FY12.

As for its fibre business, which is managed by Altel’s wholly-owned subsidiary Net2One Sdn Bhd, Nik Abdul Aziz said it has started receiving small business contracts, with a current order book of slightly more than RM1 million. “Net2One should generate a sizeable revenue next year. In fact, the fibre company has started receiving small business contracts. Besides providing connectivity to Altel and MyTV, we target Net2One to provide syndication of all the connectivity for the subsidiaries operating under the Al-Bukhary group and eventually to all enterprises,” he said.

This article first appeared in The Edge Financial Daily, on January 12, 2015.