Maintain neutral for the sector: Telekom Malaysia Bhd (TM) launched HyppTV Everywhere for DiGi.Com Bhd earlier this week. HyppTV Everywhere for DiGi is essentially another variant of the existing HyppTV Everywhere offering which has been around for more than a year.
HyppTV Everywhere is basically an extension of the Set Top Box-based HyppTV offering that allows subscribers to watch HyppTV via other online mediums such as tablets, smartphones and PCs. HyppTV for non-UniFi subscribers was made available recently with different charges depending on the channels/videos opted on an a la carte basis.
HyppTV Everywhere currently has a subscriber base of 150,000 (about 20% of total UniFi subscriber base) with an estimated average revenue per user of between RM5 and RM10 (this is based on our estimate).
What is different with the HyppTV Everywhere for DiGi offering is that a different portfolio and differently priced packages are offered. Additionally, DiGi.Com is giving away promotional zero data charges for HyppTV Everywhere for DiGi streaming up till end-June. HyppTV Everywhere for DiGi uses a stand-alone application developed specifically for DiGi.Com subscribers.
The management was tight-lipped about revenue share for the deal but generally, we believe the bulk of TM’s revenue would come from the HyppTV content provision and DiGi.Com from bandwidth provision. Five packages are available, priced at RM10.60 per month and RM15.90 per month (for the sports package).
The deal is positive in driving data traffic for DiGi.Com as video streaming consumes high bandwidth (about 250 megabyte [MB] an hour for non-high-definition (HD) and two gigabyte [GB]/hour for HD) compared with other popular applications that subscribers currently use for example social networking, web browsing, music streaming and YouTube streaming.
As of the fourth quarter of 2014 (which recorded the highest data traffic for DiGi.Com so far), we estimate the average monthly data consumption/Internet user at about 0.8GB/month. Every minute/month of incremental Internet protocol television (IPTV) or video streaming can drive the average data consumption by some 0.5%, on our estimate, assuming takers of the products are existing Internet users.
For TM, the incremental revenue would likely come from the content charges. This could range between RM10 and RM15/month/subscriber based on packages offered assuming TM takes 100% of content revenue.
The move is positive for TM in increasing the reach and scale of its IPTV business (which is a key weakness for TM versus Astro) considering the 37 million mobile subscribers versus less than one million UniFi/high-speed broadband users. However, Astro also has its own mobile based-IPTV that is Astro On-The-Go, which currently has around 1.4 million subscribers (about 30% of total Astro subscribers). Maintain “hold” on TM (fair value [FV]: RM7.20/share) and DiGi.Com (FV: RM6.50/share). — AmResearch, April 16
This article first appeared in The Edge Financial Daily, on April 17, 2015.