Redtone’s Penang wifi project gets two-year extension

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GEORGE TOWN: Broadband management services provider Redtone International Bhd expects to register revenue of RM1.85 million from its collaboration with the Penang government, which has been extended by another two years.

Its president and chief business officer Shaifubahrim Saleh told reporters yesterday that the extension and increased revenue were attributable to the backhaul bandwidth upgrade to improve the free Penang wifi service, offered since 2009.

He said the increase in the bandwidth from 75Mbps to 375Mbps since the recent Chinese New Year celebration meant that users would be able to enjoy a faster speed of 1Mbps compared with 512kbps previously.

“We began this five-year venture with the government in 2009 when we provided free service for 750 hotspots. Today, there are 1,550 hotspots located in all 40 state constituencies,” Shaifubahrim said.

Speaking at a joint press conference with Chief Minister Lim Guan Eng, he added that Penang had provided a reference platform for Redtone (fundmental: 2.30; valuation: 0.30) to engage in talks with three other states.

Lim said the increased bandwidth would cost the state government an additional RM25,000 every month, from RM129,200 to RM154,200, which is equivalent to a 19.3% increment for the fivefold increase in bandwidth and speed doubling.

“The free wifi service is understandably popular. To date, there are close to 600,000 registered users. An average of 20,000 users log into the service daily with usage peaking at 75mbps from 11am to 6pm.

“This has caused congestion and slowdown, hence the bandwidth enhancement of addition 300mbps,” Lim said.

Later, Shaifubahrim told The Edge Financial Daily that the free wifi service which comes under Redtone’s managed network service sector and contributes only 2% to the group’s revenue, would require extra manpower to manage complaints.

“We would add more seats to the existing six seats in our call centre in Kuala Lumpur to handle complaints. We also incur cost in the acquisition of hotspots in areas,” he said.

However, he declined to state the operating expenditure and maintenance cost due to fears of competitive pricing.

“The cost of maintenance is very competitive which is why we cannot divulge the amount. It is a trade secret. As long as we recover our cost, we are good.

“We hope that with the contract extension and bandwidth upgrade we would get more enterprise clients in Penang and that would reduce our operating cost,” he said. 

For its six months ended Nov 30, 2014, Redtone’s revenue rose 18.65% to RM78.9 million from RM66.6 million a year ago. 

Net profit for the same period was almost unchanged at RM9.72 million. 

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This article first appeared in The Edge Financial Daily, on March 5, 2015.