Analysis: Celcom buys into Tune Talk
Comm
Written by CTA Team   
Tuesday, 06 January 2009 08:35

Written by: Kugan Kathegesen

Edited by: Kashminder Singh

Last month, Celcom (M) Bhd, a subsidiary of TM International Bhd (TMI) made the surprising announcement that it will subscribe to 2.625 million shares of Tune Talk Sdn Bhd, a mobile virtual network operator (MVNO) in Malaysia.

In a statement to Bursa Malaysia, TMI said that Celcom has the option to buy another 16 per cent of Tune Talk, three years after the launch of its business or after it has 1.5 million active subscribers, whichever is earlier.

The RM2.62 million investment made by Celcom will “not likely to be a major threat to incumbent operators” according to research firm OSK Research Sdn Bhd in an article published by the Business Times.

Branding itself as a “No Frills” service, Tune Talk said that it will offer basic prepaid voice and short message service packages to consumers when it was first announced. Of course, being an MVNO, Tune Talk needs to buy wholesale “minutes” from Celcom before it can repackage those “minutes” and offer it to the market under the Tune Talk brand.

As a no-frills telco, I guess Tune Talk will offer their services at an incredible low price, just like Air Asia, but how low can they go? It would be hard to match the ones offered by mobile operators as they could easily match the price offered by Tune Talk, if not lower. After all, Tune Talk is leasing network capacity from Celcom.

The ultimate question here is why would a giant like Celcom which owns a large telecom infrastructure and which has over 8 million subscribers invest in a small MVNO company that will soon cause an impact on its voice and SMS market share?

“Celcom's investment in Tune Talk is unique, rarely seen in the mobile industry, as MVNO's typically operate independently from incumbent operators.” said Lincoln Lee, Telecommunications Research Manager for IDC ASEAN (pict).

“This partnership between both operators will allow Celcom to use Tune Talk as vehicle to target niche market segments, such as the low-budget travellers market, by leveraging on the links of Tune Talk with Air Asia and Tune Hotels. Meanwhile Tune Talk, will have the backing of an incumbent mobile operator, and hence has access to Celcom's infrastructure, services and technical capabilities.” Lincoln added.

There are not many success stories from MVNOs around the world. In general, the majority of MVNOs tend to focus their service on voice and SMS and compete with current mobile operators. I haven’t heard of any focusing on Value Added Services (VAS) or services running on top of 3G such as content and applications.

Having said that, the advantage of the MVNO business model will allow them to focus on their product, marketing and customer services without the need to build and maintain a cellular network.

“However in the long term, an investment such as this may affect Tune Talk's ability as an MVNO to be Operator independent, which may inhibit Tune Talk's ability to launch innovative services in the industry. Celcom on the other hand may reach a crossroads in the future, whereby Tune Talk may pose to be a worthy competitor in the future, hence be seen to impact Celcom's market share.” Lincoln said.

Initially, Tune Talk was scheduled to launch the service by the end of Q1, 2008 but it has since been delayed pending the award of a Network Services Provider (NSP) licence from the Malaysian Communications and Multimedia Commission (MCMC). Tune Talk also applied for an Applications Service Provider (ASP) license. However the status of the application is unknown.

Tune Talk is controlled by Datuk Seri Tony Fernandes via Tune Ventures (40%). The remaining shares are owned by Datuk Kamarudin Meranun (30%), Dennis Melka (25%) and Tune Strategic Investment (5%).

 

< Prev   Next >