"Pursuant to Paragraph 9.19(23) of the Listing Requirements, the Board of Directors of YTL Power International Berhad ("YTL Power" or "the Company") wishes to announce that the Company has resolved to acquire 300,000 ordinary shares of RM1.00 each in the issued and paid-up share capital of YTL Communications Sdn Bhd (formerly known as Y-Max Infra Sdn Bhd) ("YTL Communications") from YTL e-Solutions Berhad ("YTLe"), a related company, at par value per share or a total consideration of RM300,000 (“the Acquisition”). As a result of the Acquisition, YTL Communications will become a subsidiary of the Company. "
One news item had YTLPOWER fans buzzing and it was the speculation and rumour that YTLPOWER has acquired the rights to roll-out the WiMAX network which was awarded to one of YTL's subsidiary YTLE.
Although I do believe the company acquired did not have the license in question since the price YTLPOWER paid was much lower (only RM300k) and WiMAX license itself must've been at least worth over RM1 mil. And the company acquired was 'YTL Communications' (Formerly 'Y-Max Infra') and the license holder for the WiMAX license is actually 'Y-MAX Networks'.
But the debate was whether or not it was good for YTLPOWER. I'm in the opinion it is bad news if YTLPOWER take on the project mainly because it is not within their business profile or operating philosophy.
True it can be said communications is also one type of utility business but then that is based on common communication which is the household telephone on a fixed line. WiMAX in it's true form is the future of wireless technology which is said to be the replacement of DSL technology. Just like what happen to the conventional telephone which is being neglected by most people nowadays in favor of the mobile phone. WiMAX will supposedly do the same to DSL broadband which is based on fixed telephone lines.
YTLPOWER's main business in Malaysia, UK, Australia, Indonesia and more recent Singapore all has some form of government concession. Electricity and water, the two most common and demanded utility will ensure long term returns in their business. And all acquired business starting with Wessex Water in the UK are immediate money makers. No additional commitments or building of infrastructure required. They bought proven printing machines to print money.
WiMAX is different from all these businesses. It is different because its a future looking business. It demands a lot of attention in the beginning to grow properly and a lot of expenditure to keep growing. Until the infrastructure is saturated does it then start to cost less to maintain and the profits will be piling from then on. Being a start-up from scratch business with no proven records of profitability, it is very different from YTLPOWER's core business. Though I do believe WiMAX has it's place in the future, I just don't think the management will let YTLPOWER bear the costs of implementing this start-up business.
In the end, YTLPOWER fans who would love ride on the WiMAX bandwagon can invests in YTLE, the owner of the company holding the WiMAX license.
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To cut short, is it this wimax project uses Ytlpower's money but the entire project of this wimax is under YTLE? Where does the profit goes? to YTLE or Both YTLE and YTLPOWER?
I don't believe YTLPOWER will fund YTL-E venture directly. As this will introduce risk to YTLPOWER's otherwise stable business ventures.
And thus without direct investment, there will be no profit or loss sharing for YTLPOWER and YTL-E.
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