CTO of HP’s Gaming business talks about the wireless mobile industry
For the folks who think that whenever I blabber about telcos losing their competitive business model I am going senile, it seems I am not the only one.
Many industry experts and visionaries are viewing it in the same light.
Here is an article on a very forthcoming CTO of HP who runs his very informative blog here.
Rahul Sood:
Here’s a tough problem with multiple answers.
I’m trying to explore different wireless business models.
The wireless business has been shifting in a big way. People are using less voice, therefore less minutes are being charged to them. Users are starting to shift their usage to more data. Up until recently the data plans were unlimited so while the number of users might be increasing, the overall ARPU (average revenue per user) is dropping. In Asia and Europe texting is huge, voice simply isn’t.
So one can assume the following chain of events is true: LESS ARPU -> LESS PROFIT -> LESS INVESTMENT IN NEW TECHNOLOGY -> LESS COMPETITION -> CRAP SERVICE. I whipped this flow together in 30 seconds, please feel free to rip it apart.
Now there are ways carriers can lean out cut costs and increase margins, but this type of thing can only go on so long before they need to grow their business again. They cannot keep cutting at the cost of innovation, this happens in multiple industries, the wireless industry is no different.
I remember back in the day when a small cell phone company would make a sale, they received residual payments off of every activation they sold. Now there is no such model, the margins are just too tight, the competition is fierce, and the market is pretty much saturated.
Today Google and Verizon came up with some interesting "ideas" regarding Net Neutrality, specifically in the wireless space. The problem I see is if such ideas were to become reality we would likely see the same push in the fixed broadband space because cable providers are facing similar issues. More people are using the internet, less people watching TV, therefore they only need data, and so forth.
So how much should the consumer pay for a wireless phone plan? What should be included in that plan? If you were the CEO of a small carrier how would you adapt your business in the face of this challenging environment?
The obvious answer to many consumers is "who cares if the carriers make money…" — but this is why companies like Verizon and Google are getting together to chat.
I certainly have gathered great ideas and I’m putting them together. I think we have something unique we can offer the market, but aside from that the carriers do face big challenges – and as partners I believe it’s good to help them overcome such challenges. Thoughts?
Eric J Shoemaker:
I believe that there is no need to pay for talk anymore. Wireless carriers should just give away minute, even internationally. I say this is because if I so choose, I can just talk through my unlimited Data. This is the same with cable… I would rather have faster internet and be able to watch the shows I want through the internet. When I want. Carriers/Cable companies keep fighting this instead of embracing the ability to give the consumer what they want. My advice: Just embrace it, come up with a competitive pricing scale and their you have it problem is solved. I think that a pay for use/without overages is a great idea.
Kal El:
There are two types of users, which translates into 2 price points:
1. Consumer: willing to pay ~$45-$55 for lower Data w/ higher usage of Voice.
2. Prosumer: willing to pay ~$100 for unlimited data/voice.Sprint is charging $10 in addition for 4G. This is definitely based on a higher profit margin then the 3G plans in effect.
As companies face these cut throat times, they will make the Most profit based on equipment and insurance. But they still will make money on the plans.
They might not make what they did a few years ago, but a profit is a profit.
Companies will need to keep customer satisfaction high in-order to retain and get new customers. (Sprint has shown this last QTR)
It is cut-throat, but competition will help the consumer wallets, and keep the companies sharp.
Yield Watch:Frasers Commercial Trust Figures Tweaked
A reader pointed out that my figures for Frasers Commercial Trust does not make sense.
So I updated the Balance Sheet data with the latest third quarter data.
Before
After
I think the problem is that I use DBS Clarity’s data and the number of outstanding shares stands at 1 billion when the number of units is suppose to be 3 billion.
I was still not able to hit the yield the reader pointed to. but my calculation for the Price to Book ratio is based pm Market Cap /(Total Asset – Long term debt and current liabilities)
Still Frasers Commercial Trust proves to be a risky investment. I was vested in this since it was at $1.06. I have probably lost 90% of my money on this investment and this investment drove home the point of existential risk in investing.
Operational risk we can still take but it is risk like this that will spark a sell of in the stock.
Fraser’s long term debt over asset stands at 41% and at a yield of 7%, there has to be much better investments such as K Green Trust, First REIT or Cache.
Yield is not everything and it is better to invest in a REIT that is sustainable, good management and conservative.
I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Yield Watch:National Day Rally did not materialize
I hope every one had a good national day. National day to me is only good for one thing: Rest from a lot of office work. It doesn’t hold any special meeting for me anymore.
In fact this place, doesn’t really look like what it used to be.
The surprising thing about the REIT scene recently is that they are all holding up well. Ascendas REIT and Parkway Life REIT and CapitaCommercialTrust have been going up for no apparent reason.
Particularly, Ascendas REIT looks like not just a good stock for yield but trading since it keeps oscillating from oversold to overbought and if you are nimble you can trade it.
I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Starhub Q2 2010 Results:Declining Earning Escalating Costs
All data found in this report can be reference @ this Google Doc>>
Starhub announced its Q2 Report and here are some notable observations:
- Revenue is doing well. Revenue have been improving since last year’s Q2 as well as last quarter
- Cost have been climbing higher. On a half yearly note, cost have increased from 855 mil to 991 mil. Its not significant, but you will see in the next observation how it affects profits.
- Profit overall fell 25% from 148 mil to 109 mil quarterly. You will have to go back to Q1 2010 or Q1 2005 to find a profit this low. What this means is that it is definitely not a good sign as competition gets tougher.
- The balance sheet presents 2 significant figures. While short term bank loans differ from Q2 2009 by a reduction of 180mil, long term bank loans balanced out in Q2 2010 by an addition of 150 mil. In terms of debt finance, not much changed there.
- On a group balance sheet, the total equity is 57 mil! The question is will we reached zero or negative equity??? Do take note that at the company level Total equity is at 1.1 billion. I have an old reply from Starhub’s investor relations talking about their low equity to debt situation.
- Net Operating Cashflow fell from 217 mil(2010 Q2) to 154 mil(2009 Q2). In a sense, working capital was higher in 2009 to the tune of 40 mil. So that should partly account why cashflow is lesser in 2010
- Capital Expenditure was lower at 44 mil (2010 Q2) vs 70 mil (2009 Q2). Compare to last quarter it remain low. This is surprising since Starhubs policy is to keep within 14% of sales. This is in addition to them being the OpCo for NBN. Somehow they will need to spend to build this OpCo up.
- Essentially, free cashflow stood at 110 mil (2010 Q2) vs 147 mil (2009 Q2). Free Cashflow is the life blood of dividend companies since it determines how much they can safely give out as dividends.
- Total Dividends paid out is at 171 mil (Q2 2010) vs 154 mil (Q2 2009). This is due to the company paying 5 cent per share as dividend, which a lot of people think it is not sustainable. If you deduct this amount from free cashflow you will get –60 mil (Q2 2010) vs –5.2 mil (Q2 2009). Normally, during second quarter you account for 2 quarters worth of dividends payout so getting this figure negative is normal.
Can they safely pay out 20 cent dividends per year?
The management have reiterate that they will pay out 20 cent dividend this year. Is it sustainable?
This 20 cent will translate to 340 mil in dividend payout. Should Operation Results stay the same
Estimated Full Year Operating Cash Flow = 323 mil * 2 = 646 mil
Estimated Capex = 45 mil * 4 = 180 mil.
Estimated Free Cashflow is 646 – 180 mil =466mil
Estimated dividend payout is 340 mil.
Thus based on the example here 20 ct dividend is still sustainable. However, I expect operating cashflow is likely to be lower, cost higher and the job.
However, a more conservative pay out will have to be 300 mil or 18 cents dividend.
I will continue to hold this stock and will monitor to see if costs starts escalating out of control. The key for Starhub is to protect market share and reduce expenses.
Disclosure: Drizzt holds Starhub
I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Fwah Moment:As an American what do you like most about USA?
This is a great graphic.
Click to view bigger picture.
Fwah Moment! Americans use a lot of Energy!
Now if only they can cut down to the level of Hong Kong people, we won’t have such a big energy Crisis!
[Source>>]
Yield Watch: Asia Telco Stocks Information
My dividend stock tracker have been updated for the night. Tonight we got a special Research Report from DBS Vickers analyzing the impact of iPad on the 3 Telcos.
Here is a screenshot of a comparison of Asia’s Telco Performance. Good Information here. (Click to see larger image)
Here is the report:
2010-Jul-30 – DBS Vickers – iPad Telco
I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Zero Hedge takes notice of Singapore’s Economic Performance
I have always had a love/hate relationship with Singapore. During the seventies, the autocratic Prime Minister, Lee Kuan Yew, regularly locked up journalist friends of mine and banned magazines like The Economist that published my stories. The country is also notorious for public canings of offenders who had the audacity to discard chewing gum on public streets.
On the other hand, my hedge fund was once one of the largest commission generators on the Singapore Monetary Exchange (SIMEX), and there is no better place to spend a weekend with ten grand burning a hole in your pocket. I spent more than a few nights closing down the bar at the Raffles Hotel, home of the Singapore Sling.
Today, Singapore has won the sweepstakes to become the world’s fastest growing economy, bringing in a white hot first half 18.1% GDP growth rate. Analysts believe that the full year number could come in as high as 15%. Global equity investors have taken notice, pushing the stock index up 5%, making it one of the best performers (EWS).
The Singapore dollar has also been appreciating against its competitors. Even a slow ratcheting up of interest rates by the Monetary Authority of Singapore has done little to cool things off. The results were powered by a booming financial sector, which saw assets under management soar by 40% to $871 billion last year, thanks to an explosion of newly minted Chinese millionaires and billionaires.
Foreign banks are jumping on the gravy train, with Goldman Sachs and Morgan Stanley scrambling to add local staff. Tourism has received a huge shot in the arm, thanks to the recent legalization of gambling. Drug giants like Pfizer, Sanofi Aventis, Roche, and Glaxo-Smith Kline have gravitated there to ramp up large scale manufacturing for export to the rest of Asia.
The country’s leaders have wisely parlayed decades of trade surpluses into Temasek Holdings, one of the largest sovereign wealth funds, and long a major player in the foreign exchange markets (click here for their link at http://www.temasekholdings.com.sg/).
[Read full article @ Zero Hedge >>]
Cache Logistics Trust 2Q 2010 Results:Not bad
Cache released their maiden results today and it didn’t surprise analyst as it was inline with forecasted figures.
Cache Logistics Trust says it achieved a DPU of 1.71 cents for the 2nd quarter from 12 April 2010 to 30 June 2010 (2Q2010).
On an annualized basis, the DPU is 7.81 cents, 1.4% higher than the annualized forecast of 7.70 cents for 2010.
Net property income was $12.65 million while distributable income hit $10.83 million.
Cache’s current property portfolio comprises six quality logistics assets strategically located in established logistics clusters in Singapore.
All six properties are 100% leased with high underlying occupancy at each premises. The master leases are on long-term, triple-net basis with locked-in annual rent escalations.
The average lease to expiry of 6.1 years as at 30 June 2010.
Disclosure: Drizzt is vested in Cache Logistics Trust
I run a free Singapore Dividend Stock Tracker available for everyone’s perusal. It contains Singapore’s top dividend stocks both blue chip and high yield stock that are great for high yield investing. Do follow my Dividend Stock Tracker which is updated nightly here.
Yield Watch:Bought K-Green Trust @1.14
In the end, a lot of stocks that I wanted to get into are pretty high.
Today, for no apparent reason, Cache Log, Plife Reit and First REIT all shot up.
The current yield for a projected DPU of 7.83 cents is 6.86%. Current Debt levels is 0 debt and it’s a utility business that can change pricing based on inflation scenario.
The purchase size is small and I do have certain reservations about the Trust, so I will observe before adding more.
Right now the benefits does outweigh the negatives.
I bought Starhub at a time where many of...
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