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NEWS UPDATES Asean Affairs        11  March 2011

Kuwait firm invests in Malaysian mobile hub

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Baraka Telecom Sdn Bhd, a unit of Reach Telecom Holding KSCC of Kuwait, will invest RM50mil to set up a mobile virtual network enabler (MVNE) hub here.

The MVNE will be launched on March 17 to offer services to mobile virtual network operators (MVNOs) across Asia, Baraka Telecom said in a statement yesterday. (MVNO refers to a company that provides mobile phone services but does not have its own licensed frequency allocation of radio spectrum).

It was reported recently that Maxis was on the final leg of negotiations with Baraka on a three-year MVNO agreement.

Analysts said the impact from this deal to provide telecommunication services to Baraka in Malaysia would be negligible.

"We see the impact of the potential tie-up as being negligible for Maxis, given the niche focus of Baraka whose target markets are Islamic mobile and data services. In addition to Baraka, we understand that Maxis has an existing MVNO arrangement with another undisclosed local service provider," said an analyst from a local investment bank.

Maxis was reportedly close to securing a three-year deal to provide telecommunication services to Baraka. Both were said to be finalising the deal which will mark Baraka's return to the MVNO business in Malaysia.

Without specifying the parties it is in talks with, Maxis said,"We are in active discussions with various parties in the MVNO and MVNE space and will make the necessary announcements at the appropriate time."

MVNE is a company that provides services to MVNOs.

The development surprised analysts as Baraka had earlier aborted its commercial launch after having terminated a similar MVNO agreement with DiGi last year.

"We gather from our source that the parties behind Baraka had wanted to consider more options, including a revisit of its business model in light of the extremely competitive mobile landscape in Malaysia and the challenges faced by MVNOs," he said in a recent report.

An analyst from a local securities company viewed the deal as possible since Maxis had the capacity to provide such services, and that its rival Celcom was getting more aggressive in MVNO services.

"The profit contribution to Maxis will not be as big as their consumer business due to the niche offerings and the business is small. However, most MVNO players make good margins from their service, thus Maxis might benefit from it," the analyst said.

Maxis' net profit rose 21.3 percent to RM610mil for the fourth quarter ended Dec. 31, 2010 from RM503mil previously due to increased contribution from the non-voice segment and a bigger subscriber base.

Its revenue rose to RM2.31bil versus RM2.21bil previously.

Its EBITDA (earnings before interest, taxation, depreciation and amortisation) margin for the fourth quarter was lower at 50.6% against 51.4% in the preceeding quarter.

For the full financial year ended December 3, Maxis' net profit stood at RM2.3bil on revenue of RM8.87billion.

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