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Wednesday, October 16, 2013

Instacom: A towering giant in the making


Instacom Group sets the pieces right for a formidable future in the telecommunications industry
By Vinodhani Nair K. & Nur Atifi

Over the past few months, a particular telecommunications solutions provider based in Sarawak has been hitting the headlines and business news front pages for all the right reasons: lucrative contracts, strong cash flow, savvy management and one that towers way above its competitors in terms of expertise, technology and industry know-how. That company is Instacom Group Berhad (Instacom) helmed by Chief Executive Officer Anne Kung and Executive Director Thomas Ngu, two visionaries who have made Instacom the pulse of Malaysia’s telecommunications industry.

The fact the group sees tremendous prospects in not only building network towers or infrastructure is something to shout about as the company charts the sea of opportunities it sees for the industry going forward. From being a one stop service provider to the telecom players – both vendors and service providers – to offering ideas and plans for the industry to remain profitable in the future, Instacom is aggressively pursuing market prospects, amongst them being owning and leasing telecom towers, providing fibre optic infrastructure and setting up a tower REIT.

What’s more, the buzz on the group does not end there. Recently it was rewarded a multi-million contract in Sarawak.

In a filing to Bursa Malaysia, Instacom announced that the company has received and accepted a Letter of Award (LOA) from 1 M Utama Sdn Bhd (1M) for the supply, installation, testing and commissioning of telecommunication network and infrastructure and engineering works in Sarawak. The value of the project to Instacom is RM205 million (mn) and expected to contribute positively to Instacom’s earnings and net assets for financial years ending 2013 to 2015.

Says its Chief Executive Officer Anne Kung: “This development coupled with our sterling Q1 results announced (earlier) bodes well for Instacom’s transfer to the Main Board of Bursa Malaysia.

“We believe Instacom has met with all the criteria for an upgrade to the Main Board of Bursa Malaysia from the ACE market, and we are proud of the achievement,” she adds, explaining that institutional funds have expressed interest in acquiring equity stakes in the company.

“Moving up the Main Board will most certainly lend credence to our profile,” says Kung.
The sky’s the limit

While the telecom industry is a capex and opex intensive industry and the many service providers flinch at spending more than they need to, the demand for their services from the public hasn’t abated. In fact, it has grown and will continue to do so if the EBIDTA margins of the likes of Celcom and Maxis is any indication.

“The telco industry is growing in leaps and bounds as Malaysia moves into the LTE (long term evolution) era with major operators looking to expand their data earnings. Mobile data traffic in Malaysia should double this year in line with the global trend,” she says, quoting a recent report by telecoms equipment firm, Ericsson, which foresees mobile data volumes rising by a compound annual growth rate of around 50% between 2012 and 2018.

She adds that as long as there is a growing demand for telco services by users, like you and me, there will always be a need to build more towers for better and wider coverage all around the country.

As a matter of fact, Instacom counts Celcom, Maxis and DiGi, as well as Huawei, Nokia Siemens and Ericsson amongst its regular set of clients – the only company in Malaysia to secure all of the big telco boys.

Having been in the industry since 2001, Instacom has been privy to seeing the many changes the industry has seen and believes there is more to come – from analogue to digital, 2G to 3G to 4G, and now LTE and the impending 5G (gasp).

Kung also believes the group is best placed to know and understand the industry needs as it has been in the field for a while now. She goes on to point out that the time is right for telco players to get their act together where putting new network infrastructure is concerned, namely for underground infrastructure for fibre.

In this case, Instacom can work for all providers by laying the necessary groundwork and providers can come together and share the ready infrastructure and not do more and more digging for sites, which can disrupt other service providers like TM or TNB. “This should be the smart way to work,” she says.

Furthermore, Kung adds this smarter partnership is the way forward and is in line with the call of state governments, such as Melaka, to bring all unsightly above ground power lines underground. This spells opportunity for not only telco and such utilities service providers, Kung believes, it will also benefit state governments as well.
Getting it right

As an end-to-end telecommunications provider, the group is optimistic over the many avenues available to the group to grow its business.

Says its Executive Director Thomas Ngu: “Instacom’s strengths stem from our nationwide presence throughout Malaysia, especially our home base of East Malaysia, and we are renowned throughout the country and Asia-Pacific region for our state-of-the-art technology and engineering techniques.”

The company is confident of securing more projects of significant sizes in the foreseeable future in line with its expansion plans and commitment to operational excellence. In addition, Instacom is also looking at making at least one acquisition by year-end to lend more depth and expand its business base. The company is also constantly looking at corporate proposals to consider ways to maximise value for and reward loyal shareholders in the near future.

Speaking on the types of services Instacom does, Kung says that besides the building of network infrastructure, the company also does maintenance work and the volume of work keeps increasing, this is in addition to the upgrade works of networks from 2G to 3G, and optimisation.

“Being in this industry for long enables us to understand their needs and serve them well, which is definitely an advantage for us,” says Kung.

In fact being an end-to-end provider also enables the group to better plan for other service providers, in terms of sites and coverage areas, while they concentrate on what they do best – provide services to the end consumers and market them well.

The group was also reported to be pushing the idea of building and leasing telecommunication towers to our telco players and reckons many are warming up to this idea since a few years ago.

Kung has also started to build a portfolio of towers in the group’s quest to plan for a tower REIT in the future. “We are trying to get existing and new tower owners together to drive a Malaysian tower entity. It is one way we can all build value for our towers, not just be an asset for the company.”

She aspires to create a REIT much like that of the American Tower Corp that started in 1995 when US tower owners came together as one entity and now manages and owns over 55,000 sites worldwide.

Taking a step in the right direction, the group is already in talks with a large tower owner from India to join forces with fellow Malaysian tower owners in a bid to start a regional tower REIT, which can then be listed on the NASDAQ.

Such bold moves by Kung and her able team from Instacom, it is no wonder this group will be making headlines in the country in the times to come.

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