ANANDA VS VINCENT TAN: CLASH OF TWO TYCOONS – WHO IS STRONGER?

<> on July 9, 2011 in Sun Valley, Idaho.

TWO notable tycoons in Malaysia – T. Ananda Krishnan and Tan Sri Vincent Tan – keep bumping into each other, not literally, but in the businesses they venture into.

Tan’s recent foray into Ansa Broadcast, a cable pay-TV venture, makes it the third time the Berjaya Group founder is going head on against one of the key businesses of Ananda, who owns Astro Malaysia Holdings Bhd.

 Tan’s move into Ansa is being watched closely. Both these billionaire tycoons are known to have made bets which have paid off handsomely. Forbes lists Ananda as Malaysia’s third richest tycoon with a net worth of US$6.5bil (RM28bil) while Tan ranks at number 20 with a value of some US$820mil (RM3.51bil).

In Tan’s case though, a strategy of getting late into the game and winning market share has worked with U-Mobile – the country’s youngest telecommunications operator. Tan was an early player in the telecommunications space when, in 1995, he partnered with Telenor to set up Mutiara Swisscom, which was later renamed DiGi.Com Bhd. Tan sold his stake to Telenor.

Tan is the second largest shareholder in U-Mobile with a 21.46% interest, after Singapore Technologies Telemedia which has 49%.

Launched in 2007, U Mobile has taken the market by surprise by grabbing market share from the three major players in the telco industry. As a disruptor, the presence of U Mobile is saying to be one of the reasons why competition in the cellular segment is fierce.

It has to-date over five million “active” subscribers, with one million being postpaid customers. Its market share is estimated to be up to 13%.

Last year, U Mobile was awarded with additional telecommunication spectrum. This, in turn, meant that the newcomer need not rely on existing telcos such as Ananda’s Maxis for leasing telecommunication networks anymore.

U Mobile has also said it will be aggressive on its expansion plans, coughing out about RM1bil for capital expenditure this year, the bulk of which will be used to build up its network. Also, there are indications that U-Mobile is aiming for an initial public offering sometime next year.

Where Ansa is concerned, the 65-year-old Tan has in the past voiced out issues regarding Astro’s monopolisation in Malaysia’s direct-to-home satellite pay-TV.

Astro has, in the last 20 years, conquered the market with this monopoly rights for satellite TV but the exclusivity came to an end in February.

Now that this exclusivity is over, it looks like Tan has his eyes set on this business.

While little is known about Tan’s plans for his Ansa venture, some details surfaced recently in an equity analyst’s report on Astro.

Analyst Sia Ket Ee of Hong Leong Investment Bank downgraded Astro to a “hold” on the premise of the end of the monopoly and that Tan’s Ansa, if it materialises, will pose competitive pressure on Astro, which have been absent in the past 20 years.

The history of Ansa apparently dates back to 2005 when Tan launched Malaysia’s third pay-TV service – MiTV. Two years later, MiTV was rebranded as U-Television, but the service did not take off.

Ansa’s possible impact on Astro

With trends in OTT players now seen as a threat to incumbent pay to free-to-air TV companies, some do say that what Tan might be drawn to is the amount of money Astro generates.

With a return on equity that is more than 100%, Astro is a money-making machine at the moment. Although the number of households paying for Astro’s service has slipped in recent times, it is still a sizeable number that is willing to pay a sizeable amount to watch content beamed over satellite to their homes.

Prior to Astro, there were other non-satellite broadcasters that tried to penetrate the broadcasting scene but had grappled with technical issues.

These include MiTV, Mega TV and Asian Broadcasting Network (M) Sdn Bhd (ABNxcess).

Established in 1994, Mega TV was Malaysia’s first ever subscription-based pay-TV service. It started transmission in November 1995, but failed to sustain in the pay-TV market.

Then ABNxcess – the first digital cable TV network provider – was launched in 2014 with billions of ringgit poured into the business. However, the network went downhill, as it faced numerous problems such as frequent damages to its cables and shortage of technicians to rectify problems encountered by clients, among others.

With the high barriers of entry to the pay-TV market, pricing is a major determinant for pay-TV and satellite services.

Content cost and the weak ringgit are pressure points for satellite providers such as Astro and the company is said to have given up some of the exclusive rights it has over certain channels to lessen its costs.

While the Bloomberg poll shows that Astro has 11 “buy” ratings, nine “hold” and one “sell”, an equity analyst thinks that Ansa’s entry into the broadcasting space will cause a stir in Astro’s business.

“There isn’t much details on Ansa for now, but Tan did make an attempt in the broadcasting business 12 years ago when he launched MiTV.

“So, if Ansa is a definite business plan, it could possibly stir Astro’s business, but it all boils down to the right content and product offering,” the analyst notes.

Meanwhile, another analyst says it will take time for Ansa to begin operations.

“There is a lot to do in the broadcasting business and Ansa will have to deal with issues concerning pricing for content and satellite services, among others.

“Apart from the weak sentiment, the competition is also stiff with the entry of other over-the-top (OTT) content players such as Netflix, iflix and Viu,” the analyst adds.

While Astro is dealing with high costs, and not the entry of another competitor, it has one main advantage in the pay-TV market. The big money it pays for football, especially the English Premier League, has proven to be a grasp in maintaining a legion of paying customers.

To this end, if Ansa comes into the picture, it will definitely add more tension on Astro’s business.

It is left to be seen if Tan will steer Ansa to apply the same strategy he used in the telco scene with U-Mobile.

– ANN