WiMax operator lays off close to 100 staff in bid to streamline business and increase profitability
Will be outsourcing parts of its operations as part of strategy to cut cost
WIRELESS operator Packet One Networks (P1) has laid off close to 100 workers in a bid to streamline its business operations and increase profitability. It is believed the company has about 600 employees in total.
News of the layoffs was first reported yesterday by technology news portal PC.com. People familiar with the matter later confirmed with Digital News Asia (DNA) that between 90 and 100 people were laid off this week and that the key divisions affected were the service operations and network deployment departments.
The WiMax operator has termed the exercise a “redundancy let-off,” and letters to this effect had already been sent out to the affected staff concerned, according to more than one source.
“This is part of an internal exercise to streamline the two departments,” said a source who requested anonymity, citing the sensitive nature of the news. “It is also part of a longer term strategy as the company is expected to go through an outsourcing exercise in the coming months.”
In telecommunication parlance, service operations often refers to the department in charge of monitoring the network elements, while network deployment is in charge of the roll-out of network gear.
It is not clear how much compensation the laid off workers will receive but one source familiar with the pay-out said some could get up to four months’ compensation.
When contacted, Puan Chan Cheong (pic), group chief executive officer and managing director of Green Packet, the parent company of P1, confirmed the retrenchment exercise and said that it involved “more than 90 people” but declined to elaborate further.
An industry source confirmed with DNA that P1 is looking to outsource part of its operation to a China-based vendor in a bid to increase efficiency, cut costs and boost profitability.
Asked if this were true, Puan said, “P1 is in negotiation with a few vendors and will outsource if it is more competitive [to do so].”
Highs and lows
The retrenchment comes off the back of a very difficult time for P1 as it struggled to court consumers and businesses with its WiMax services in an increasingly competitive wireless market.
The company first launched its P1 wireless service, now dubbed P1 4G, in 2008 based on the WiMax standard in a bid to challenge other more established wireless players like Maxis, Celcom Axiata and DiGi Telecommunications, which offer their services based on the competing GSM standard.
After two years, having ramped up its WiMax coverage in Malaysia, it went on the offensive, kicking off a popular but controversial multimillion-ringgit marketing and advertising campaign with the theme “Sudah Potong” (Cut to WiMax).
The campaign was aimed not only at wireless broadband players but also the incumbent operator Telekom Malaysia Bhd (TM), which was at that time pushing its newly launched wired fiber-based high-speed broadband (HSBB) service, UniFi.
Though P1’s campaign was a massive hit and helped it rake in subscriptions, the company fell victim to its own success and struggled to meet customers’ expectations the following year; the increased subscriptions having put pressure on it to provide sufficient capacity.
The host of customer complaints included not fulfilling its promise to deliver surfing speeds as advertised; lack of coverage in some areas which it claimed to be in; slow customer service response times; and the inability to solve service queries within acceptable turnaround times.
As a result, the company experienced quite a bit of ‘churn,’ or customers leaving for other operators.
After addressing the problems in 2011, P1 diversified its business by tying up with TM to offer its P1 Fiber service. The idea was for P1 to lease wholesale bandwidth from TM’s UniFi fiber infrastructure and sell its P1 Fiber service bundled with its WiMax service to end users, while managing its own marketing campaigns, billing and maintenance.
Industry observers had wondered if such a move made sense for P1, given that TM’s UniFi had already been gaining traction and with other players such as TIME dotCom also pushing fiber services.
Anecdotal evidence suggests that the P1 Fiber take-up was marginal and the company will continue to struggle to sell its services to an already crowded market.
Rumors persist despite ‘sound’ financials
Green Packet had said in a statement in February that its revenue for fiscal year 2012, which ended Dec 31, had gone up by RM50 million from the previous year to hit RM588.6 million, while its fourth quarter revenue hit RM162.3 million, a 5% rise from RM154.6 million in year-on-year comparison.
[RM1 = US$0.32]
Green Packet also registered a RM31.2 million EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) for FY2012.
Its P1 pillar contributed RM82 million to the Group’s revenue and registered a positive EBITDA of RM7.1 million for the fourth quarter of 2012, which represented a 1,222% improvement year-on-year, the company added.
Green Packet also claimed that P1 had also reached new heights with its total subscriber base, surpassing the 500,000 benchmark it had set for 2012, and had already met and surpassed its target last quarter with 506,000 subscribers and achieved a new milestone of 517,000 subscribers by year-end.
In the same quarter, it also posted a better than industry average churn rate of 4.9% while its ARPU (average revenue per user) increased to RM81. Year to date, it managed an industry average churn rate of 4.4% and a favorable ARPU of RM78, the company said.
P1 has also declared 2013 to be an “interesting and significant year,” as the company plans to roll out Fourth Generation (4G) TD-LTE on a combined 50MHz channel bandwidth in the second half of the year.
But despite its financial reports, rumors surfaced last October that Green Packet would put its 61% stake in P1 up for sale, something that the company declined to comment on.
The company however said it was exploring strategic alternatives for P1 “including the possibility of merger, consolidation, to sell a stake and other options to maximize shareholders’ value,” according to a report in the business section of local English daily The Star.
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