By Mark Holmes

Thaicom is undergoing a familiar style of leadership change, as Dumrong Kasemset, the man behind the company’s IPStar satellite broadband strategy, is stepping as executive chairman and being replaced by Arak Chonlatanon, who is charged with building the business further.

    Chonlatanon faces some obstacles to success, according to Rattana Leenuthaphong, a satellite equity analyst at IV Global Securities. “His major challenges would involve his effort to aggressively market the IPStar service in untapped countries,” she said. Jitra Amornthum, executive vice president, Syrus Securities, added, “I think the marketing strategy remains the biggest challenge for the new CEO, especially in international markets. Each market is very unique in terms of people’s need. You have to deal with government in some markets and the outcomes are unpredictable.”

    While IPStar is a technical achievement, analysts are split on whether Dumrong’s tenure can be viewed as a success. “Dumrong’s success has been too slow both in terms of marketing and operational activities,” said Amornthum. “Since IPStar has sent into orbit late 2005 and commercially run in early 2005, its key sources of revenue have come from Thailand, Australia and New Zealand, whose combined capacity allocation are 23 percent of total IPStar capacity. The utilization rate is much less, which, of course, is the reason the company is still making loss up until now,” said Amornthum.

    “Dumrong has been the important person in Thaicom. He worked with Thaicom for more than 10 years and created many beneficial things to company, such as launching IPStar or the Thaicom 4 satellite. That is one of key success factors in the future for Thaicom,” said Putcharin Wattanakaewsripetch, a satellite equity analyst at Adkinson Securities. “Although in the present day IPStar will not make profit, I believe that IPStar will be breakeven within 12 months thanks to the success of IPStar in Japan and Indonesia. In terms of IPStar strategy, I think it will not change too much because the new management team also have the same target as the ex-management ‑ increasing bandwidth usages in IPStar and try to open IPStar in India as fast as possible.”
 

Satellite Broadband

In terms of the potential growth of the broadband satellite sector, Leenuthaphong said, “I would rather be conservative and not expect strong growth. The strong growth in IPStar utilization would be partly backed by individual government policy (from each country) in supporting (or subsidizing) their people to be able to access to the broadband Internet service.”

    Amornthum is unsure whether satellite broadband will be a success in Asia. “It’s hard to say that broadband satellite services will be a beautiful success in Asia as satellite bandwidth cannot and will not compete with terrestrial solution by nature. So I see satellite broadband services as a compliment to ADSL. The target area for satellite broadband to serve are countries which have lots of islands and blind spots and remote areas. However, value-added services or killer applications (and probably pricing) can make satellite solutions competitive.”

   Amornthum sees good growth for IPStar based on the efforts to establish the service in India, Indonesia, Taiwan, Singapre, Brunei and other countries. But the company is struggling to gain traction in some off the biggest markets. “The key driver of the company’s profitability and share price is China and India. The Chinese market is the most important for IPStar, as it takes as much as 26.2 percent of the total capacity, while India takes 17.5 percent capacity allocation. In the case of China, despite commercial launch in February 2007, IPStar take-up remains extremely disappointing, with utilization rate of only 6 percent to 7 percent (based on my calculation). India is my last hope as the market contains a large population and high demand as well as low broadband penetration. Management always told analysts that all necessary licenses have been received, but the company is not allowed to import Gateway’s PATs to install and provide services. It has spent three years trying to entering India,” he said.

    The analysts also differ on the state of the company’s financial position. “After Thaicom’s announcement to stop an investment plan for replacing Thaicom 1A, it makes the company have less of a problem to find new funding in financial global crisis.  In addition, Thaicom has time to focus on IPStar, and that is the main business for company. In my opinion, I still believe Thaicom will be breakeven in this year and strong performance in the next year,” said Wattanakaewsripetch.

    “Thaicom has already reduced its own debt level to a comfort and serviceable level. The telecom service operations in Cambodia and Laos showed continue strong performance based on [2009 first quarter] earnings. However, I would still forecast that Thaicom will incur net a loss for this year,” said Leenuthaphong.

    But the global credit crunch will have an impact on Thaicom,” Amornthum said. “People’s wealth has been diminishing. Cost savings are widely expected throughout corporations and [small  and medium enterprises]. Therefore, I don’t think the company will perform strongly in 2009.”