MyTV’s woes, a case of good money chasing after bad money?

• Competitive scenario today very different from when DTT deal was inked in late 2014
• Veteran in satellite industry, Khairuddin Rahman, offers to help or take over MyTV role

THE troubles of MyTV Broadcasting Sdn Bhd, the Syed Mokhtar Al-Bukhary linked company entrusted with Malaysia’s transition from analog television to digital terrestrial television (DTT) are well known with MyTV unable to pay Telekom Malaysia Bhd for the services the telco is providing MyTV. It owes TM at least US$15.7 million (RM66 million) as reported in the media.

 As a result, TM has reportedly shut down its transponder sites in eight states. The transponders are used to deliver content to users who have a MyTV set-top box. And apparently TM is not the only vendor MyTV owes money to.

Meanwhile a shipment of set-top boxes are sitting in a bonded warehouse in Port Klang with conflicting versions of why they have not been collected. One version is that the devices will not be released to MyTV until payment is made to Pos Malaysia Bhd. However, a source as Pos Malaysia has told DNA that MyTV has no debt owing to Pos Malaysia and that the set-tob boxes apparently do not meet MyTV's technical specifications. A new shipment is due in December now.

[Paragraph updated at 9.45am 26 Nov: An earlier version stated that the set-top boxes were not being released due to a debt to a vendor.]

Meanwhile worried MyTV staff have reportedly sent a letter to the authorities urging them to intervene to safeguard employee rights, replace current management with competent and trustworthy leaders and investigate the leadership for any shady dealings. It is a right mess.

But the impact of MyTV’s failure to meet its financial obligations to TM and other vendors goes beyond the struggles of a corporate entity. For Malaysia’s hopes to be a leading digital economy are also hit by MyTV’s struggles as it means that Malaysia’s analog switch-off (ASO), scheduled for Q1 2019 is also in real danger of being delayed, again. The original date for the ASO was due to be in June 2018.

This in turn will mean delays in Malaysia’s 5G rollout of an advanced mobile network as well because the 700MHz spectrum that is currently being used for analog TV transmission cannot be freed up and allocated to the telcos until the ASO happens.

‘Funding has always been the issue – right from beginning’

A little understood fact about MyTV’s model is that it only gets paid or collects a licence fee from broadcasters for the transmission services when the ASO happens. “Right now it is still on simulcast meaning transmitting on analogue and digital. Only once ASO happens can MYTV finally charge the broadcasters for the transmission services, for the next 30 years,” explains a former executive of the company.

“Their model means that they have to front-end most of their investments and only collect revenue later when the ASO happens and that’s tough to do especially when there’s any delays,” notes an industry player.

This is why, in a bid to earn some revenue, MyTV had, in 2015, asked for a five year moratorium during which time only MyTV set-top boxes could be sold in the market. According to the former MyTV executive, this did not happen as the Malaysian Communications and Multimedia Commission (MCMC) did not enforce this as cheaper set-top boxes invaded the market.

However the government back then did promise it would provide MyTV with 2 million set-top boxes, to be matched by MyTV ona 1:1 basis, as part of the government’s promise to give all the 4.1 million BR1M recipients, a free set-top box. However, to date, DNA understands that less than 400,000 set-top boxes are in the hands of consumers. BR1M is a welfare scheme launched in 2012 by the Malaysian government to help the B40 (Bottom 40) group.

As to why the roll-out has lagged so badly behind schedule? An executive familiar with MyTV’s situation back in 2014 points out, “Funding has always been the issue – right from beginning. The plans laid out were good if it had been supported with the promised funding but that never came,” he says.

For a quick history reminder, it was almost four years ago, in Nov 2014, that MyTV signed a 15-year US$218.5 million (RM916.1 million) network sharing deal with TM that will earn the latter US$14.6 million (RM61.07 million) a year over the 15 year contract period starting in 2016. That deal was supposed to be a giant step for MyTV in meeting its promise to the Malaysian government of providing DTT broadcast to 85% of the population by April/May 2016.

Incidently, it was not MyTV but another Syed Mokhtar linked company, Puncak Semangat Sdn Bhd, which originally won the tender to build, operate and manage Malaysia’s DTT service as the Common Integrated Infrastructure Provider for Free-to-Air (FTA) broadcast in the country. But Puncak Semangat transferred the license to MyTV a month earlier, in Oct 2014.

Classic case of technology disruption and competition

The current situation is a far cry from the “game changer”, “new era”, “reshaping competitive landscape”optimism expressed by the Malaysian government back then which hoped the roll out of DTT would further Malaysia’s digital ambitions and introduce the digital economy into the lives of Malaysians from every corner of the country.
 
It may be four years since MyTV signed its network sharing deal with TM but ironically “game changer”, “new era” and “reshaping competitive landscape” can today be applied again but referring to the change in government in the recent 14^th General Elections  (GE) in Malaysia on May 9.

But the winds of change with a new government in charge will likely not portend well for MyTV which does not have a strong reason for missing its DTT milestones over the years. Where it had gone on record in Nov 2014 to say it was planning to invest US$358 million (RM1.5 billion) within three years, yet today a much smaller amount of around US$107.3 million (RM450 million) is claimed to have been invested by MyTV. That under investment will not help its case any should the government decide to take drastic action over its failure.

Yet, one executive in the satellite industry claims to understand why MyTV has under invested and why its owner, Syed Mokhtar will likely not invest any more. “It would be a case of good money chasing bad money,” states Khairuddin Rahman, founder and CEO of satellite operator Smart Digital International Sdn Bhd. “Syed Mokhtar has to fork out as least US$14.6 million (RM61.07 million) a year to TM besides other costs and he must be having second thoughts as the math doesn’t add up.”

Two key factors have changed the viability of the DTT project for MyTV Khairuddin claims. The first is technology disruption. “Five years ago over-the-top (OTT) services like Netflix and iflix were not yet on the horizon but today both are major players in the video entertainment market here offering low monthly subscription fees,” he says.

The other factor is the rising popularity of Astro Malaysia Holdings Bhd’s free content service njoi launched in May 2017. “It is now a force to be reckoned with. It has about 2 million subscribers and offers 29 free TV channels and 20 radio stations.” That’s the competitive landscape that Syed Mokhtar sees today for MyTV, says Khairuddin.

A veteran of the satellite industry since 1995, he has delivered broadband via satellite, to 5,000 mostly remote public schools in the East Malaysian states of Sarawak and Sabah through a programme called SchoolNet between 2004 to 2010. He has also been involved in various regional and global satellite organizations. He feels that he can come in and either help MyTV or to even take over its responsibility of delivering the ASO to the government.

It seems like an audacious claim but Khairuddin feels he has the experience and background to deliver and the necessary licenses with a CASP (Content Application Service Provider) satellite, a NSP (Network Services Provider) and NFP (Network Facilities Provider) license.

“It is cheaper and faster for MyTV to deliver digital TV via DTH (Direct to Home) than through its current DTT approach. And they can do it faster by partnering with me instead of doing it themselves,” he claims.

Still, while Khairuddin claims MyTV is better off partnering with him, he also believes he can deliver the ASO faster and cheaper than them simply because the former accountant is from the Satellite sector and can get better rates than MyTV or even TM when leasing infrastructure and capacity from satellite players.

He claims to be doing a beauty contest now among 4 satellite operators on who can give him the best transponder price bundle with uplink facility, broadcast equipment, content and consultancy.

He will also take a multi-platform approach to give the market a choice with FTH, DTT and OTT options to receive their favourite entertainment content.

And here is where he departs from the approach taken by MyTV. “Because this is mainly entertainment content, I do not believe consumers should be given free set-top boxes. Instead, they should pay and I plan to charge RM200 a box with installation a separate cost based on market rates.”

He believes the current government will also take this approach and not honour the free set-top boxes promise made by the previous government.

Selling the set-top boxes also helps him craft a better business model, he believes. “I will be able to earn revenue right away instead of waiting till the ASO to earn license fees from broadcasters.”

And even here, he says he will charge broadcasters US$477,000 (RM2 million) a year instead of the US$1.43 million (RM6 million) MyTV is. And even better, “I can even sign on broadcasters for free and in return we do a revenue share of the content they produce,” he says while claiming to be in talks with one leading producer for such an arrangement.

And if it seems like Khairuddin is putting the horse before the cart, including outfitting a new office that will be the hub for his satellite operations, he just wants to prove to the government that he has what it takes to quickly deliver on the ASO and free up the 700 MHz spectrum while accelerating Malaysia’s transition into the digital economy.

The key question though is, how much more slack will the government give MyTV and will TM, which has been shown very little love by the government, post GE14, be asked to bend over backwards to assist MyTV? But will TM agree to that or stand firm and insist the commercial agreement MyTV signed, be honored. Or will the MCMC decide that enough is enough, MyTV had its chance and failed and open up the ASO contract to new, willing players like Khairuddin?